An insurance underwriter balances the risks an insurance company takes on with the potential returns from premiums. For example, an auto insurance underwriter decides whether or not an auto insurance company should take on a particular client and their risks. Understanding how insurance underwriter decisions are made can help you control your risk factors.
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UPDATED: Oct 30, 2020
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The purpose of an insurance policy is to protect you against the risk of a given set of eventualities. For example, when you take out an auto insurance policy you’ll be looking to protect yourself against liability, collision damage, etc.
So the risk for the insurance company is that if your car does get damaged or your car damages someone or something else, they will have to pay a benefit out to cover the costs of that damage.
An insurance underwriter’s job is to make sure that the risks an insurance company takes on a single policy or group of policies, is balanced with the potential returns from the premiums of that policy or group of policies.
It is an insurance underwriter’s decision as to whether or not an insurance company takes a particular risk and issues a particular policy. They decide what information is required to assess the risk of any individual applicant for a policy and how that information may be helpful in comparing similar individuals or by consulting actuarial studies regarding losses against similar policies.
Most insurance underwriters are college graduates; however, insurance companies have been known to hire high school graduates as underwriting clerks and then promote them into full insurance underwriting positions later.
There are various certifications available to insurance underwriters and these vary depending on the types of risk that an underwriter will be responsible for assessing, as you can imagine there are very different risks associated with householders insurance policies compared to auto insurance policies, and professional qualifications take this into account.
Insurance underwriters are reasonably well-rewarded professionals though they don’t earn as much as actuaries and the average salary for an insurance underwriter in the United States is around $50,000 though this amount can vary substantially between new underwriters and of course for very experienced industry hands.
It’s a good career path to take as generally there is always reasonable demand for insurance underwriters in the market at any one time, and experience and qualifications count when making a career move during the course of an underwriting career.
Why is an insurance underwriter important to me?
Insurance underwriters are important to policyholders as they have the final say as to whether or not a particular policy will be issued and they also bare a large amount of the responsibility for the financial health of your insurance company – which affects their long-term ability to pay out claims against any policy you hold.