How is underwriting best defined from an insurance perspective?

Underwriting is best defined as the process of determining insurable risk. This is a critical function within the insurance industry, where underwriters assess the risk associated with insuring an individual or entity. They evaluate various factors, such as the applicant’s health history, lifestyle, occupation, and any other relevant information that might influence the likelihood of a claim being filed in the future.

The goal of underwriting is to establish whether the risk is acceptable to the insurance company and under what terms. This includes deciding if the applicant is eligible for coverage and if so, at what premium rate. By accurately determining risk, underwriters help maintain the profitability and stability of insurance companies, ensuring that they can meet future claims and remain financially solvent.

While setting premium rates, evaluating claim submissions, and canceling policies are all important components of an insurance operation, they fall outside the core definition of underwriting. Setting premium rates is often a result of underwriting decisions but is not the process itself. Similarly, evaluating claim submissions and canceling policies are actions taken after underwriting has been completed.