Underwriting refers to the process that financial institutions use to evaluate potential clients and assess their eligibility for various financial products like insurance, mortgages, or credit. Insurance underwriters evaluate risks and exposures of clients to determine how much coverage they should receive, what premiums they should pay, or whether to accept the risk at all. The underwriting process involves measuring risk exposure and setting premiums accordingly based on objective guidelines, with the goal of protecting the long-term viability of the insurance program.
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Underwriting refers to the process that financial institutions use to evaluate potential clients and assess their eligibility for various financial products like insurance, mortgages, or credit. Insurance underwriters evaluate risks and exposures of clients to determine how much coverage they should receive, what premiums they should pay, or whether to accept the risk at all. The underwriting process involves measuring risk exposure and setting premiums accordingly based on objective guidelines, with the goal of protecting the long-term viability of the insurance program.
Underwriting refers to the process that financial institutions use to evaluate potential clients and assess their eligibility for various financial products like insurance, mortgages, or credit. Insurance underwriters evaluate risks and exposures of clients to determine how much coverage they should receive, what premiums they should pay, or whether to accept the risk at all. The underwriting process involves measuring risk exposure and setting premiums accordingly based on objective guidelines, with the goal of protecting the long-term viability of the insurance program.
Copyright:
Attribution Non-Commercial (BY-NC)
Available Formats
Download as DOCX, PDF, TXT or read online from Scribd
Underwriting refers to the process that financial institutions use to evaluate potential clients and assess their eligibility for various financial products like insurance, mortgages, or credit. Insurance underwriters evaluate risks and exposures of clients to determine how much coverage they should receive, what premiums they should pay, or whether to accept the risk at all. The underwriting process involves measuring risk exposure and setting premiums accordingly based on objective guidelines, with the goal of protecting the long-term viability of the insurance program.
Copyright:
Attribution Non-Commercial (BY-NC)
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Insurance underwriting
Underwriting refers to the process that a large financial service provider (bank, insurer, investment house) uses to assess the eligibility of a customer to receive their products (equity capital, insurance, mortgage, or credit). The name derives from the Lloyd's of London insurance market. Financial bankers, who would accept some of the risk on a given venture (historically a sea voyage with associated risks of shipwreck) in exchange for a premium, would literally write their names under the risk information that was written on a Lloyd's slip created for this purpose.
Insurance underwriters evaluate the risk and exposures of potential clients. They decide how much coverage the client should receive, how much they should pay for it, or whether even to accept the risk and insure them. Underwriting involves measuring risk exposure and determining the premium that needs to be charged to insure that risk. The function of the underwriter is to protect the company's book of business from risks that they feel will make a loss and issue insurance policies at a premium that is commensurate with the exposure presented by a risk. Each insurance company has its own set of underwriting guidelines to help the underwriter determine whether or not the company should accept the risk. The information used to evaluate the risk of an applicant for insurance will depend on the type of coverage involved. For example, in underwriting automobile coverage, an individual's driving record is critical. As part of the underwriting process for life or health insurance, medical underwriting may be used to examine the applicant's health status (other factors may be considered as well, such as age & occupation). The factors that insurers use to classify risks should be objective, clearly related to the likely cost of providing coverage, practical to administer, consistent with applicable law, and designed to protect the long-term viability of the insurance program.[1] The underwriters may either decline the risk or may provide a quotation in which the premiums have been loaded or in which various exclusions have been stipulated, which restrict the circumstances under which a claim would be paid. Depending on the type of insurance product (line of business), insurance companies use automated underwriting systems to encode these rules, and reduce the amount of manual work in processing quotations and policy issuance. This is especially the case for certain simpler life or personal lines (auto, homeowners) insurance.
