Is life insurance underwriting important? You bet underwriting is important. Just think about the "sub-prime mortgage mess," where underwriting standards were first lax and then non-existent.
I would argue that good underwriting is more important in life insurance because of asymmetry of knowledge between the buyer and the company and the huge leverage between the very low term premiums and the huge benefit. For example, a $1,000,000 term policy only costs about $1,000 per month. Any asymmetry of knowledge (the applicant knows of a risk that is not disclosed to the company), quickly moves the odds in favor of the applicant.
At the same time, the insurance company is in the business of selling life insurance and often looks quite hard for favorable factors that will allow them to issue a case or improve the rating. But once, underwritten and placed in force, that risk will remain for decades to come and can not be canceled except for non-payment or premiums.
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