Blonde female insurance underwriter working with laptop

What Are Insurance Underwriters? – Best Explanation

In the U.S, underwriting is a good career option, particularly if you interested in insurance or finance. Therefore, in this article, you will learn about what are insurance underwriters and the full job description of underwriting.  

What Are Insurance Underwriters?

So What Are Insurance Underwriters? Insurance underwriters are well-trained professionals. Usually, insurers use underwriters to determine the risk of insuring someone or something and for how much. In simple terms, they evaluate the risk of the applicant to decide whether or not to provide the insurance.

After evaluation, the underwriters will decide the coverage amount they are going to offer to the applicant. Not only that, but also they decide the premium amount applicant should pay for the specific amount of coverage. 

The insurance underwriter works for an insurance company. They do not represent the customers, only the insurer. Underwriters will always try to protect the insurance company from risks that could cause a considerable loss. Therefore, underwriters are vital for an insurance company. 

After analyzing if underwriters decide the risk is very minimum, then they will agree and hand over the insurance policy as early as possible. But, if the applicant who provides too high of a risk, then the insurance firm will consider charging more than usual or maybe denied the policy before offering coverage.

What Does an Insurance Underwriter Do?

According to The U.S Bureau of Labor Statistics underwriters job duties are included here;

  • Review applications and figuring out the risk of insuring candidates
  • Find solutions that may reduce or avoid the risk of future claims
  • Determines appropriate premiums and the coverage amount
  • Decide whether or not offer insurance policy
  • Prepare terms and conditions of insurance policy
  • Analyze and updating the rules for the automation program
  • Take help from healthcare providers, field representatives and others for extra information
  • Write quotes and negotiate the terms with clients and brokers 
  • Evaluating suggestions from underwriting program (Software)
  • Screening candidates based mostly on a particular set of criteria

Underwriting is a desk job. It involves computers and technology because underwriters use a software program to investigate and rate insurance applicants. Usually, they work 40 hours a week inside the insurer’s regional office or headquarters. 

The specific elements rely upon the type of insurance coverage you are applying to. These are the common elements;

  • Kind of business 
  • Age of business
  • Previous financial behavior (bankruptcies, credit score)
  • Property condition
  • Loss prevention practice
  • Financial characteristics (assets, size, sales)
  • Safety programs
  • Previous insurance claims

Underwriters are mostly specializing in different insurance types. But, the distinction between these specialties lies within the criteria used to make a choice. Few examples include here;

Insurance Types Examples of criteria
Life Insurance Age and financial history
Auto Insurance Age, driving vehicle and type of vehicle
Health Insurance Age and medical history
Insurance types with examples of criteria

Insurance Underwriting Process

However, as I mentioned earlier, underwriters include particular details about the applicant or client into a software system. The system recommends premium and coverage based mostly on the information. Then underwriter should evaluate the system results and decide whether they approve or reject the application. 

Usually, for common types of insurance policies, automated suggestions are often enough. But for more complicated kinds of insurance like business income or worker’s compensation, underwriters have to rely on analytical insight. Not only that, but they can also review other sources, for instance, credit scores and medical records.

Requirements

Critical Skills For Insurance Underwriters

Typically, to start a profession as an underwriter, at least you should have a bachelor’s degree in finance or business administration. Underwriters require plenty of skills to be a successful insurance underwriter. For example, excellent decision making, problem-solving, mathematics, statistics, IT skills, and excellent interpersonal, communication, sharply analytical, and research skills required for underwriters.

However, underwriters do not require a license to become an insurance underwriter like insurance agents and financial representatives who sell insurance as an investment.

  • Bachelor degree (minimum) in finance or business administration
  • Strong analytical and research skills
  • Attention to details
  • Excellent math, statistics, and IT skills
  • Verbal and written communication skills
  • Reasonable and sound judgment
  • Negotiation and interpersonal skills  
  • Ability to work under pressure
  • Ability build a positive relationship with brokers and clients
  • Solid decision making and problem-solving skills

New underwriters usually required to be an associate for and experience underwriter. So newcomers can learn common risk factors and basic applications on the job. Therefore, larger insurance companies usually supply comprehensive training for newcomers. Eventually, they become well experienced. They don’t need any supervision, and they will begin to work independently as an underwriter.

Underwriting Professional Development is a big thing between most underwriters. Underwriters can sharpen their knowledge and abilities, especially newcomers, through this program. 

What is the Difference Between an Underwriter and Broker or Agent?

When someone applies for insurance, there are many teams involved with the insurance purchase process. For example, underwriters, brokers, and agents are few groups interact with one another in the insurance purchase process regularly. However, all three parties perform different roles.

In short, underwriters are the one work behind the scene. They receive an application and have to go through the underwriting system to decide whether or not to offer insurance policy to the applicant and at what rate. 

The insurance agent and broker, in the meantime, is the field representatives of this system. In short, they are the frontline salesperson who sells insurance policies to clients. Usually, the agents don’t have decisions making authority. Because before consulting the insurance underwriters, they can’t alter the insurance policy as they wish.

insurance broker shake hands with a underwriter before hand over application
Underwriters a different from insurance agents and brokers. Therefore all three parties perform different roles

Insurance agents and brokers job duties included here;

  • Assist customers understand the type of insurance they might qualify for
  • Assist customers in completing an insurance application 
  • Provide details to the underwriters to understand about clients or their business
  • Negotiate with insurance underwriters
  • Help customers understand about insurance policy they purchase

Conclusion with Underwriter Salary

Now you should understand What are insurance underwriters and how crucial is insurance underwriters to insurance companies. If you want to start a profession as an insurance underwriter is an excellent entry point to a career in finance or insurance. 

Nevertheless, most underwriters try to get their insurance license. Because they can become insurance agents and use experience and knowledge they have gained to work directly with customers. 

According to the U.S. Bureau of Labor Statistics, 2017, insurance underwriter annual salary:

  • The top 10% yearly salary is $123,660, and the hourly wage is $59.45.
  • The median annual salary is $69,760, and the hourly wage is $33.54.
  • The bottom 10% yearly salary is $41,800, and the hourly wage is $20.09.

As you can see, experienced insurance underwriters can earn well into six figures according to the above details. Specially underwriters who are working in specialized fields like worker’s compensation, health care, and marine insurances are most likely to have the highest earning potential. 

However, now you have learned all about insurance underwriters and their full job description from this article. But, if you have any questions, do not hesitate to put a comment here. 

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