A top equestrian, Sundar Raj, insured his prize show horse, Karishma, for ₹ 2.5 lakh. After a series of lack lustre performances, Karishma died suddenly from what appeared to be colic, a common killer disease of horses.

The underwriting process follows a series of stages, at the end of which the status of a risk is decided. An important part of the insurance underwriting process is assessing risk variables as a competent underwriter. It is only after the risk has been weighed and all possible alternatives evaluated that the final underwriting is done. There are different types of hazard which can influence the decision to accept or reject a risk: Physical hazards: These are hazards that affect the physical characteristics of whatever is being insured. For example a building made of wood represents a higher level of physical hazard than the one made of bricks. Moral hazards: These hazards refer to the defects that exist in a person's character that may increase the frequency or the severity of loss. Such a character may tend to increase the loss for the company. Financial hazards: If the value of the risk is beyond the capacity of the insurer he may reject the risk, or share the same. In this case, as a prudent underwriter, at the time of issuance of the policy, besides the cost of the horse, the character of the owner and his past loss record are some of the factors to be considered. Underwriters can issue insurance policies with more knowledge and assurance that the insurer will be able to manage potential losses while providing coverage to those who fulfil the risk criteria by carefully examining risk variables.