Anti-Selection is when the client select specific high risks to insure and exclude other low risks falling in the same category.
this action affects the insurer's ability to build financial reserves as well as the insurer's financial rating that is measured by ratio of his total risk exposure from his total financial reserves.
Anti-Selection is applicable to all classes of business
All insurance policies are subject to premium payment warranties. If the clients fails to pay his due premiums, the insurer will not settle any eligible claim.
Any contract with discrimination from the part of the client is subject to cancellation.
Discrimintaion can be based on the sex of the insured (In group policies, insuring either sex with better conditions than the other or among the same population (some people get indemnified 25 times their annual salaries whiles others ger only 10 times their annual salaries for the same claim)
Insurance Premiums (technically known as risk premium) are calculated based on
1 - information provided by the client
2 - client's claim history
3 - client's ability to manage the claim and minimize the damages
4 - Insurer's claim experience in this field.
5 - insurer's claims experience in this specific field
7 - insurer's and reinsurer's financial rating.
any discrepancy from any part involvd in the contract (Client / Consultant / Insurer) will result in a non accurate rating
If the policy rating is based on a False Declaration from the side of the clients; The policy will be low rated leading to loss of potential earned premiums / decreasing the financial reserves of the insurer.
If the rating is based on a false assessment from the side of the insurer; the policy will be over rated leading to losses of potential profits of the client
The insurance consultant job is to keep the balance.
If the risk is exposed to aggravating factors known by the clients and not communicated to the insurer will lead to insurers not settling related claims.
The client, at all times, has the obligation to maintain his risk and take all reasonable measures to keep it at its minimum level (i.e. well maintained fire fighting system for fore policies...)