Underwriting profit
Encyclopedia
Underwriting profit is a term used in the insurance
industry. It consists of the earned premium remaining after losses have been paid and administrative expenses have been deducted. It does not include any investment income earned on held premiums.
It has also been very elusive to most insurance companies. Many companies will eschew Underwriting profit in order to gain a greater market share.
For example, an auto insurer collects money every month from its customers in the form of a premium. Should a customer have a covered auto accident, the company pays out a claim. In the time between the receipt of each premium payment and the paying of the claim, the money received by the insurer can be invested. Returns from investments are the primary source of profits for an insurance company. If the amount of premiums taken in is greater than the claims paid out, even before taking into account investment returns, the excess additional profit is called "underwriting profit".
Insurance
In law and economics, insurance is a form of risk management primarily used to hedge against the risk of a contingent, uncertain loss. Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange for payment. An insurer is a company selling the...
industry. It consists of the earned premium remaining after losses have been paid and administrative expenses have been deducted. It does not include any investment income earned on held premiums.
It has also been very elusive to most insurance companies. Many companies will eschew Underwriting profit in order to gain a greater market share.
For example, an auto insurer collects money every month from its customers in the form of a premium. Should a customer have a covered auto accident, the company pays out a claim. In the time between the receipt of each premium payment and the paying of the claim, the money received by the insurer can be invested. Returns from investments are the primary source of profits for an insurance company. If the amount of premiums taken in is greater than the claims paid out, even before taking into account investment returns, the excess additional profit is called "underwriting profit".