The process insurers use to evaluate the risk of insuring a person or asset and determine the appropriate premium. Underwriters review applications, claims history, credit scores, and other data to decide whether to issue a policy and at what price.
Related Terms
Premium
The amount you pay to an insurance company to maintain your coverage, typically billed monthly, quarterly, or annually. Premiums are determined by factors such as risk level, coverage amount, deductible, location, and claims history.
Actuary
A professional who uses mathematics, statistics, and financial theory to assess risk and set insurance premiums. Actuaries analyze historical data and probability models to predict future losses and ensure insurers can pay claims.
Moral Hazard
The risk that having insurance may encourage riskier behavior because the policyholder does not bear the full cost of a loss. Deductibles and coinsurance are common tools insurers use to reduce moral hazard by keeping policyholders financially invested in preventing losses.