Insurance underwriting derives from the Lloyd’s of London insurance market in London, United Kingdom. The basics of underwriting are a process used to assess the process of providing access to insurance. The term ‘underwriting’ was for financial backers who would accept some of the risk on a venture in exchange for a payment, or premium. The financial backer would literally write their names under the risk information which was written on a Lloyd’s slip.

Insurance underwriters have the task of calculating the risk of insuring people and businesses. The insurance underwriter is responsible for determining the risk factor, how much insurance coverage the business or person needs and how much the business or person will pay for the insurance.

The risk is measured on an exposure scale and the premium is a charge to insure the risk. The primary function of underwriters in the insurance business are to write business (insurance policies) that will make the insurance company money and protect the insurance company from risks that have high potential for loss. To be short, underwriting is the process of distributing insurance policies.

Every insurance company has their own set of guidelines for risk and underwriting. In these cases, companies look at proposals from people or businesses and then decide on whether insurance will be granted. In the case of life insurance, the risk assessment and underwriting process usually requires that the applicant for life insurance provide medical evidence.

Underwriters have the ability to make counteroffers to proposals. Usually these counter offers have a significantly higher premium (considered a loaded premium). The counter offer from a high-risk insurance policy application may also include restrictions on circumstances in which a claim could be paid by the insurance company.

Some insurance companies have an automated underwriting system that uses the rules encoded, which helps reduce the vast amount of manual work required by an underwriter.

Lloyd’s of London insurance in London, United Kingdom is a society of underwriters and financial backers. This society can be approached by specially registered insurance brokers to obtain insurance. High risk insurance proposals sometimes have a difficult task of finding insurance, but societies like Lloyd’s of London specialize in such risk analysis. The premiums for extremely high risk business or people is often staggering, and the restrictions can be daunting, however, at the end of the day, it’s most important to remember that you have complied with insurance regulations set by your lease, company, loan agreement or other agreement and that you have met the compliance issues set out.