What is the main purpose of underwriting in the insurance industry?

The main purpose of underwriting in the insurance industry is to evaluate risks for policy issuance. Underwriting involves assessing the potential risk an applicant poses to the insurance company, which includes analyzing various factors such as the individual's health history, lifestyle choices, and other relevant information. This thorough evaluation helps determine whether to accept or decline an insurance application, and if accepted, what the terms and premiums of the policy will be.

Underwriters play a critical role in ensuring that the insurer accurately prices the risk and maintains financial stability by rejecting applications that exceed acceptable risk thresholds. This process ultimately protects both the insurance company and its policyholders, allowing for a more viable insurance market.