In insurance, what does 'underwriting' primarily refer to?

Underwriting primarily refers to the process of evaluating risks and determining policy terms in the insurance industry. This step is crucial as it allows insurers to assess the likelihood of a claim being made and the potential cost associated with it. By conducting thorough evaluations of various risk factors, such as an applicant's health status in life insurance or driving record in auto insurance, underwriters aim to establish fair premiums and appropriate coverage limits.

This careful risk assessment ensures that the insurer can manage its exposure to loss while providing protection to policyholders. The outcomes of underwriting greatly influence the overall pricing and accessibility of insurance products, making it a foundational aspect of the insurance business.