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Article: Keeping the promise.(insurance industry stocks)(Illustration)
- Article from:
- Best's Review
- Article date:
- April 1, 2005
CopyrightCOPYRIGHT 2005 A.M. Best Company, Inc. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. (Hide copyright information)
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Behind the sale of each insurance policy is a promise: today's payment secures protection against a future loss that may otherwise be financially disastrous.
To fulfill that promise, insurers engage in underwriting, the practice of looking at the likely frequency and severity of claims from prospective customers. Underwriting determines the quality of the risk and how much to charge for covering it.
Successful insurers collect enough premium to pay claims without exhausting their resources. They invest those premiums prudently to earn returns that bolster their financial strength and reward their stakeholders. Beyond the premium, they may collect ...