01.Core Concepts

The basic principles of underwriting include: Attain an underwriting profit Select prospective insureds according to the company’s underwriting standards Reduce adverse selection against the insurer Adverse selection is the tendency of people with a higher-than-average chance of loss to seek insurance at standard rates; if it is not controlled by underwriting it will result in higher-than-expected loss levels. Provide equity among the policyholders One group of policyholders should not unduly subsidize another group