Insurance Underwriting Explained

Insurance Underwriting Explained

All insurance companies have the same objective: to minimize their losses by avoiding risk and increase profits through the collection and investment of premium dollars.

Insurance companies minimize their losses by assessing the risk and exposures of prospective clients through a process called “underwriting.” Insurance underwriters assess risk by evaluating the likelihood that an applicant might submit a claim based on factors such as the applicant’s age, sex, weight, height, occupation, health history and family health history.

Insurance underwriters determine how much coverage an applicant should receive, if any; the terms and conditions of the policy, as well as the premium amount the applicant must pay on a lifetime or term basis to maintain their coverage.

Insurance underwriters work with actuaries, claims managers, medical specialists and brokers to ensure that the premiums being proposed to prospective clients are competitive whilst high enough to cover possible losses from claims. Underwriters also play a key role in defining the terms and conditions of policies to mitigate the chances of a claim being paid.

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