What does the term 'underwriting' refer to in the insurance industry?

Underwriting in the insurance industry is primarily focused on evaluating the risk associated with insuring an individual or entity. This process involves assessing various factors such as the applicant's health, lifestyle, financial situation, and prior insurance history. The goal is to determine whether the applicant qualifies for insurance coverage and to establish appropriate premiums based on the assessed risk level.

This means that underwriters employ statistical data and guidelines to estimate the likelihood of a claim being filed, which directly influences the terms of the coverage and its cost. The outcome of the underwriting process is essential for both the insurer, who seeks to minimize losses, and the insured, who wants to obtain coverage that is fair and adequate for their needs.

This comprehensive risk evaluation distinguishes underwriting from other processes within the insurance sector, such as claims filing, fraud investigation, or marketing, which do not involve the initial assessment of risk related to new policyholders.