Underwriting
The insurer process of selecting, classifying, and pricing risks before binding coverage.
Overview
Life underwriting uses medical exams, labs, prescription histories, motor vehicle records, and financial justification for the face amount, sorting applicants into preferred, standard, and substandard classes. Property and casualty underwriting judges construction, protection, occupancy, claims history, and catastrophe exposure, while reinsurance underwriting prices treaties and individual placements. Automated systems now approve most simple applications in seconds, with humans reserved for edge cases. The discipline balances adverse selection, since applicants know their risks better than insurers, against market pressure to grow volume. Underwriting profit, premiums exceeding claims and expenses, was long the profit engine of insurance before investment income grew, and hard versus soft markets describe the cyclical tightening and loosening of appetite.
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