What is the role of underwriting in personal lines insurance?

Underwriting plays a crucial role in personal lines insurance by evaluating the risks associated with insuring an individual or property. This process involves assessing various factors such as the applicant's history, the characteristics of the property, and broader market conditions to gauge the likelihood of a claim being made.

Based on this evaluation, underwriters determine appropriate premium rates that reflect the level of risk. They also decide on the specific terms and coverage options that will be offered in the insurance policy. The goal of underwriting is to ensure that the insurer can cover potential claims while remaining profitable. By strategically setting premiums and coverage limits, underwriters help maintain the balance between affordability for consumers and the financial viability of the insurance company.

The other options highlight important functions in the insurance industry but do not encapsulate the primary responsibility of underwriting. Claims review is focused on post-sale activities where policy validity is assessed. Advertising is a marketing function aimed at attracting new clients. Customer service activities relate to maintaining client relationships after policies have been issued but do not involve risk assessment or premium determination.