What does "underwriting" involve in insurance?

Underwriting in insurance is a critical process that focuses on determining the risk associated with insuring a particular individual or entity and setting appropriate premiums based on that assessment. This involves evaluating various factors such as the applicant's health status, lifestyle choices, past insurance claims, and other relevant data to assess the likelihood of a claim being made and its potential cost.

The objective of underwriting is to ensure that the insurer can cover potential losses while maintaining profitability. By accurately assessing risk, underwriters can set premiums that appropriately reflect the level of risk being assumed. This process is foundational to the insurance industry, as it helps maintain the balance between providing coverage to customers and managing the insurer's financial health.

The other options pertain to different functions within the insurance field. Adjusting claims is related to evaluating and processing claims after losses occur, external audits focus on financial assessments of insurance companies, and customer service support handles inquiries and assists policyholders with their needs.