Underwriting is a critically important function and is performed each time an insurance application is taken. Its purpose is to determine if applications represent risks acceptable to the insurer to determine whether or not the insurer will issue a policy to an applicant. Underwriting is based on a variety of criteria, established by each insurer and regulated by state laws. Each underwriting decision involves balancing the insurer’s desire to earn premium with the insurer’s ability to cover claims and remain in compliance with regulatory financial requirements while making a profit.
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