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

Underwriting refers to the assessment of risk and determination of premium rates in the insurance industry. This process begins when an application for insurance is submitted. The underwriter evaluates the applicant's information, such as health history, lifestyle, occupation, and other relevant factors, to determine the level of risk the person represents to the insurance company.

Once the risk assessment is complete, the underwriter establishes the premium rates that reflect that risk. Higher risks are often associated with higher premiums to ensure that the insurance company can cover potential claims. Conversely, individuals deemed to be lower risk may qualify for more favorable rates. This careful evaluation helps insurance companies maintain financial stability while providing suitable coverage for their policyholders.

The other options, while related to insurance, do not accurately capture the essence of underwriting. Selling policies, adjusting claims based on policy terms, and evaluating beneficiaries pertain to different aspects of the insurance process and do not specifically align with the purpose or function of underwriting.