Which of the following best defines the term "underwriting"?

Which of the following best defines the term "underwriting"?

• A. An assessment of risk to determine policy issuance
• B. A reviewing process for claims after policy issuance
• C. A marketing strategy for selling insurance products
• D. A standardized approach for premium collection

Answer: (A)

The term "underwriting" specifically refers to the process of assessing risk in order to determine whether an insurance policy should be issued and under what terms. This assessment involves evaluating the applicant’s health status, lifestyle, and other factors that could impact the likelihood of a claim being made. The goal is to ensure that the insurer can make informed decisions about the coverage they provide and the premiums they charge. The other options do not accurately describe underwriting. For example, reviewing claims after a policy has been issued pertains to the claims handling process, which comes after the underwriting stage. Marketing strategies involve promoting and selling insurance products, which is unrelated to the evaluation of risk. Lastly, while premium collection is a necessary part of the insurance business, it does not encompass the risk assessment that defines underwriting. Therefore, the definition focused on risk assessment directly aligns with the central role of underwriting in the insurance mechanism.

The term "underwriting" specifically refers to the process of assessing risk in order to determine whether an insurance policy should be issued and under what terms. This assessment involves evaluating the applicant’s health status, lifestyle, and other factors that could impact the likelihood of a claim being made. The goal is to ensure that the insurer can make informed decisions about the coverage they provide and the premiums they charge.

The other options do not accurately describe underwriting. For example, reviewing claims after a policy has been issued pertains to the claims handling process, which comes after the underwriting stage. Marketing strategies involve promoting and selling insurance products, which is unrelated to the evaluation of risk. Lastly, while premium collection is a necessary part of the insurance business, it does not encompass the risk assessment that defines underwriting. Therefore, the definition focused on risk assessment directly aligns with the central role of underwriting in the insurance mechanism.