The practice of accepting insurance without a medical examination (
I.e., non medical) became
established in the UK in the 1920’s.
Eventually this practice spread to North America. For many years, non0medical
medical history question are asked by agent rather than a doctor was limited to smaller amounts at the
ages of 40 under , but due to favourable
experiences, it was extended to
quite large amounts in the early 1980’s The term non-medical should not
however, be taken to mean that insurance
is issued without any medical
information. Medical information is sought from the proponent
directly and in this regard, there is an
additional responsibility on the
proponent to be totally fair and frank. Here the agent also plays an important
role as his role as the primary underwriter is brought into play because of his close intimacy with the
proponent and knowledge of any
additional adversity in the proponent’s
health condition. There are many reason for accepting applications without medical examination. (a) There has been a growing realization in the recent past that a medical examination is not
indispensable because it is known from
experience that it brings out the adverse feature in not more than the a tenth
of all the applications received. (b) The slight increase in the claims can
well be compensated for by the saving of medical fee and other procuring expenses.
( C ) In our country more than 75%
of the population is in rural areas. It is difficult to have competent medical examiners in these areas to conduct
the medical examination for the purpose
of life insurance. This is a more true in respect of lady medical examiners. It is also difficult to bring applicants to
nearby towns for that purpose, which
will also be prohibitively costly. (d) Where the applicants are employees of an
institution which insists on standard
age proof and a medical examination at
the time of a entry in to service and also maintenance of regular leave records, medical examination can be
dispensed with. (e) The effect of
selection by medical examination for life insurance on the rate of the
mortality is limited to a few years after acceptance of the application may be
a year or two. There could be some extra death during the period, which can be
compensated by savings of medical fees.
In view of these reasons, if some safeguards can be designed and adopted it will become possible
to considered applications without the necessity oaf any medical examination. The
following condition are generally
employed.: (1) Application form may be
more elaborate and may included a
personal statement.
The applicant will have to furnish his/her physical
measurements like height and weight (LIC of India has built the tables which
gives the range of weight for each age and height-minimum and maximum for
consideration of applications under its Non medical schemes those beyond are considered subject to medical
examinations. (2) A detailed report of the field worker is also called for
in a which, after making careful
enquiry, the agent will have to furnish
details of the health habits, personal and family history, financial position of the applicant to avoid
moral hazard. (3) There can be certain
restrictions regarding age at entry
types of products offered maximum
maturity age, maximum sum assured etc., (4)
There can be more restrictions on allowing non-medical scheme to female
lives. (5) The insurance company can
always reserve its right to call for a medical examinations in any case. LIC
of India has introduced two
different schemes: (a) Non-Medical
special scheme, and (b) Non Medical (General) scheme. They are discussed in
detail here
LIFE INSURANCE PREMIUM SETTING: The insurer collects
contributions from a large number of individual to compensate the financial
consequences of the loss of the
unfortunate few. This contributions is
known as premium. In other worlds, premium is the price paid to the insurer by
the insured fro underwriting risk. There
is a rate for each type or insurance. The rate of premium depends upon the risk undertaken by the insurer, expressed generally per hundred or per thousands of sum insured. It can be paid either in one
lump sum or in easy periodic instalments
like monthly, quarterly half-yearly of
annual. The manner of a payment usually annual and the payment by monthly or
other instalments usually involves
slight extra cost.
TYPE OF PREMIUM: The determination of life insurance premium
is one of the most technical and a
difficult aspects of the branch of actuarial
science which requires a broad knowledge
of science of mathematics and satistics The premiums can be classified
into the following heads: (1) Net
premium. (2) Gross premium. (1) NET PREMIUM: This premium is mainly based on the past experience mortality and assumed rate of interest. No
consideration is given for expenses incurred
and for future contingencies. The net premium should be equal to the
claims paid other on the death or due to the maturity of the policy. (2) GROSS PREMIUM: It is also known as the
“office premium” It is the amount that
the life assured is required to pay. It
includes the mortality rate, the assumed
rate of interest, the expenses and loading
. So if expenses and bonus to policy holder are added to net premium it
becomes gross premium. Gross premium =
Net Premium + Expenses + Loading.
The premiums mentioned above may be further classified into two parts. (a) Net single premium: and.
(b) Level premium. (a) NEWT SINGLE
PREMIUM: This premium is received by the
insurer in a Lump sum and is exactly
adequate, along with the return earned thereon, to pay the amount of
claim. It does not provide for expenses of management and for contingencies. Net single premium =
Mortality cost + Loading --Interest. The computation of net single premium
rates on any kind of policy requires the
information as to. the age and sex of the assured since rate must be commensurate with age and
sex. the type of policy, for the rate depends on the type of policy. The size
of the policy, for the rate depend on
the amount of assurance or the amount of the claim guaranteed and the rate of
interest assured fr investment made by
the insurance company. (b) LEVEL PREMIUM.: Due to financial constraints,
some insured may find it difficult to
pay for this their life insurance on a
single premium.