What does "underwriting" mean in insurance?

Underwriting in insurance refers to the process of assessing risk and determining appropriate premium rates for insurance policies. This critical function helps insurers evaluate the likelihood of a loss occurring and the potential costs associated with that loss. Underwriters analyze various factors, including the applicant's history, industry standards, and other risk indicators, to make informed decisions about whether to accept or decline coverage and at what price.

This process is fundamental to maintaining the financial health of an insurance company, as it enables insurers to set premiums that appropriately reflect the level of risk involved. A thorough underwriting process ensures that the insurer is capable of covering potential claims while remaining profitable.

The other options provided relate to different aspects of the insurance industry. The design of new insurance products is a distinct function focused on innovation rather than the assessment of risk. The method for resolving legal disputes pertains to the claims process or legal framework of insurance contracts, which does not involve determining premiums. Customer satisfaction measurement is related to service quality and operational effectiveness but is unrelated to the technical aspects of underwriting and risk assessment.