What term describes the process of evaluating and pricing risks for insurance applicants?

The process of evaluating and pricing risks for insurance applicants is known as underwriting. Underwriting serves as a critical function within the insurance industry, where underwriters assess the risk associated with potential policyholders based on various criteria such as health history, lifestyle factors, and other relevant information. This assessment allows them to determine the appropriate premium rates and coverage options that reflect the level of risk involved in insuring that individual or entity.

In contrast, risk management refers to the broader strategy of identifying, assessing, and prioritizing risks followed by coordinated efforts to minimize, control, or eliminate the impact of unforeseen events, but it does not specifically refer to the evaluation of risks associated with insurance applications. Policy evaluation is not a standard term used in the insurance industry; rather, it may suggest reviewing existing coverage rather than assessing new applicants. Claims processing is distinctly different, as it involves handling claims made by policyholders after a loss has occurred, focusing on the resolution and payment of these claims rather than evaluating new risk. Overall, underwriting is essential for ensuring that insurance companies remain financially stable while providing coverage that is fair and equitable based on the risks presented.