In connection with underwriting in insurance, it is the process undertaken by an insurer whereby it properly evaluates the risk associated with a specific coverage (policies for a specific type of insurance), and makes rational decisions on acceptability and pricing relating to that coverage. Discipline involves a thorough assessment of the risks and quality of insurance applications, with less focus on merely writing for premium, reaching capacity limits and meeting volume targets and planned income levels. Well-positioned, profitable insurance companies realize that underwriting may result in slower growth or even portfolio shrinkage but that discipline would potentially bolster profitability.
In a nutshell, underwriting discipline may involve reducing volume in order to underwrite profitably.
