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Insurance Underwriter explained
An underwriter is defined in the dictionary as:
- A person or a company that underwrites an insurance risk
- A bank or other financial institution that pledges to buy all the unsold shares in an issue of new shares.
Both definitions leave the reader only slightly more educated on the subject. Insurance professionals are more concerned with expanding on the first definition, the Insurance Underwriter.
Have you ever filled out an application to buy insurance? An underwriter is a person who receives and analyzes your responses on that application. The underwriter uses a series of questions and related material to determine the level of risk you present, the premium you’ll pay, and your suitability for coverage.
Insurance companies employ insurance underwriters to assess the risk of insuring people and assets. They are responsible for determining a premium (revenue for the insurance company) based on the risk exposure (potential loss) to the insurance company.
What does an underwriter do?
The underwriter determines:
- If a risk is worth insuring or not.
- The scope of the coverage the insurance company is willing to undertake.
- The premium that will appropriately compensate the insurance company for taking on the risk.
Essentially, the underwriter determines the revenue the insurance company will collect in the form of a premium in exchange for a promise to cover a client in the case of a claim.
Depending on the specifics of the role, the underwriting processes may be systematic. For example, the underwriter may have formal guidance (in the form of a checklist) for determining eligibility and pricing. In contrast, other roles offer underwriter more freedom in analyzing and making a case to insure a risk or not, including calculating the pricing.
In addition, an underwriter may also have some business development responsibilities, such as building relationships with partner brokers to drum up business. The insurance broker is responsible for advising insurance buyers. Nevertheless, an underwriter may at times meet with the insurance buyer, together with the broker to provide added expertise. An underwriter’s year-end performance may be evaluated not only on the profitability of the book of business they handle but also on the growth of that book.
Read about the broker role: What is a broker? (an insurance broker)
Areas of specialization
Insurance underwriters specialize by gaining indepth knowledge of a specific category of risk and can advance their careers by becoming subject matter experts. There are several different areas of specialization; the primary ones are life, health, mortgage, property, and casualty insurance.
As an insurance underwriter, you can develop your career to match your lifestyle. For example:
- A sports fanatic may start in general commercial underwriting and then build expertise in sports programs and associations.
- A finance and business graduate may start as a financial lines underwriter and have the opportunity to analyze businesses of different sizes and potentially specialize in mergers & acquisitions.
- Entertainment and health experts underwrite the risk of an actor getting hurt while performing stunts for an upcoming thriller.
Career options
Remember, no plane flies, no car drives, and no buildings are built, without insurance. Underwriting offers endless opportunities for specialization. Alternatively, managerial positions are also an option for advancement.
Although most insurance professionals have a university degree, underwriters do a lot of the learning on the job by assessing risk in real-time with the guidance of a more senior underwriter. Some progressive organizations have strong learning and development programs. This enables them to advance their underwriter’s knowledge systematically and according to the appetite and views of the employer.
Insurance underwriters have a broad range of career options across specializations and geographies. Insurance underwriters’ jobs may be located in company headquarters or regional offices in primary and secondary markets. Some insurance brokerages employ underwriters as in-house specialists on proprietary programs. Some insurance companies offer underwriters international assignments.
Insurance companies look for bright, business-minded, analytical individuals with strong interpersonal and commercial skills to become underwriters. It’s a rewarding profession and perfect for those who enjoy problem-solving, big picture thinking, and looking for an exciting, collaborative environment. An underwriter’s compensation typically includes salary plus a year-end bonus based on performance.
Learn more: What is Insurance Underwriting
Make a plan: Download a free career development plan template
Get started: 8 Steps to Interview Success: Insurance Underwriter
