whilst expeditious processing and settlement of claims is one
of the most important and vital functions of an insurance
organization, prudent and sound underwriting discipline
is the hallmark of its steady growth and profitable operations,
particularly in the long run. Similarly, meticulous risk assessment and
competitive pricing of its products are very fundamental to effective
underwriting of risks. Prompt scrutiny and fair settlement of claims are the
basic needs of effective claims administration.
Although both the said functions are equally crucial
and fundamental for the success and steady growth of profitable
business, for insurers, claims management, to a large extent, is
indirectly dependent on the technical expertise and high standards
of underwriting efficacy of the concerned insurance
company. This factor assumes all the more importance and prominence, in the
general insurance business in India, arising out of `detariffication' of
premium rates in the recent past.
Underwriting refers to the process that a large financial service provider (bank, insurer, investment house)
uses to assess the eligibility of a customer to receive their products (equity capital, insurance mortgage or credit).
The name `underwriting' is derived from the Lloyds London insurance market. The word or the process
of `underwriting' is associated with various financial services with different connotations and accordingly
referred to with related nomenclature, such as securities underwriting, bank underwriting, insurance underwriting,
real estate underwriting, forensic underwriting, sponsorship underwriting, etc., only to name a few. The
term underwriting in insurance parlance and also the underlying process is slightly different from other types
of underwriting. For the purpose of this article, we confine the usage of the term and also the process involved
to insurance underwriting only. |
