In the old days, insurance existed through informal contracts and gentlemen's agreements. It wasn't until the advent of modern insurance in the late 17th century that the practice of underwriting came into existence.
The underwriting professional had two basic duties--to select appropriate risks, and to ensure that the negotiated price paid by the insured would provide adequate compensation for the risk assumed. This continues to be the primary role of the underwriter today.
Actuaries establish modern insurance pricing for personal lines insurance using complex analytic techniques. With appropriate methods and adequate historical data, the actuary can calculate an insurance premium for any insurance exposure. The result is that the only bad risk is an underpriced risk.
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