Insurance Underwriter

An insurance underwriter determines the acceptable amount of risk for any given insurance policy. By reviewing the background of any applicant, an insurance underwriter can determine if that applicant meets the necessary qualifications for coverage under an insurance policy. By using statistics based on mortality and morbidity rates, underwriters can determine a person’s likelihood of acquiring an illness, having an accident, or dying prematurely. These statistics are used to help underwriters keep the companies they represent profitable. By limiting a company’s exposure to financial loss, by examining risk on a case-by-case basis, a single underwriter can save a company millions of dollars a year. There are very few other careers where such massive responsibility is shouldered by so few.

Underwriters have the final say on whether an insurance policy is issued at the standard rate, or whether it receives a sub-standard rating for a higher premium. Insurance underwriters can also determine that an applicant does not meet the criteria and is an unacceptable risk. If an insurance underwriter makes this determination they can deny an applicant completely. Since insurance companies share much of their client information this denial of insurance can make it difficult, if not impossible for this person to get coverage from other companies in the future.

Underwriters must remain unbiased in their decisions and must remain consistent. If underwriters judge too harshly too often the company they represent may get a reputation for being unfair and overly critical of applicants. In this way, an insurance underwriter may cost a company more money than they save.

There are many factors that determine rates for prospective clients. Underwriters have to thoroughly examine the backgrounds of those interested in the policies they underwrite. For instance, underwriters in the life and health insurance fields must look at the applicant’s age, weight, occupation, mental health history, physical health history, family medical history, geographical location, and family status. These are important factors to use to determine an applicant’s mortality rate.

An insurance underwriter who deals in the property and casualty sector of insurance must look for other key factors that could make the applicant less profitable to the company. These underwriters must examine: the property location to determine if it is in a flood plain or other high risk area, the crime rate in that area to determine if loss is more likely, criminal history of applicants to determine if they are high risk, rental and ownership history to determine if the applicant is responsible, the frequency of claims in the past, and even whether or not the applicant has an aggressive breed dog. Examining these factors can either greatly increase or provide discounts on monthly premiums.

Throughout the course of their career, underwriters must use many tools in their jobs to help them learn more about those they are providing their services to. To assist them in their jobs, an insurance underwriter has a variety of tools at their disposal. These tools include computer software that gives access to driving records and claims records. This software will allow underwriters to enter an applicant’s information and will return a rate based on that information.

Before an insurance underwriter can put this software to use they must first do some legwork that will give them the information they need to input into this software. One of the first things underwriters use to do this part of their jobs is the applicants Medical Information Bureau (MIB) report. This report serves as a clearinghouse for insurance companies that store health related data such as underwriting denials, substandard issue rates, and the reasoning behind this. The MIB report is not used by all insurance companies; it is a completely optional membership. The MIB report can be requested by an applicant at any time.

Another tool used by the insurance underwriter is the mortality and morbidity rate table. The mortality table allows underwriters to determine if a person at a specific age and health is going to live long enough to pay enough premiums to be profitable to the company. Insurance companies do not want to write policies for someone who may pass away before their next birthday. The morbidity table is used to determine how likely it is that a person of a given age and history will be exposed to a disease or illness. Underwriters use this tool to track the number of diseases or illnesses throughout a given population.

An insurance underwriter is not the person who comes into a place of employment or private residence to sell insurance products to consumers. In fact it’s rare for an applicant to have any contact at all with underwriters. Underwriters don’t go out and pound the pavement looking for leads and prospective clients. They wait for insurance agents to send them a completed application; that’s when their jobs start.

Underwriters won’t be found sitting behind the desk in a local insurance office. Underwriters often have meetings and telephone contact with the agents that are in the field writing the business. By staying in contact, a field agent can readily have access to all of the information regarding their pending policies. Often, the underwriting department is the most frequent contact that an agent will have with the home office of the company employing them. Underwriters spend their careers working in the company’s main offices where they are often surrounded by other insurance underwriters doing the same jobs. The career of an insurance underwriter is not one of ease. Often, their jobs require long hours spent researching prospective clients so that they can offer the best rates. Most of their time is spent in front of the computer doing the legal and background information checks for the companies they represent.

There are over 100,000 underwriters working in the United States. While the vast majority works directly for the insurance industry, a select few work for state governments. These watchdogs, which are generally employed by the state insurance regulatory agency, do spot reviews of insurance company records to ensure fairness with regard to their underwriting practices. Insurance companies, while allowed a great amount of leeway in their underwriting rules, still have to obey the law, and cannot turn an applicant away without cause. These government underwriters ensure fairness and maintain the integrity of the underwriting process.

