Introduction to General Insurance Underwriting

Subject Content

Underwriting methods

  • Individual risk underwriting

    Individual risk underwriting involves underwriters dealing with each insurance application on a case-by-case basis. The underwriter carefully composes the appropriate terms, limitations, conditions and premiums by giving relevant consideration to:

    • risk characteristics
    • physical hazards
    • applicant moral hazard (including attitudes to risk management, claims history and frequency of past losses)
    • any insurance cover automatically provided by legislation (for example, the Earthquake Commission in NZ).
  • Portfolio underwriting

    When an insurer oversees a large number of risks of a similar product type and confidently understands those risks to be relatively undifferentiated, they can underwrite on a portfolio-wide basis.

    Methods used in portfolio underwriting may include:

    • evaluating risks endemic in the product
    • characterising the geographic spread of risks
    • evaluating and applying generalised indicators of risk
    • examining the total at-risk value in the portfolio as a whole.