What is an example of negative action affecting underwriting?

High claim frequency is a primary example of a negative action that can significantly affect underwriting decisions. When an insurer evaluates the potential risk associated with insuring a person or entity, the frequency of past claims plays a crucial role. A high number of claims suggests that the insured has a greater likelihood of filing more claims in the future, which raises concerns about overall risk. This can lead to increased premiums, stricter coverage terms, or even denial of coverage, as underwriters aim to minimize their risk exposure.

In contrast, strong financial backing, lower premium rates, and stable risk assessment models are indicators of positive actions or circumstances that can enhance an insurer's willingness to underwrite a policy or provide favorable terms. Strong financial backing implies that the insurer can absorb potential losses, while lower premium rates can indicate competitive pricing or a lower perceived risk. Stable risk assessment models suggest consistency and reliability in evaluating risk, further supporting positive underwriting outcomes.