What Is Underwriting in General Insurance?
Underwriting decides which risks an insurer takes and on what terms.
Underwriting is the work of deciding which risks an insurer will accept, on what terms and at what price. A general insurer takes in premium today in exchange for promises it may have to keep later, so every acceptance is a judgement about future claims.
Sales brings proposals in, but the underwriter decides what the insurer actually carries. That is why underwriting quality shows up directly in the loss ratio.
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What an Underwriter Decides
| Question | Decision |
|---|---|
| Should we take this risk? | Accept or decline |
| How much of it? | Keep it, or share it through reinsurance |
| On what terms? | Cover, exclusions, warranties, deductible |
| At what price? | Rate, loading or discount |
Why It Matters
- check_circleRisks must be spread so that the many pay for the losses of the few.
- check_circlePoor selection attracts more bad risks, because they find the cover cheap.
- check_circleUnderpricing wins business now and shows up as losses later.
- check_circleConsistent decisions keep treatment fair between similar insureds.
Quick practice on rating and risk selection. No signup needed.
Exam Angle
Expect questions on the aims of underwriting and on how it differs from claims and sales. Remember that the job covers both selection and pricing, not just saying yes or no.
FAQs
What is the main aim of underwriting?expand_more
To build a profitable, balanced portfolio by selecting risks and setting suitable terms and prices.
Is underwriting only about rejecting risks?expand_more
No. Most of the work is finding terms on which a risk can be accepted.
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