Insurance Fraud Awareness 2025 – 400 Free Practice Questions to Pass the Exam

An insurer uses loss history in underwriting primarily to assess risk and determine premiums. The loss history provides vital information about an individual's or entity's past claims, which helps insurers evaluate the likelihood of future claims.

By analyzing this history, insurers can identify patterns or trends related to the frequency and severity of claims. For example, if a potential policyholder has a history of frequent claims, the insurer may view them as a higher risk and adjust their premium accordingly to cover the anticipated costs associated with that risk. Conversely, a clean loss history may result in lower premiums, reflecting a lower risk assessment by the insurer.

This approach allows insurers to tailor their pricing to individual circumstances based on factual evidence, rather than employing a one-size-fits-all method. It also ensures that the financial stability of the insurance pool is maintained, as the premiums more accurately reflect the risk presented by each policyholder.