Life After Death: Modern Genetics and the Estate Claim Dealing with Private Company Shares at Death: Post-Mortem and Insurance Planning (Part 1) Dealing with Private Company Shares at Death: Post-Mortem and Insurance Planning (Part II) Planning for Success: Coping with Adversity Charitable Giving & Life Insurance

Personal Financial Risk Management

Advanced Life Underwriting

The term "advanced life underwriting" is rooted in society's understanding of the ideas of 'risk' and 'uncertainty' and its evolving capacity to anticipate and financially prepare for life's developments.

To be specific, the term "underwriting" actually refers to the practice of offering to insure against risk. In the trading house where company representatives offered, in return for a fee, to ensure a payment of money in the event of loss, an agent would write their name underneath the name of a ship set to sail, to indicate his or her willingness to insure the cargo, and thereby, offset the risk of financial failure of the enterprise. These agents became known as 'under-writers'.

Through the first half of the 20^th century, agents and brokers for life insurance and related financial products, were known as life underwriters - witness the creation of the Life Underwriters Association of Canada in 1906, now the Financial Advisors Association of Canada (operating under the trade name "Advocis") and, to this day, the Institute of Chartered Life Underwriters, a division of Advocis.

The descriptive term 'advanced' in "advanced life underwriting" refers to specific applications of life insurance and related financial products (including customized retirement savings, investment, pension and benefits vehicles) directed to business continuity, estate and tax planning, income security, wealth creation and more complex risk-oriented problems. Active Members of CALU, the Conference for Advanced Life Underwriting, are members of TFAAC (Advocis) who specialize in these areas.

Personal Financial Planning and Risk Management

Over time, different terms and names have been introduced or used to refer to offering a financial product or service. At the moment, "financial planning" and "financial advisor" are commonly used to refer to people operating broadly within what's known as the financial services industry - an inclusive reference to a variety of financial products and vehicles and the people and institutions who distribute them.

The work of the Conference for Advanced Life Underwriting, and its members, concerns the applications of life insurance and related financial products in a variety of situations and circumstances. CALU is very concerned with the effective use of these products to address the most important decisions, whether in the life of a business or a person, which are associated with high levels of uncertainty and threaten the on-going well-being of a firm or family. The concepts of risk, value, performance, and quality are just a few factors that need to be measured in order to manage them from a personal financial perspective. The core competency at play is the capacity to help others consider and make economically rational decisions in advance of such uncertainty, risk and volatility.

Financial Risk Management

According to wikipedia, "Risk management can therefore be considered the identification, assessment, and prioritization of risks followed by coordinated and economical application of resources to minimize, monitor, and control the probability and/or impact of unfortunate events…The strategies to manage risk include transferring the risk to another party, avoiding the risk, reducing the negative effect of the risk, and accepting some or all of the consequences of a particular risk."

As with many of our mathematical, and by extension, financial and commercial concepts, the word "risk" is reported to have come into English from Arabic origins, largely due to contact, through trade, with European countries, whereby the words "rischio" and "riezgo" were derived from the Arabic "رزﻕ" or "rizk", meaning 'to seek prosperity'. This usage signaled a conceptual development from the ideas associated with "luck" (as expressed through the idea of "fortune") toward that of "prudentia" as a virtuous ideal within the context of an emerging commercial society and the notion of planning, preparation and protection.

Personal financial risk management succeeds where all parties agree to consider the basic facts and the underlying premise of the issue or problem to be resolved. Put simply,

Risk = {probability of event occurring} x {impact of event occurring}.

Ideally, risk management involves a prioritization process whereby the risks with the greatest loss and the greatest probability of occurring are handled first, and risks with lower probability of occurrence and lower loss are handled in descending order. In reality, however, given our subjective and emotional points of view, which unavoidably enter the consideration of problems, this process is more easily stated than applied. The balance one tries to reach between risks with a high probability of occurrence but lower loss versus risks with high loss but lower probability of occurrence is rarely achieved.

Personal Financial Risk Management

CALU is mandated to inform people, businesses and governments about the essential, productive and constructive applications of life insurance and related financial products and services, and, in the process, deepen its members civic literacy and professional expertise. CALU accentuates the importance of pragmatic, solution-based approaches which enhance personal socio-economic development and security, by recognizing and addressing financial risk and uncertainty and working with consumers, businesses and governments to help balance the need for publicly-funded programming with private initiative and self-reliance.

Paul McKay, CAE