Glossary · UK
What is Insurance Underwriting?
The process an insurer uses to assess risk and decide whether to offer cover, on what terms, and at what price.
Full Definition
Underwriting is the process an insurer goes through to assess the level of risk presented by a prospective policyholder, and then to decide whether to offer cover, on what terms, and at what premium. For personal lines insurance such as car, home or life insurance, underwriting is largely automated: an applicant's answers to standard questions (age, occupation, claims history, health information, property details, and so on) are fed into pricing models and risk-scoring systems that generate a quote almost instantly, though some applications -- for example, those with unusual risk factors, unusually high sums insured, or unclear medical history for life insurance -- may be referred to a human underwriter for individual assessment, sometimes requiring further evidence such as a medical report. Underwriting decisions can result in standard terms, a loaded (increased) premium to reflect higher-than-average risk, specific exclusions for known risks, or in some cases a decline of cover altogether if the risk is considered outside the insurer's risk appetite. Accurate disclosure at the underwriting stage matters a great deal: under the duty of "fair presentation" that applies to most consumer insurance in the UK, failing to disclose relevant information, or answering underwriting questions carelessly or dishonestly, can allow an insurer to reduce a claim payout proportionately, apply different terms retrospectively, or in cases of deliberate or reckless misrepresentation, avoid the policy entirely and refuse to pay a claim.