What does risk assessment involve in the insurance process?

Risk assessment is a crucial part of the insurance process that involves evaluating and analyzing the individual circumstances of applicants to determine their insurability. This includes gathering pertinent information about their background and health status, which helps insurers assess the potential risk of insuring an individual. By analyzing these factors, insurance companies can make informed decisions on whether to provide coverage and under what terms.

This process helps insurers establish the likelihood of claims being made in the future, allowing them to set appropriate premiums that reflect the risk associated with insuring a particular individual. It is a fundamental step that ensures both the insurer and the insured have a clear understanding of the risks involved before a policy is issued. In contrast, collecting premiums, verifying claims, or setting prices without evaluations do not encompass the critical analytical component that defines risk assessment.