An insurance underwriter evaluates insurance applications in order to decide whether to provide the insurance and, if so, the coverage amounts and premiums. Underwriters act as go-betweens for insurance agents who are eager to sell a policy and insurance companies who want to minimize risk. For someone with an interest in finance or insurance, an eye for detail, and decision-making skills, it is an attractive career option. Read on to learn more.
Insurance underwriters are trained insurance professionals. They are well-versed in identifying, understanding, and preventing risks. Their specialized risk assessment knowledge enables them to determine whether they will insure something or someone and for how much. In simple terms, underwriters decide whether to agree to be financially responsible to the insured if something unexpected or catastrophic happens related to the policy.
Most underwriters specialize in either life, health, or property and casualty insurance. Property and casualty is a broad field that can include business insurance, home insurance, or auto insurance. Overall, no matter their specialization, the job duties are similar. The U.S. Bureau of Labor Statistics describes what an underwriter does as follows:
The difference between the specialties lies in the criteria used to make the decision. For life insurance, examples of the criteria are age and financial history. For health, the main criteria are medical history and age. For auto insurance, which is a form of property and casualty insurance, underwriters look at driving record, age, and, sometimes, type of vehicle. In everything they do, insurance underwriters must strike a balance between risk and caution. Too much risk means the insurance company will pay out too many claims. Too much caution and the carrier will not make enough money from premiums.
Underwriters work for insurance companies and can be found at the insurer’s headquarters or a regional office. Underwriting is a desk job that involves computers and technology because underwriters use software systems to analyze and rate insurance applications, make recommendations based on risk, and adjust premium rates according to the risk. They generally work 40 hours per week, but sometimes they might have to work overtime or on weekends, depending on the type of underwriting.
Insurance underwriters enter specific information about a client or applicant into a software program. The program recommends coverage and premiums based on the data, and it’s up to the underwriter to decide to approve or reject the application after an evaluation of the software results. For simple and common types of policies, such as those for automobile or homeowners’ insurance, the automated recommendations are usually sufficient.
For more complicated types of insurance, such as workers’ compensation or business income—or even for complexities in a simpler type, like auto insurance—they will have to rely on analytical insight. In some cases, this requires analyzing the risk factors that are listed on the application. An example is an effect a reported bankruptcy or cancer treatment might have on a policy. To help with this kind of decision, they can review other sources such as medical records and credit scores.
In general, to become an insurance underwriter, you should have excellent decision-making and mathematical skills, strong analytical and computer skills, and good interpersonal skills. You should also be detail-oriented. You’ll need a bachelor’s degree at a minimum. You do not have to be a finance or business major; however, you should plan to complete mathematics, economics, finance, and business courses. Unlike insurance agents and financial representatives who sell insurance as an investment, you do not have to have a license to become an underwriter. However, in some of the larger insurers, having an insurance license can help you stand out in a group of prospective trainees or associates.
Underwriters who are just starting out are usually required to be an associate for an established underwriter, learning about basic applications and common risk factors on the job. As they become more experienced, they begin to work more independently, and their work becomes more complex. Also, big insurance firms often offer comprehensive training for new hires. Eventually, they no longer need supervision and will work independently as underwriters. Most underwriters participate in underwriting professional development to sharpen their skills and knowledge.
Underwriting is an excellent entry point into a career in insurance. Many underwriters go on to earn their insurance licenses, so they can become agents and use the knowledge and experience they’ve gained to work directly with clients. Having an insurance license in the same specialty as their underwriting, such as life or property and casualty, can also be beneficial for candidates applying for associate underwriting positions. To explore insurance licensing and underwriting education, visit our insurance education page and select your state.
As an aspiring insurance professional, wouldn’t it be great if you could sit down with a room full of successful insurance veterans and ask them for their advice? The Kaplan Financial Education team interviewed over 100 insurance professionals to develop this exclusive eBook for those who are considering the insurance industry.