Of course, it isn’t just insurance that needs underwritten. Banks and mortgage companies also use underwriters to limit their own exposure to bad financial decisions. When a person applies for a personal loan, or a mortgage, their applications are underwritten by an impartial and unimpassioned person who will make the final decision as to whether they receive the loan or not. Without a strong underwriting process, banks would be even more vulnerable to fraud and deadbeat borrowers.

Depending on where they work and their professional qualifications, underwriters can expect to earn a salary between 40,000 and 75,000 dollars annually. Underwriters in the private sector tend to earn more, by about 10 percent, than those employed by governmental agencies. The biggest factor in determining the salary received by an underwriter is their level of professional qualification. Those who are in training or mentorship programs may be paid an hourly wage in lieu of a salary, and have their hours limited to part time. This allows companies to use several new-hires at once, and then keep the most suitable candidate at the end of their mentorship.

Underwriters can expect their pay to increase a great deal once they get permission to underwrite business on their own authority. There are several different types of professional qualifications that are recognized in the insurance industry. Along with a college degree, any number of these may be required to advance the career of an insurance underwriter to the management level. Underwriters, like most occupations, are allowed to advance higher in their career track if they have more professional designations.

For those who may be interested in a career as an insurance underwriter, it is important to note that most underwriters undergo an on-the-job training program. Most of what an insurance underwriter does is best learned through experience, so a newly employed underwriter may work under a more experienced mentor for 6 months to a year before being allowed to continue their career on their own and underwrite business on their own authority. There are no industry requirements before becoming an underwriter, and employer preferences vary widely. Most insurance companies that employ underwriters require at least a bachelor’s degree. They don’t necessarily care what type of degree it is, only that the applicant for the jobs they’re offering have the ability to be taught. Having a college degree shows some degree of aptitude toward learning, and employers may look for that. Though it is not industry standard, many underwriters choose coursework in risk management, accounting, and economics.

Many insurers require that their staff of underwriters undergo several hours of continuing education each year. This ensures that they are always up to date on the most current computer software that they’ll be using, and that they are constantly being updated with the latest underwriting guidelines. Insurance companies often change their underwriting guidelines to ensure that they can stay ahead of changing trends in the market. For example, with new cancer treatments coming on the market every day, underwriters no longer put the same stigma on cancer patients than they did just a few years ago. It wasn’t that long ago that it was not unheard of for someone who had survived cancer to be denied insurance for the rest of their life. Now, as long as a cancer survivor has been “cancer-free” for 5 years, underwriters will often qualify them for the same rate as the rest of us.

There are, however, a few professional associations and schools that provide professional designations to underwriters. These differ between types of insurance. Life insurance underwriters will qualify for different professional titles than commercial or property Underwriters. The Insurance Institute of America uses the designations of Associate in Commercial Underwriting and Associate in Personal Insurance. These qualifications are generally the first of several that an insurance underwriter is expected to receive throughout their career, and are generally issued after 2 years of study and examinations.

More experienced underwriters can receive the distinction of Chartered Property and Casualty Underwriter. This designation requires that the applicant pass a total of 8 exams, along with 3 years of work experience in the insurance industry. Receiving this designation is often required before underwriters can receive a management position, and often accompanies a marked increase in salary.

Many insurance agents, as well, receive underwriter’s designations. The Chartered Life Underwriter is offered by The American College after significant coursework is completed. Many companies allow their insurance agents who have this designation to field-underwrite policies up to a certain face amount, without going through the standard underwriting process.

It isn’t at all uncommon for jobs in underwriting to come available often. Underwriting can be stressful, and it is a great deal of responsibility. Because of this, underwriters typically “turn-over” at a higher than average rate. Having the responsibility of often millions of dollars of liability on one’s head can at times be too much. Though most underwriters seldom leave the field for good, they often take time out from behind the desk and do a stint as a field agent. Of course, doing this requires them to obtain an insurance license from their state of residence.

A job as an insurance underwriter, as mentioned before, doesn't require a professional license, but it does require a bit of personal desire. The most successful and content underwriters are those who enjoy breaking down and analyzing data and maintaining it in an orderly fashion. Underwriters must have the ability to make a decision, and defend that decision against those who would disagree. Underwriters often find themselves at odds with field agents, policyholders, and their own bosses, and they must be able to rely on their own judgment.