A chief underwriter will seek to design insurance products with a predictable likelihood. In 2011 Japan had a tsunami that caused radiation and other health hazards for a large portion of the populati... on. Is it possible to design a long-term disability policy for residents of that region? Why or why not? [Show More]

By CPA Guru 3 days ago

Answers to the above Question

No, it is not possible to design a long-term disability policy for resident of that region. The insurer seeks to estimate the probability and magnitude of a losses and claims under a policy. If costs are too severe, the business will not be written. If costs and treatments are too frequent, the same decision will be made. In the absence of a good estimate of the probability, the insurer may simply decide a loss is not likely to occur. This would be the situation for a new disease that has no statistical history and does not seem to affect the population targeted for insurance coverage. If the amount of the coverage is relatively small compared to the size of the insurance company, a policy will be issued.

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