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

The term "underwriting" in the context of insurance primarily refers to the process of evaluating risk and determining the premium for coverage. This involves assessing the potential risk associated with insuring a person or entity and deciding whether to offer insurance and at what price. Underwriters analyze various factors, including the applicant's history, type of coverage requested, and the likelihood of a claim occurring. This crucial step ensures that the insurance company can maintain financial stability while providing coverage appropriately.

Setting insurance rates is a broader activity that may result from the underwriting process but does not fully encapsulate what underwriting entails. Adjusting claims and providing customer service are roles that occur after the underwriting process is complete, focusing on managing claims once a policy is in effect and assisting clients with their inquiries or concerns, respectively. Therefore, the correct understanding of underwriting lies in its role as a foundational process in the insurance lifecycle that precedes coverage issuance.