Application: Improvement in Underwriting Procedures

Abstract

The primary aim of the statistical study described in part II is to change the tariff applied by Belgian insurers. However, in a regulated country like Belgium, any change of statutory tariff must be accepted by a whole series of institutions before being imposed on the companies by a ministerial decree. The proceedings can last several years. Until then, the preceding results can be used by the underwriting and administration departments of the companies. Indeed, setting tariffs and risk selection are two complementary functions; if the tariff could take into account all the criteria influencing the risk, the underwriting department would be redundant. The very existence of such a department constitutes an acknowledgment of the defectiveness of the tariff. Any suggestion of change of tariff must consequently be transmitted to the underwriting department in order to improve the selection of risks just as it must be transmitted to the administration department in order to refine the procedure for cancellation in the case of bad risks.