In INSURANCE, a pricing method where in actuality the PREMIUM charged is under the EXPECTED CONTROL AMOUNT. The intention is always to produce a large amount of premiums through underpricing and employ arises from reinvested premiums to pay for expected losses and profit return.
The practice employed by risk-taking organizations (underwriters) to justify giving coverage to and lowering premiums for corporations that'll perhaps not usually be considered under the insurer's written requirements. It really is done to create cash into the system so that financial investment earnings may be received. Most common during times of large stock market comes back.