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In: Finance

Fund life & health insurance Explain carefully why this sentence is false The judgment method is...

Fund life & health insurance

Explain carefully why this sentence is false

The judgment method is a preferred method when multiple factors (sometimes conflicting) factors are involved.

Solutions

Expert Solution

Judgement method is related to studying the life of a person to be insured by the insurer based on the material information presented to him and apply all his knowledge and experience to analyse the level of risk involved. The decision is based on the combined report of medical, acturial and other departments. The judgement method works well where the decision lies on acceptance or rejection.

If the multiple factors which are conflicting in nature exists, the judgement method does not work. It requies a highly skilled personnel to analyse the various risk factors involved. Thus, we use Numerical Rating Method for conflicting factors. Numerical Rating method is based on the various standard and actuary seeks the extent of deviation from these standards. Adverse features are recorded as debit points and favourable features are recorded as credit points. The total of debit points are considered for the extra mortality and helps in analysing the total risk involved. Total extra mortality ratings are compared to standard chart which helps in deciding the monetary value of the premium to be paid.

Thus, the above statement is false.


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