Which of the following contributes to the financial integrity of insurance operations?

Which of the following contributes to the financial integrity of insurance operations?

• A. Selective underwriting practices
• B. Keeping premiums low regardless of risk
• C. Reducing claim processing times regardless of accuracy
• D. High advertising expenditures

Answer: (A)

Selective underwriting practices contribute to the financial integrity of insurance operations by ensuring that insurers evaluate the risks associated with potential policyholders carefully. By assessing the likelihood of claims accurately, an insurer can set premiums that reflect the actual risk involved. This practice helps maintain the insurer's financial stability, as it minimizes the chances of incurring losses from higher-than-expected claims costs. By engaging in selective underwriting, insurers can attract business while also ensuring they do not take on excessive risk that could jeopardize their financial health. This careful selection process ultimately supports the sustainability and profitability of the insurance operation.

Selective underwriting practices contribute to the financial integrity of insurance operations by ensuring that insurers evaluate the risks associated with potential policyholders carefully. By assessing the likelihood of claims accurately, an insurer can set premiums that reflect the actual risk involved. This practice helps maintain the insurer's financial stability, as it minimizes the chances of incurring losses from higher-than-expected claims costs. By engaging in selective underwriting, insurers can attract business while also ensuring they do not take on excessive risk that could jeopardize their financial health. This careful selection process ultimately supports the sustainability and profitability of the insurance operation.