What is one primary function of underwriting?

The primary function of underwriting is to select acceptable subjects of insurance. Underwriters assess the risks associated with insurance applications and decide whether to accept or reject those applications based on various factors such as the applicant's risk profile, past claims history, and the overall risk associated with the type of coverage requested.

In doing so, underwriters play a crucial role in ensuring that the insurance company maintains a balanced and profitable portfolio of risks. Effective underwriting helps protect the insurer from adverse selection, where individuals with higher risks are more likely to seek insurance. By carefully selecting which risks to insure, underwriters contribute to the financial stability of the insurance company while also ensuring that those seeking coverage have a legitimate need for it.

This function distinguishes underwriting from other activities in the insurance process, such as customer service, which focuses on the relationship and communication with insured parties, and market analysis, which evaluates the popularity of different insurance types and products. The elimination of all risks is not feasible in underwriting, as the goal is to assess and manage risk rather than completely remove it. Thus, the choice of selecting acceptable subjects of insurance accurately captures the essence of underwriting's role.