What reason might an underwriting department have to reject a disability income insurance application?

The underwriting department may reject a disability income insurance application if the applicant's profile suggests that there could be likely severe losses compared to what the insurer anticipates in terms of rates. This decision is based on assessing the applicant's health status, occupation, lifestyle, and medical history, which can indicate a higher risk of experiencing a disability that would result in a claim. If the potential financial implications of insuring an applicant outweigh the expected premium income, the underwriters may determine that accepting the application is not economically viable for the insurer.

In this context, the underwriting process involves evaluating the likelihood of a claim being filed and whether that risk aligns with the company's risk tolerance and pricing strategy. If an applicant presents a high probability of severe disability that may lead to significant payouts, the insurer would view such an application as too risky and therefore choose to reject it.