What is Life Insurance Underwriting?
To "underwrite" means to accept liability for possible losses by clients. As such, underwriters review new or renew applications for insurance coverage, both for individuals and companies.
Life insurance underwriting is using a set of analyitics to come up with the right premium amount an individual should pay. This premium should minimize company losses in light of the individual health, medical history, age, gender, credit score, and more! AccuQuote Life insurance 101 explains how different companies have different underwriting systems which could affect your premium rating. This is why it’s always good to shop around for life insurance and take advantage of differing systems.
The idea of Life Insurance underwriting is what determines the cost of your policy. If might even determine if you will even be able to purchase life insurance at all. But what is it? In the insurance industry, the term underwriting refers to the process of evaluating risk. In order to understand what underwriting is, you have to review the basic premise on which insurance operates. The underlying principle of insurance is the transfer of risk. The risk is taken away from the insured and transferred to the insurer. What makes this possible is that the Insurance Company is going to assume the risks for a large number of individuals. Since the large number of individuals will be paying premiums, there will be funds available to pay claims and still allow the Insurance Company to pay its expenses and make a reasonable profit. In order to make sure that this is true, there must be a very good understanding of just what the risks are and projections must be made of how many claims are likel
