Underwriting
Underwriting is the process of examining risks for the purpose of insurance, deciding which risks to accept, the amounts of cover that will be given and what terms, conditions, exclusions will apply (if any), and the rate of insurance cover (the premium.) During the underwriting process applicants are classified according to their insurance profile to determine the actual premium to be charged. Uninsurable and unacceptable risks are rejected during this process. If you wish to insure your car and the insurance company find the particular risk unacceptable they have the right to refuse insurance.
The Underwriting cycle describes the regular pattern of rising profits and increasing premiums at the one end of the scale; at the other end reduced profits or losses and decreased premiums. When underwriting losses reach unacceptable levels the insurer will increase premiums and the underwriting cycle starts.
Underwriting expenses represents all the running expenses of the insurance company relating to the operation of its underwriting expenses. Underwriting income is the income of the insurance company after all claims have been settled and running costs have been deducted from the premium income. If the income is not sufficient to cover the costs and expenses an underwriting loss is the result. The loss or profit can also be called the underwriting result.