The term ‘underwriting’ began in a 17th century coffee house owned by Edward Lloyd in Tower Street, London. Little did he know that the dealings of the ship owners who met in the shop would turn into the world’s greatest insurance organisation, Lloyd’s of London.
In order to share the risks of transporting goods by sea, the ship owners would literally write their names under slips of paper which set out details of each voyage and which apportioned the risks of the voyage among them. The term ‘underwriting’ therefore came to mean the evaluation of financial risks and their acceptance on terms agreed by an ‘underwriter’, in return for paying a premium.
This is what underwriting consists of today. When you apply for insurance, an underwriter will assess your application and decide on acceptance terms. The three main areas under which your application is assessed are:
- Your health.
- Your occupation.
- Your pastimes.
Your health is naturally an important consideration when applying for life, health, trauma, income protection or permanent disability insurance. When you apply for any of these policies you provide details of your current health and your previous medical conditions. Some medical conditions present an increased level of risk, and these may attract an additional premium or an exclusion.
For life insurance, almost all occupations are eligible, including if you have no occupation at all right now. Consequently it is most unlikely that you would be disqualified for job reasons. A small number of occupations, however, can be quite hazardous, and those occupations might attract an additional premium or may be excluded.
Kiwis enjoy participating in a wide range of pastimes, outside of their normal work activities. While most pastimes have no effect on your application for insurance, some activities can put your life or health at significant risk and may therefore be subject to either an additional premium or an exclusion.
If you engage in a dangerous pastime for which an additional premium would apply, you may be given the option of either accepting the additional premium or having an exclusion apply for that pastime. If you choose the option of an exclusion then the additional premium is not applied.