What is the primary purpose of an underwriter?

The primary purpose of an underwriter is to protect insurers from adverse selection. Adverse selection occurs when individuals with a higher risk of making a claim are more likely to purchase insurance, which can lead to a disproportionate level of risk for the insurer. Underwriters assess the risk associated with insuring applicants by evaluating their health, lifestyle, and other relevant factors. This process helps determine appropriate premium rates and ensures that the insurer can maintain a balanced and sustainable risk pool. By carefully selecting who is eligible for coverage and at what price, underwriters play a crucial role in safeguarding the insurer's financial stability. This function also ultimately supports the overall integrity of the insurance market.