What is underwriting primarily concerned with?

Underwriting is a crucial function within the insurance industry primarily focused on evaluating and selecting risks that an insurance company is willing to insure. This process involves analyzing various factors related to the individual or entity seeking insurance—such as their health, financial status, driving record, and other relevant information—to assess the level of risk they represent to the insurer.

The primary aim of underwriting is to ensure that the risks taken by the insurance company are manageable and profitable. When underwriters accurately assess the risk, they can set appropriate premiums that reflect the likelihood of a claim being made. This helps maintain the financial health of the insurance company by ensuring that the premiums collected outweigh the claims paid out over time.

The other options, while relevant to operations within the insurance sector, do not directly capture the essence of underwriting. For instance, determining the legality of policies pertains more to regulatory compliance than risk selection, while setting rates based on market value involves pricing strategies that may come after risk assessment has taken place. Investigating claims is an essential function for ensuring that claimed losses are legitimate, but this is distinct from the underwriting process, which occurs prior to the issuance of a policy.