Risk Selection

What Does Risk Selection Mean?

Risk selection is a method used by insurance companies to evaluate and screen insurance applicants. It involves categorizing applicants based on underwriting principles and determining the appropriate premium rate for each individual.

Insuranceopedia Explains Risk Selection

This screening process is commonly used in the insurance industry. The underwriter determines what the insurer should cover, and what exclusions should apply, and categorizes the applicant based on the risk they pose to the company. Applicants are typically classified into the following groups:

• Standard: The applicant is considered an average risk and is offered the standard premium rate.
• Substandard: The applicant poses a higher-than-average risk and is charged a higher premium.
• Preferred: The applicant is deemed a low-risk and qualifies for a discounted premium.