Attorney at Law

What is Underwriting?

During underwriting, an insurance company determines whether to accept a risk and, if so, how much coverage it will provide and at what rate. As part of the process, the underwriter will analyze the risk to help calculate the premium for the insurance policy. Underwriting helps an insurance company determine whether providing coverage to an individual or company will be profitable. Ultimately, if the chances of a costly payout are too high, an insurance company probably won’t issue a policy.

Underwriting is performed by professionals known as underwriters that are specialized in risk assessment. Their primary responsibility is to decide which insurance policies they should offer prospective clients. Actuaries aid in the underwriting process by providing underwriters with complex data, statistics, and guidelines.

Key Takeaways

  • Underwriting is the process through which an insurance company decides whether to accept a risk and if so, how much it will provide and at what rate.
  • Using actuarial data and complex risk assessment formulas, underwriters decide whether a policyholder is a suitable candidate for insurance.
  • An insurance underwriter will review a policy if conditions change and coverage need to be re-evaluated.

Medical Underwriting

Medical underwriting is used to decide if an insurance company will accept a health insurance applicant based on their overall health and pre-existing conditions. However, since the Affordable Care Act was enacted in 2010, insurers are limited in their ability to determine coverage and premiums based on an individual’s pre-existing conditions. Other factors such as your age, gender, weight, and whether you smoke may be considered during medical underwriting. Additionally, some serious conditions may make you ineligible for health insurance altogether, such as Alzheimer's disease and Type 1 diabetes.

Medical underwriters may also request a medical examination or information about your medical history from your current healthcare provider.

Homeowner Insurance Underwriting

Certain guidelines may be used by underwriters to assess which homes to insure and at what cost. A home's age and location will likely be examined by an underwriter. If your home is older than 50 years old, it might be excluded from the insurance policy due to the high risk of damage.

Insurers could also avoid insuring apartments located in buildings with known electricity or water issues. In addition, underwriters may consider factors that could lead to lawsuits against policyholders. A balcony without a railing, rotting wooden floorboards, or even an aggressive pet could be red flags to a homeowner’s insurance underwriter.

Auto Insurance Underwriting

Auto insurance underwriters consider a variety of factors when setting eligibility and premiums. There is a greater chance of costly claims for vehicles with few safety features and powerful engines compared to less sporty models, so individuals with higher-risk vehicles might end up paying higher premiums. A car insurance underwriter may also take a look at a driver’s accident history and driving record. Insurers may charge a higher premium if a driver has received too many tickets or has been in several car accidents.

Bottom Line

Underwriting is a careful process that plays a huge role in establishing how much you will end up paying for your insurance as well as the profitability of an insurance company. In fact, Warren Buffet has emphasized the importance of underwriting's role in the success of his company, Berkshire Hathaway.

If you want to learn more about underwriting or need assistance in finding the best insurance plan for your circumstances and needs, get in touch with an experienced insurance attorney ASAP.

Ask a Lawyer

Ask your own question and get advice from expert attorneys
Ask Question

Featured Insurance Law Lawyers

Hiten Patel Attorney PLLC

12 years in practice
Criminal Defense, Insurance Law, Personal Injury
View Profile

RYTELAW-Payman Bafekr, Esq.

1 years in practice
Auto Accidents, Bad Faith Insurance, Bicycle Accidents, Contract Law, Insurance Law
View Profile

Jane Gordon Law

11 years in practice
Animal Bites, Auto Accidents, Bad Faith Insurance, Bicycle Accidents, Brain Injury
View Profile

D&O Law Group, LLC

15 years in practice
Criminal Defense, Divorce & Family Law, DUI Law, Personal Injury
View Profile

Law Offices of Ricardo J. Mauro, P.C.

29 years in practice
Auto Accidents, Personal Injury
View Profile

Law Offices of Robert F. Julian

47 years in practice
Auto Accidents, Construction Injury, Personal Injury, Wrongful Death
View Profile


Are you looking for an attorney? Do you have questions about a legal case you are facing? Contact us now and we will put you in touch with a lawyer for free.
Attorney At Law is changing how clients connect with lawyers. By providing an innovative platform to lawyers who want to expand their practice’s reach, AAL is bringing law practices into the future.
6142 Innovation Way
Carlsbad, California 92009
Some of the content of this website may be considered attorney advertising under the rules of certain jurisdictions. The information on this website is for general information purposes only. Nothing on this site should be taken as legal advice for any individual case or situation. This information is not intended to create, and receipt or viewing does not constitute an attorney-client relationship.
crossmenuchevron-upchevron-down linkedin facebook pinterest youtube rss twitter instagram facebook-blank rss-blank linkedin-blank pinterest youtube twitter instagram