Underwriting

Select and classify applicants so that premiums charged match the level of risk assumed — Underwriting evaluates each applicant's risk and places them in a class — preferred, standard, or substandard — so the premium reflects the probability of loss. This risk selection protects the pool: if poor risks paid standard rates, good risks would subsidize them and adverse selection would push rates upward. Underwriting exists to keep the insured group reasonably homogeneous and the premium structure sound over the long term.

National insurance concept

Accurately recording the applicant's statements and reporting observable risk factors in the agent's report — Field underwriting is the agent's role: interview the applicant, record answers accurately, observe signs of health or risk (such as a dangerous occupation or hobby), and report findings to the home office. The insurer's underwriters make the issue decision, assign the risk class, and review medical evidence. An inaccurate agent's report distorts the underwriting process and can lead to rescission later. The agent's observations and truthful recording are essential inputs the underwriter relies upon.

National insurance concept