What is the purpose of risk assessment in underwriting?

The purpose of risk assessment in underwriting is primarily to determine the coverage and pricing for an applicant. This process involves evaluating various factors related to the individual's or entity's risk profile, such as their claims history, the nature of their business or lifestyle, and other relevant characteristics. By conducting a thorough risk assessment, underwriters can make informed decisions regarding the terms of the insurance policy, which includes the types of coverage that are appropriate and the premium that should be charged.

Risk assessment helps underwriters to accurately match the risk presented by the applicant with the insurer's risk appetite and pricing strategies. This individualized approach not only supports the insurer's financial stability but also ensures that the policyholder receives appropriate coverage tailored to their specific situation.