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What is underwriting?
Underwriting is a process in which there are those financial service provider such as bank, investments and inusrers which uses these to find out the eligiblity of a customer to receive the products which is owned by them such as equity capital, insurance and credit. In this process there are risks which are involved and mostly financial provider participates in those kind of risks and remain prepared to tackle them.
What role does it play?
Underwriting is a process which refers to the services which have been given to the client without finding out that the client is eligible to receive those services or not from the large financial institution. It also shows the risk management which might be useful in financial activities. It is used in professional field to describe the methods which are related to loan or insurance or to the bank that buys up new insurance or debt. It is basically based on the actuarial science which is a study of risk assessment by the use of various mathematical and statistical methods under the finance industry. The two important terms under which this is used are as follows:-
1. Bank Underwriting is also termed as conventional banking which is used to explain the behaviour of the borrower and its ability to pay. For private people it is a credit report which gives all the details about their finances.
2. Insurance Underwriting under this it is used as a risk assessment. In this evaluation of the person or the project takes place where the receiving of the insurance and their payment related terms are handled.
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