What is 'underwriting' in the context of insurance?

Underwriting in the context of insurance refers to the process of evaluating risk to determine the premium and coverage for an insurance policy. This is a critical function performed by underwriters, who assess the likelihood of a policyholder making a claim based on various factors, such as the applicant's health, lifestyle, financial stability, and other relevant criteria.

By accurately assessing risk, underwriters help insurance companies establish appropriate premium rates that reflect the level of risk involved in insuring an individual or entity. This ensures that the insurance company remains financially sound while also offering competitive pricing and adequate coverage options to policyholders.

The other options relate to different aspects of the insurance process. The speed at which claims are paid is an operational concern but does not define underwriting. Marketing of insurance products involves promoting policies to potential customers, which is separate from the evaluation of risk and premium determination. Lastly, the settlement of claims deals with the process of paying out benefits after a claim has been made, which is also not related to the underwriting process.