Which of the following best describes the term "underwriting" in insurance?

The term "underwriting" in insurance primarily refers to the method of assessing risk and deciding on coverage terms. Underwriting is a critical function in the insurance industry that involves evaluating the potential risk an applicant represents to the insurer. This process includes analyzing various factors such as medical history, lifestyle choices, and other pertinent data to determine an individual's or entity's risk profile.

Once the risks are assessed, underwriters then decide whether to accept the application and under what terms and conditions. This can include setting premium rates and specifying coverage limits. By accurately assessing risk, underwriters help insurers maintain financial stability while ensuring that coverage is appropriately matched to the risk presented by the insured.

Other options may represent functions that are related to insurance but do not fully encapsulate the concept of underwriting. For instance, determining rates is an outcome of the underwriting process rather than the process itself, investigating fraudulent claims is a separate area of risk management, and evaluating loss ratios pertains to the performance analysis of the insurance company, rather than the assessment of individual risks for issuing coverage.