What does the term "underwriting" refer to in insurance?

The term "underwriting" in insurance relates specifically to the process of evaluating risks to determine whether to issue a policy and under what terms. Underwriters assess various factors associated with the potential insured, such as health, history, credit score, and other relevant data, to gauge the likelihood of a claim being made. This assessment helps insurers decide the appropriate premiums to charge and the conditions of coverage.

Understanding underwriting is crucial for insurance companies as it directly impacts their financial stability. A well-conducted underwriting process ensures that the insurer can properly manage the risks they take on by issuing policies. This means they can balance the premiums collected with the potential claims they may have to pay out.

Other options, while relevant to the insurance field, do not accurately define underwriting. Evaluating claims is part of the claims-handling process, marketing insurance products falls under sales and distribution, and settling disputes relates to claims resolution or dispute resolution mechanisms, none of which align with the true definition of underwriting.