What is UNDERWRITING in insurance?

 Insurance underwriting refers to the process that the insurer takes to assess and analyze the risk exposure of the proposer or client; and decides whether to accept or reject the risk and if accepted, at what rate of a premium to charge the proposer.

Sounds mouthful? Don't worry, let's break it down!

The insurance underwriting process basically enables the insurers to select the applicants who will best fit their pool of insured parties with similar risk exposures.

The insurance underwriting process is done by a professional called an insurance underwriter, whose main task is to assess and manage the risk exposure of insureds’ pool so as to make sure that the insurance company is operating at a profit.

Other than assessing the risks that the new clients bring to the pool, other functions of underwriters include:

1. Deciding whether to accept or reject the risk.
2. Deciding how much of the risk to accept.
3. Determining the terms, conditions, and scope of cover to be offered.
4. Calculating the suitable premium amount to charge the client for insuring their risk.

Most underwriters are employed by insurance companies to undertake the insurance underwriting process. Lloyd’s underwriters, on the other hand, are independent underwriters from Lloyd's of London who accepts the whole or part of a risk offered on behalf of Lloyd’s members and acts as an insurer as per the proportion of the premium received. [Lloyd's of London is the world's leading insurance market located in London, United Kingdom].