Underwriting in insurance is the process of...

• A. Determining whether a risk can be insured and at what rate.
• B. Appraising the market value of the insured asset after a loss.
• C. Issuing a policy automatically to all applicants.
• D. Collecting premiums and filing tax returns.

Answer: (A)

Underwriting is the process of evaluating an applicant’s risk to determine if it can be insured and at what rate. It involves analyzing factors such as age, health, medical history, occupation, hobbies, and details of the specific risk to decide insurability and the appropriate premium. The underwriter may approve the risk at standard terms, offer preferred or substandard (rated) pricing, modify policy terms, or decline coverage if the risk is too high. The goal is to balance the insurer’s exposure with a price the insured can pay, maintaining profitability and affordable protection.

The other activities—appraising market value after a loss, issuing policies automatically to all applicants, and collecting premiums or filing tax returns—fit into claims evaluation, policy administration, and financial/tax duties, not the underwriting process.