What is insurance underwriting?


What is insurance underwriting?

Last Updated on 2 years by AlexJames

Insurance underwriting is the process of determining whether or not a potential customer is eligible to be insured for a particular reason and, if so, assigning a monetary value to the insurance. There is a wide spectrum of possibilities for what someone can be insured for, and it is up to the insurer to use the many tools at her disposal to determine the right cost for her business, as well as the terms of the insurance agreement. Examples of risks an underwriter may assess are automobiles, property, illness, sports, and life, each of which can vary greatly depending on many factors.

The main tool used in underwriting insurance is a computer. Which can be used in many ways to try to ensure that a policy does not result in a loss. One of the ways this is done is by examining large amounts of data on past policies. And comparing it to information on the current insurance applicant. If the risk to a client is particularly high, for example, a computer program will determine a premium to apply. Or simply deny the client a policy if it is too risky. Computers are also used to access many online databases. That may carry information about a specific client’s history. Or previous records of similar cases, as well as the success rates of those insurance policies.

Insurance underwriter working categories

While there are many categories and subcategories of insurance. An insurance underwriter will generally work in one of four categories: property/casualty, life, health, or mortgage. Several varieties of these types of insurance may also cover group policies. Which can make underwriting difficult because more people must be insured. One risky person in a group can increase the premium for the entire policy. And it is often up to the insurer to interview everyone involved in the potential policy. An insurance underwriter will often be responsible for learning about all the different categories of insurance. Especially when your employer offers umbrella policies that may insure a client for a “package” of risks rather than just one.

Insurance underwriting does not require any formal training. Although most insurance companies will require a prospective underwriter to have credentials. Such as a bachelor’s degree or several years of prior experience as an underwriter. The inexperienced underwriter will require training under someone with experience. Even an experienced insurance underwriter starting out at a new company will require training. Due to specialized software and techniques that vary between companies. Since there are constant technological advances, insurance underwriting generally requires continuing education and up-to-date knowledge of the field. An insurer may also obtain a state license and use the knowledge of that license to work as an agent or broker who sells insurance policies.

Skills and competencies of the insurance underwriter

Underwriters must develop and document analytical, quantitative, decision-making, verbal, written. And presentation skills to be hired and successfully carry out their responsibilities.

  • Math skills: An understanding of statistics and probability is perhaps the most relevant math skill. Much of the work involves determining an appropriate rate for an applicant based on how likely the applicant is to file a claim, based on available data.
  • Computer skills: Much of the statistical analysis is done with industry-specific computer software. Insurance underwriters must be adept at operating the software and ensuring that data is entered properly.
  • Analytical Thinking – While some decisions are easy, many situations require insurance underwriters to weigh multiple factors related to a particular applicant. Even subscription software is just a starting point for many decisions; Trained subscribers should evaluate automated recommendations based on their own best judgment.
  • Detail-oriented: Every applicant is different, and each data point can affect applications in different ways. It is important for insurance underwriters to be as accurate as possible with this information in order to make the best decisions.

Job outlook

According to the US Bureau of Labor Statistics , job opportunities for insurers are projected to decline 5 percent over the decade ending in 2026. This is dramatically worse than the 7 percent growth projected for all occupations. . The projected decline is due to the increasing prevalence of automated underwriting software used to process insurance applications.

There is an exception to this projected decline for insurance underwriters who work specifically for health and medical insurance companies. Growth in those jobs is projected at 15 percent for the same period due to expected increases in demand for health insurance.

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