Is it true that underwriters prefer insureds whose actual losses will closely align with expected losses?

Underwriters indeed prefer insureds whose actual losses are expected to closely match the anticipated or predicted losses. This preference is rooted in the fundamental principles of insurance and risk management. When an insurer can accurately align expected losses with actual experiences, it enhances profitability and sustainability for the insurance company.

By maintaining a close relationship between expected and actual losses, underwriters can better manage their risk exposure. Predictable loss patterns allow for more precise premium pricing, which ensures that the insurer is adequately compensated for the risk being assumed. This alignment helps avoid situations where claims significantly exceed what was anticipated, potentially leading to financial instability for the insurer.

In contrast, scenarios where actual losses differ vastly from expected losses can lead to unexpected financial strain on the insurer, influencing their underwriting decisions negatively. Overall, the goal of an underwriter is to achieve a balanced portfolio where risks are well-understood and managed effectively, thereby ensuring the long-term viability of the insurance product.