Insurance Underwriting

Purpose of Underwriting

To ensure unhealthy lives are not subsidized by healthy, standard or unimpaired lives upon

policy issuance.

• Protect the company from anti-selection risk.

• Ensure profitability. Hence, financial strength of company.

• Remain competitive.

• Underwriter will evaluate the potential risk of an insured.

Underwriting assessment depends on (but not limited)to these factors:

• Type of Insurance
• Regulation
• Non-Medical Limit (NML)
• Financial UW
• Occupation and avocation
• Foreign Risk Status
• Health Condition

Underwriting Guide - Regulatory

CDD is a conduct to identify and verify the identity/legal existence of a customer or

beneficial owner in order to prevent money laundering and avoid terrorism financing.

By knowing the customer and understanding the business, the company can better identify if there are any suspicious transactions. 

CDD > Client Identification > Client Verification > Client Profile

INFORMATION REQUIRED:

Individual Customer & Beneficial Owner:

• Full Name

• Date of birth

• Nationality

• Correspondence & Residential Address

• Contact Details ( home, office, mobile )

• Name and Address of Employer

• Occupation and Nature of Business

• Purpose of Transaction

Corporate Customer:

• Company Name & Address

• Company Registration

• Contact Number

• Nature of Business

• Beneficial Owner details

• Person (s) appointed to act on behalf of

the Company

What is FATCA?

FATCA : Foreign account tax compliance act of 2010

Forms part of tax regulations in the US which requires financial institution

such as Prudential to identify US person with account outside the US &

thus report those accounts to the US Inland Revenue Service (IRS)

Under FATCA, Prudential will suffer 30% withholding on certain US

source income unless it enters into an agreement with the IRS.

From January 2004 onwards, Prudential is required to gather

documentation from customers who have links from the US.

Information required in proposal form (FATCA INDICIA)

Nationality (Existing)

Country of Birth

Correspondence/Business address (country) including residential address

Do you currently file a tax return in the US?

Available US tax form for individual and Corporate

Individual Customer & Beneficial Owner:

• W9 Form

• W8 BEN Form

• A copy of the individual’s Certificate of Loss of Nationality of the US

• A form of government issued identification evidencing non US citizenship /passport.

Corporate Customer:

• W9 Form

• W-8BEN-E Form

• W-81MY Form

• W-8EXP Form

• W-8ECI Form

• Substitute declaration

What about CRS?

Common Reporting Standard (CRS) approved by the OECD Council on 15 July 2014.

It helps authorities identify tax residents who evade tax through offshore investments in foreign jurisdictions.

Under FATCA, CRS is developed to calls on jurisdictions to obtain information from their financial institutions and automatically exchange that information with other jurisdictions on an annual basis.

Information required in proposal form (CRS INDICIA – INDIVIDUAL)

Correspondence / Business / Residential add

Country of contact number

Are you a tax resident(s) in or do you file tax returns in any country other than Tax country, Malaysia?

TIN / equivalent number & reason if TIN is not available

Information required in proposal form (CRS INDICIA – CORPORATE)

Type of entity

Country of incorporation of company

Registered address & country of address of company?

Are you a tax resident(s) in or do you file tax returns in any country other than Malaysia?

**Controlling person holding min 25% of comp’s ownership / senior managing official

TSAR CALCULATIONS (GENERAL PRINCIPLE)

Total Sum at Risk > All in-forced policies per life (Include policies from other insurers)

FINANCIAL UNDERWRITING

• Financial tables define the standard financial underwriting requirements that will be

required based on total cover per life.

• Purpose is to provide company an understanding of the financial background of clients.

• Insurance shall protect for potential financial loss of the insured (in the event of claim),

but not financial gain.

• Company reserved the right to call for any additional information irrespective of the sum

assured on cases where the sum assured does not seem to relate to the proposer's

financial situation.

Income Multiple

BANKRUPTCY

Bankruptcy is a way to deal with debts that one is unable to settle as and when they fall due. A person

who has been judged by a law-court to be unable to pay his debts as they fall due is a bankrupt.

Things to take note:

• A bankruptcy MUST NOT OWN a policy. Any application for insurance should be proposed

under someone with insurable interest (i.e. Spouse, Sdn Bhd company).

• Sum assured applied is restricted to RM200,000.

• Premium payment must not be from the bankruptcy. Hence the payment mode should be via

credit card/auto debit (Source of account need to be checked).

• NO INCOME BENEFIT is allowed for bankruptcy applications.

• If there is no insurable interest when wanting to own a life insurance policy (e.g. term policy), the

bankruptcy will require to attain permission from the Official Assignee (Solvency Department). The

permission must be given in “writing” form.

OCCUPATION UNDERWRITING

The main consideration in underwriting occupation or avocation risk is the level of exposure to accident that may increase mortality or morbidity.

Occupation class is classified based on exact duties & nature of business. Further clarification by calling agent, amendment form and/or QA may be required.

The classes below are standard terms:

FOREIGNER / TRAVAL & RESIDENTIAL RISK

• Natural disaster

• Mortality and morbidity risk in different countries

• Political stability

• Medical advancement

• Accessibility to medical facility

• Claims administration

– Fraud/manipulation of reports

– Language barrier

– Reliability of legal and public record systems etc.

• Regulations

• Others

FOREIGN RISK UNDERWRITING

• Gainfully Employed
• Malaysian PR
• Under MMSH program
• Owning a real estate/property or business/investment in Malaysia
• Married to Malaysian / one of parents Malaysian

FOREIGN RISK UW - REQUIREMENT

• Copies of passport/travel documents containing personal particulars and the relevant

entry stamp to the country as proof of valid entry and stay at time of submitting

proposals.

• Copies of employment pass, marriage certificate, dependent pass or Approval document

for Malaysia-My Second Home Program (whichever is applicable).

• Foreigner Questionnaire

• Medical Examination by PAMB panel doctor (if applicable)

MEDICAL UW – SOME SCENARIO (CASE TO CASE BASIS)

Happy Investing! 😉