Underwriting

Underwriting is the process by which a financial institution, insurance company, or lender evaluates the risk of providing a service, loan, or insurance policy to an individual or organization. The underwriter assesses factors such as creditworthiness, health, income, and other relevant details to decide whether to approve the application and under what terms.

Example: An insurance company receives an application for a life insurance policy. The underwriter reviews the applicant’s age, medical history, lifestyle, and occupation to determine the risk of insuring them. Based on this assessment, the company may approve the policy, set a premium, or reject the application.