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Financial Underwriting — The Easiest Underwriting There Is? But the hardest to get right!

Ross’ Hard Earned Rules

1. Big and early claims will test the best of underwriters and management regardless of how well you select risks.

2. Be proactive in analysis, questioning and agent training as to your needs.

3. Does it all make sense?

4. How good are the sources of your information. Third party information gatherers can be worse than agent or better than accountant.

5. Does the agent know the owner, insured and beneficiary? How long and well?

6. Did the applicant owner approach the agent or has it been a long “sales process” by the agent?

7. Get the agent to sign a synopsis of the financial aspects of the risk and his rationale for the sale.

8. Know; really know the lender of money as beneficiary.

9. Audited statements are excellent if you read the fine print to make sure they are truly audited and represent a complete company profile financially.

10. In partnership insurance who are all the partners and are they all insured equitably?

11. Does the sum assured applied for (and in force) represent the absolute maximum of a companies worth or a reasonable estimate of its worth (per share)?

12. Get your senior officers to agree on your company’s position on estate protection (no brainer), estate equalization (harder to adapt) and/or estate creation (avante garde).

13. Never, never allow a person to be worth more dead than alive to family or business!

14. Multiples of salaries for keyperson or personal insurance are strictly guides and must reflect in summation the true financial loss in terms of the time value of money.

15. Banks make great beneficiaries but they are not necessarily without bias — they always win with or without the insurance.

16. Is the application for insurance complete, current and all information volunteered on the application or in additional notes, memos or letters?

17. Are you guaranteed that the in force to be replaced will indeed be replaced? Do you follow up? Do you have legal remedial solutions?

18. Make use of your own companies accounting and investment experts to see if the finances are right on.

19. Use the Internet as you personal search engine for finding both personal and industry information.

20. Use your reinsurer to build a financial picture even if it means you and/or your reinsurer visiting the applicant for detail and peace of mind.

21. Never reinsure the risk if in your opinion the financial picture is unacceptable and the risk makes no sense since although you can reinsure the mortality you can never reinsure the notoriety from a bad claim.

22. If, with your advice and counsel, the agent cannot make it make sense, decline.