What is the primary purpose of underwriting in insurance?

The primary purpose of underwriting in insurance is to evaluate risks based on established guidelines. Underwriters assess the risk presented by potential policyholders to determine the likelihood of filing a claim. This process involves analyzing various factors such as health status, lifestyle choices, and other relevant criteria that influence the risk level associated with an individual or entity.

By evaluating these risks, underwriters can make informed decisions about whether to approve or deny insurance applications. They also provide critical insights that help insurance companies determine how to tailor policies and coverage options to match the assessed risks. This assessment is foundational in ensuring that insurance products remain viable and financially sound for the insurer while offering appropriate protection to the policyholders.