Underwriting the process of determining the level of risk presented by the proposer and deciding whether to accept the same and if so at what terms and at what price.
Underwriting is essential in all forms of insurance. Understanding the concept of risk sharing or pooling makes it easier to understand the role of underwriting and asset classification. In life insurance, underwriting of healthy person and a sick person shall never be same.
Purpose and objectives of underwriting
Underwriting helps insurer to
•cover the risk properly
•offer competitive price
•cover suitable margin to pay claims and expenses
•compliance with regulatory requirements
•Reject Uninsurable risks
•Prevent Moral hazard
•Earn Reasonable profit
•Apply suitable deductibles
