underwriting
The process by which an insurance company assesses the risk of insuring a home, car, or person, and decides whether to offer a policy and what premium to charge.
In health insurance, underwriting is heavily regulated. For example, in many countries, 'medical underwriting' (charging more or denying coverage based on pre-existing conditions) is banned for standard health plans.
Word relationships
- risk assessment: Risk assessment is the general practice of evaluating hazards, while underwriting is the specific insurance process of evaluating risk to set policy terms and prices.
Commonly confused with
- actuary: An actuary is the mathematician who calculates broad risk pools and rates; an underwriter applies those rates to specific individuals or groups.
Word family
- underwrite (verb): To accept financial responsibility for an insurance risk; to sign and accept liability.
- underwriter (noun): A person whose job is to assess risk and write insurance policies.
Collocations
- medical underwriting
- underwriting process
- underwriting guidelines
- underwriting risk
Example sentences
- "Strict underwriting guidelines help insurance companies maintain financial stability by ensuring they do not take on more risk than they can afford to cover." An analysis of insurance company operations.
- "Before the passage of the healthcare reform act, medical underwriting allowed insurers to deny coverage to individuals with chronic illnesses." A historical look at healthcare reform.
Memory hook
Picture an insurance agent standing 'under' a giant contract, 'writing' their signature to support and take responsibility for your health risks. Underwriters write their names under the risk to accept it.
When not to use
Do not use underwriting to mean the physical act of writing at the bottom of a page, although that is where the name comes from.
Fun facts
- The concept of underwriting dates back to the ancient Babylonian Code of Hammurabi, which allowed merchants to write off loans if their shipments were stolen or lost at sea.
Related words
Our English vocabulary app: FSRS spaced repetition, 5,000+ curated words across 119 topic groups, CEFR A1 to C2. Explore your mastery with the beautiful Vocabulary World feature.