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Morbidity reinsurance

Morbidity risks can also be reinsured. The most common example is income protection insurance which can be reinsured on original terms basis or risk premium basis.   Critical illness cover can also be reinsured wither as a stand alone basis or as a rider on a life insurance policy.

Quota share reinsurance

Under this form of reinsurance treaty the reinsurer and original life office both take a fixed percentage share of the risk. The life office writes and insurers the original insurance policies and then passes this fixed percentage to the reinsurer. There is an obligation on the life office to pass over the fixed percentage and there is an obligation on the reinsurer to accept the risk.

Reinsurance administration

The reinsurer will want to access the risk he/she is underwriting. They will ask for previous details of the life offices experience. They will want records of this and will need to check if the portfolio balance has changed and if so what changes have taken place.

They will want to know the experience and qualifications of the underwriting staff and chief medical officer. They will want to see the forms that the life office is using.

Reinsurance is often harder to place if it is on a ‘with profits’ plus original term basis. This is because the reinsurer is accepting the ‘with profits risk as well as the life risk.   If the reinsurer accepts the with profits risk then they will have to have confidence in the life office’s investment strategy, bonus strategy and how bonuses are declared.

Where a young life office is involved there may be situations where the reinsurer has greater under writing experience, such as with substandard lives. The reinsurer may place a clause in the treaty where by sub standards lives are referred to the reinsurer for rating purposes.

The life office staff will need to be aware of the existence of the reinsurance and of the terms of the treaty or facultative placement. Changes in the original life policy may have to be agreed by the reinsurer, this will be particularly true where facultative reinsurance has been placed.   When a claim is being considered, the reinsurer will need to be advised and may need to be consulted. The reinsurer has no direct legal say in what happens on the original claim. However if the reinsurer has to agree claims under the reinsurance policy, then the life office will want to make certain that it collects enough data to satisfy the reinsurer.

Claims

The job of the claims department is to pay claims as efficiently and as quickly as possible whilst protecting the life office from payment of fraudulent claims and those claims which are not covered by the policy or where sufficient detail has not been obtained to get a clean legal receipt for the claim payment.

Claims usually require documentation/details to support the following,

Claims fall into two categories. Maturity claims and death claims.   For both of these there is the consideration of lost policies. Then there are surrenders and loans. The key item to remember is that it is the claimants’ duty to produce all documents required to prove his ownership of the life policy by providing documents of title.