What process do insurers use to determine whether a policy should be issued and on what terms and conditions?

• A. Underwriting
• B. Auditing
• C. Claim adjustment
• D. Policy rating

Answer: (A)

Underwriting is the process insurers use to evaluate risk and decide whether to issue a policy and on what terms and conditions. An underwriter reviews the information the applicant provides—such as age, health, driving history, property details, and other risk factors relevant to the line of coverage—and applies the company’s guidelines to determine eligibility, coverage scope, and pricing. Based on that assessment, they decide if the risk is acceptable and, if so, what premium, deductibles, limits, and any exclusions or endorsements should apply. This step ensures the policy reflects the level of risk and helps the insurer maintain solvency while offering appropriate protection to the insured. Auditing, claim adjustment, and policy rating involve other parts of the insurance process and don’t capture the full decision-making role of underwriting.