The occupational class is a method of classification to ascertain the level of inherent risks that goes along with specific types of occupations.
This helps with profiling, which in turn determines risk levels that affects premiums.
Occupational class is most often observed in personal accident insurance policies where coverage is provided for serious accidents.
As some types of jobs are inherently more hazardous compared to others, they are rightly classified as riskier.
For example, a foreman who works at a construction site would generally have higher probability of suffering injury from accidents than a desk-bound accountant.
The level of risk that goes with each type of occupation can depend on the type of insurance policy being underwritten.
For example, it can be argued that an insurance policy for protection against office fires would put the accountant at a higher risk as the foreman would seldom (if ever) step into an office.
Some people can also have life insurance applications rejected for being in risky professions.
Common occupational classes
The common practice is to categorize people who apply for insurance policies into 3 types of occupational classes.
- Occupational class 1
- Occupational class 2
- Occupational class 3
Do note that this is not a standard across the insurance industry that is adopted by all insurance companies.
The first class is often identified as the group with the lowest risk. While the higher numbered classes would carry a higher risk.
Occupational class 1 are often described as jobs that are indoor desk-bound like clerics, accountants, salespeople, housewives, doctors, retirees, etc.
At the higher occupational class 3, jobscopes would include manual labour, operating of heavy machinery, or require working in hazardous conditions.
They can include those working as lifeguards, contractors, delivery men, technicians, plumbers, etc.
In general for the same amount of sum assured, the higher the class, the higher the risks, and the higher the premiums.
Some insurers can be very specific in their wording found in policies about what types of occupations would fall under which occupational class level.
While other insurers can be pretty vague or broad in their definition about what types of jobs fall under what class. These insurers usually do so due to an aggressive marketing strategy to capture market share.
While personal accident policies often come to mind when discussing occupational class, other types of policies such as car insurance can also make occupational class a primary factor.
For example, someone working as a driver would automatically have a higher risk of running into an accident on the road compared to an office worker who only used the vehicle to travel to and fro the office.
Some types of insurance does not allow applicants to be profiled according to occupation as it is deemed as a form of discrimination.
Basic travel insurance purchased for a holiday for example should have no bearing on the occupation of the insured. However, this might be a different issue should it be a policy for business travels.
Something else to note is that occupational class is also a term that is used for national statistics. This has no relation to insurance underwriting.
