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Underwriting and Claims

The Challenges of Determining Worth

Financial Underwriting In Emerging Markets

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How much is a life worth? That is a difficult question to answer. Addressing it from a social, emotional, or spiritual perspective can provide a wide range of responses – if in fact the question is answerable at all. From a strictly fiscal perspective, however, determining a person’s long-term financial value is exactly what financial underwriting in life insurance seeks to do. Although this process can prove difficult – especially in developing markets – new forms of evidence and analysis may provide the answer.

Financial underwriters face significant challenges in developing economies, where seeking to identify an applicant’s financial worth slows and can potentially derail the sales process. The central challenge lies in collecting accurate financial information. In these markets, documentation is often insufficient or lacks transparency. Under-reporting of earnings and profits means the actual net worth of an individual is often much higher than what can be found in financial documents made available.

While fraudsters seek to capitalize on this disconnect, many life insurance applicants claiming they are worth more than it seems are actually telling the truth. So how can insurers accurately underwrite these individuals financially – especially as companies face pressure from increased competition and larger coverage amounts?  

Turning to New Forms of Evidence

The traditional approach – standardized guidelines across all channels and products, the analysis of actual income and assets, and all information confirmed with appropriate documentary evidence – does not apply in many developing markets. As a substitute, insurers must apply differentiated approaches tailored to individual customers – based on demographic segment, sales channel, product type, etc. – using proxies for standard evidences. Examples include:

  • Experience analysis/predictive modelling
  • Credit scoring
  • Bank customer segmentation
  • Family assets (traditionally only individual’s assets taken into account)
  • Premium paying capacity

Proxies such as these help paint a more complete, reliable picture of an individual’s net worth. At the same time, companies must deter fraudsters by keeping an eye open for red flags, such as:

  • Accumulation of high coverages in a short period of time
  • Inconsistent declarations or conflicting information
  • Questionable value of the assets
  • Extremely inflated income numbers
  • Income-asset mismatch

Effective financial underwriting – like all good underwriting – requires approaches customized to the individuals served. It is a complex process in which one size does not fit all, especially in emerging markets. Proxies may offer a way forward in lieu of standard evidence. As numerous novel ways to underwrite are explored, experience over time will provide the best guidance. Reinsurers can help speed up the learning process, providing experience, perspective, and reinsurance support to improve financial underwriting capacity.

It is a dynamic time for the industry. New streams of data have engendered a new era in underwriting never before thought possible, and this includes financial underwriting. Above all, effective financial underwriting helps insurers provide better coverage for their customers. And for many, the peace of mind derived from the security of life insurance – like life itself – is priceless.


Contact us to learn more about financial underwriting in emerging markets.

The Author

  • Dhiraj P. Goud, M.D.
    Chief Underwriter 
    Southeast Asia Markets

    RGA Southeast Asia