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Principles of Risk Management and Insurance, 13th Edition by Michael McNamara, George E. Rejda

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Underwriting

Underwriting refers to the process of selecting, classifying, and pricing applicants for insurance. The underwriter is the person who decides to accept or reject an application.

Statement of Underwriting Policy

Underwriting starts with a clear statement of underwriting policy. An insurer must establish an underwriting policy that is consistent with company objectives. The objective may be a large volume of business with a low profit margin or a smaller volume with a larger margin of profit. Classes of business that are acceptable, borderline, or prohibited must be clearly stated. The amounts of insurance that can be written on acceptable and borderline business must also be determined.

The insurer’s underwriting policy is determined ...

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