A person seeking life insurance cover has to make an application to the insurer. Such an application is called as ‘proposal’. The person applying for insurance is called the proposer. The insurer then decides about the proposer’s admissibility to the pool of policyholders. The process of taking such decision is called ‘underwriting’. It is selection of life to be insured after assessing the risk associated with the policyholder.
The official doing the process of underwriting in the office of insurance company’s is called as ‘Underwriter’. Underwriter is the employee of the insurer. They assesses the risk, determine the premium to be charged. The underwriter acts in the interest of the policyholders as a whole and in the interest of the insurance company. No policy can be issued without the underwriter’s decision. The underwriter charges extra premium for hazards such as physical, occupational & moral hazards. If underwriter feels that the risk is more then he may impose a lien.
Underwriting is done in the both cases where medical examination is done and a non-medical case where there is no medical examination is done. The agent’s report is important for the underwriter. He is expected to make his report commenting on the risk factors.