Risk Selection

Published: | Updated: March 27, 2018

Definition - What does Risk Selection mean?

Risk selection is one of the ways insurance companies screen insurance applicants. It involves classifying applicants using underwriting principles and determining the amount of premium they should offer to a given applicant.

Insuranceopedia explains Risk Selection

This is the screening process that is used generally in the insurance industry. The underwriter decides what the insurer should cover and what they should exclude. They also slot the applicant into a group according to the risk they pose to the insurance company. The basic groups are:

  • Standard: the applicant is offered the basic rate
  • Substandard: the applicant is deemed a higher than usual risk and is offered a more expensive premium
  • Preferred: the applicant is considered a low risk and is offered a premium discount accordingly

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