What does 'underwriting' in the context of the insurance industry involve?

'Underwriting' in the insurance industry primarily involves evaluating risks to determine premiums and coverage for potential policyholders. This process is crucial because it allows insurers to assess the likelihood that a claim will be made and to set appropriate terms for the insurance policy. Underwriters examine various factors such as the applicant's health, history, and specific circumstances related to the coverage requested. This evaluation plays a significant role in protecting the insurance company’s financial stability by ensuring that premiums are aligned with the level of risk they are taking on.

The other options, while related to the broader insurance process, do not define underwriting. Calculating total payouts for claims is a post-coverage activity focused on financial management rather than risk assessment. Marketing involves promoting products to potential customers, which is distinct from the underwriting process. Handling policyholder inquiries relates to customer service and management rather than the evaluation and pricing of risk that underwriters perform. Hence, the primary role of underwriting is accurately capturing and evaluating risk to inform decisions on insurance policies.