Medical examination for contingent assurances

Extract

The object of medical examination in life assurance is to guard the insurer against financial loss which might occur if the life assured suffered a heavier mortality than that underlying the premium calculation. Such a loss would occur under a whole-life assurance; on the other hand, if the sum assured became payable on the death of A provided B survived him, then the higher the mortality of B the greater the profit of the insurer.

There are, however, more complex types of assurances for which it is less easy to say whether a higher mortality in a particular life will produce a profit or loss to the insurer. Examples will be given below of assurances under which an increase in mortality will produce a profit or loss according to the age of the life in question. It is therefore necessary to give a rule to settle this point, and with it the question whether medical examination is required or not.