Which term describes the risk selection process that insurance companies utilize?

The term that describes the risk selection process used by insurance companies is underwriting. Underwriting is the process by which insurers evaluate the risks associated with insuring a person or asset. This involves assessing various factors such as an individual's health history, lifestyle, and other relevant information to determine the likelihood of a claim being made. The goal is to decide whether to accept the risk, and if so, at what premium price.

Underwriting is crucial because it helps insurance companies maintain a balance between accepting sufficient risks to remain profitable and avoiding those that may lead to significant losses. Insurers need to ensure that the premiums collected will cover the claims they may need to pay out while also allowing for operational costs and profit.

Actuarial analysis, although related, primarily focuses on the calculation of risks and premiums based on statistical data rather than the actual selection of risks. Risk management refers to broader strategies employed to mitigate financial losses, while policy administration encompasses the management of existing policies rather than the selection of new risks.