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The Pillars of Underwriting in Property and Casualty Insurance

Updated: Jul 4

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In the intricate world of property and casualty insurance, the backbone of the industry lies in the meticulous process of underwriting. Underwriting encompasses the art of selecting, classifying, and pricing applicants for insurance, and it’s the underwriter who plays a pivotal role in making these critical decisions. The core principles that underpin the practice of underwriting draw parallels with a beloved story from my book, Once Upon A Claim: Fairy Tales to Protect Your Ass(ets).


Attain an Underwriting Profit


The first principle of underwriting revolves around the quest to attain an underwriting profit. In simple terms, insurers aim to collect more in premiums than they pay out in claims and expenses. Achieving this profit is essential for an insurance company’s financial stability and ability to provide coverage.


In our fairy tale world, the three little pigs are well aware of the importance of underwriting profit. They understand that their premiums, much like the bricks in their sturdy houses, need to provide a solid foundation for future protection.


Select According to Underwriting Standards


The second principle emphasizes the selection of prospective insureds according to the company’s underwriting standards. Insurance companies establish criteria that help them assess an applicant’s risk profile. By adhering to these standards, insurers ensure that policyholders are a good fit for their coverage.


In our fairy tale, the three little pigs follow their own standards when choosing materials for their homes. Each pig selects wisely, considering the strength of the bricks, sticks, and straw. Similarly, insurers must carefully select applicants whose risk profiles align with their underwriting standards.


Provide Equity Among Policyholders


The third principle of underwriting aims to provide equity among policyholders. Equity means fairness and impartiality. Insurance companies strive to treat all policyholders fairly and ensure that no one group is unfairly burdened with higher premiums due to the actions of others.


In our story, the three little pigs share a sense of fairness when they offer shelter to one another in times of need. This sense of equity is mirrored in the insurance industry, where policyholders collectively share the risks and benefits of coverage.


As we journey through the pages of Once Upon A Claim, we discover how these principles of underwriting and premiums play a pivotal role in the fairy tales we know and love.


Grab your copy of "Once Upon A Claim" here.


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