What is a key function of underwriting in insurance?

The key function of underwriting in insurance is to assess the risk of insuring a client. This process involves evaluating the applicant's information, such as health history, lifestyle, occupation, and other relevant factors, to determine how likely it is that a claim will be made. The underwriter aims to discern whether the risk presented by the applicant falls within acceptable limits for the insurer. This risk assessment is crucial, as it directly influences the insurer's decision to offer coverage and the terms of that coverage, such as conditions and exclusions.

Setting premium rates based on market trends, while important, does not encapsulate the core function of underwriting. Premium rates are influenced by multiple factors, including market competition and profitability, but underwriting specifically focuses on individual risk assessment. Handling the claims process relates to the administration of insurance once a policy is in effect, which is separate from the underwriting function. Providing customer service involves assisting clients but does not pertain to the evaluation and acceptance of risks, which lies at the heart of underwriting activities.