WHO ARE INSURANCE UNDERWRITERS?
Insurance underwriters are professionals who evaluate and analyse the risks involved in insuring people and assets. Insurance underwriters establish pricing for accepted insurable risks. The term underwriting means receiving remuneration for the willingness to pay a potential risk. Underwriters use specialized software and actuarial data to determine the likelihood and magnitude of a risk.
Insurance underwriters assume the risk involved in a contract with an individual or entity. For example, an underwriter may assume the risk of the cost of a fire in a home in return for a premium or a monthly payment. Evaluating an insurer's risk before the policy period and at the time of renewal is a vital function of an underwriter.
For example, homeowner’s insurance underwriters must consider numerous variables when rating a homeowner's policy. Property and casualty insurance agents act as field underwriters, initially inspecting homes or rental properties for conditions such as deteriorated roofs or foundations that pose a risk to the carrier. The agents report hazards to the home underwriter. The home underwriter additionally considers hazards that may trigger a liability claim.
WHAT DOES AN INSURANCE UNDERWRITERS DO?
Insurance underwriters use computer software programs to determine whether an applicant should be approved. Insurance underwriters decide whether to provide insurance, and under what terms. They evaluate insurance applications and determine coverage amounts and premiums.Underwriters work in several insurance categories, including health, life, auto and home. Their job is to review applications for insurance, analyse risks and decide whether the company will offer coverage. Underwriters must approve applications so that the insurance company can collect premiums.
Underwriting is the process of evaluating the risk of insuring a home, car, driver or individual in the case of life insurance or health insurance, to determine if it's profitable for the insurance company to take the chance on providing insurance. After determining "risk", the underwriter sets a price and establishes the insurance premium that will be charged in exchange for taking on that risk.
TYPES OF INSURANCE UNDERWRITERS
Firm Underwriting.
Firm underwriting is an underwriting agreement in which underwriter
takes up a certain number of securities of firm himself.
Sub-Underwriting.
Joint Underwriting.
Syndicate Underwriting.
Complete Underwriting.
Partial Underwriting.
Firm Underwriting
Firm underwriting is an underwriting agreement in which underwriter takes up a certain number of securities of firm himself. These securities are subscribed by underwriter in addition to his liabilities for securities which remain unsubscribed by public. Under this agreement, underwriter needs to subscribe to agreed number of securities irrespective of public response to company issue that is whether such issue is fully subscribed or oversubscribed.
In case of over subscription of securities by public, only underwriter will be allotted such agreed number of securities. Whereas in case of under subscription, he will subscribe to both that is to agreed number of shares as ordinary subscriber and to all unsubscribed shares for which he is liable to subscribe as underwriter.
. Joint Underwriting
Joint underwriting is one in which there are more than one underwriter appointed by company for underwriting of its securities. This type of underwriting takes place when issue by company is too large and contains large risk. For minimising the burden solely on single underwriter, the firm itself appoints numerous underwriters. All underwriters underwrite to specified amount of securities and in specified ratio.
Sub-Underwriting
It is an underwriting agreement under which an underwriter appoints several other sub-underwriters to safeguard him. When after underwriting of securities, underwriter feels that it is beyond his capacity to assume the whole risk he appoints other underwriters with him. This is done to diffuse the risk associated with underwriting of securities which is too high for single underwriter to assume.
The sub-underwriter has no connection with customer and is liable only to underwriter for the amount of securities they have underwritten. Relationship between the underwriter and sub-underwriters is same as of agents and sub-agents. Prospectus consists of name of every underwriter along with amount of securities they have agreed to underwrite.
Syndicate Underwriting
Syndicate underwriting is an underwriting agreement in which several underwriters join together for underwriting securities. Such agreement takes place when issue is too big that a single underwriter cannot underwrite the whole amount. Under this, different underwriters form a syndicate and represent themselves as single underwriter for underwriting securities.
All the underwriters decide in advance the amount and ratio of securities that they will underwrite. It is different from joint underwriting in which company itself appoints several underwriters for underwriting of its securities whereas in syndicate underwriting several underwriters joins together themselves for underwriting.
KNOWLEDGE AREAS NEEDED FOR INSURANCE UNDERWRITERS
Analytical skills.
Good maths and statistics skills.
Attention to detail.
Verbal and written communication skills.
IT skills.
Good judgement.
Negotiation and interpersonal skills.
EDUCATION
Employers prefer to hire candidates who have a bachelor's degree. However, insurance-related work experience and strong computer skills may be enough for some positions. Certification is generally necessary for advancement to senior underwriter and underwriter manager positions. Most employers prefer to hire applicants who have a bachelor's degree. Although a specific major is not required, some coursework in business, finance, economics, and mathematics is helpful.
Insurance Underwriter Training
Beginning underwriters usually work as trainees under the supervision of senior underwriters. Trainees work on basic applications and learn the most common risk factors. Some companies offer training programs that include classroom instruction on the basics of underwriting.
As new underwriters gain experience, they work independently and handle more complex applications.
Licenses, Certifications, and Registrations for Insurance Underwriters
Employers often expect underwriters to become certified through coursework. These courses are important for keeping current with new insurance policies and for adjusting to new technology and changes in state and federal regulations. Certification is often necessary for advancement to senior underwriter and underwriter management positions. Many certification options are available.
For underwriters with at least 2 years of insurance experience, The Institutes offer the Chartered Property and Casualty Underwriter (CPCU) designation. For beginning underwriters, The Institutes offer a training program.
The Institutes also offer several other designations in insurance specialties, including the Associate in Commercial Underwriting (AU) and Associate in Personal Insurance (API). To earn these designations, underwriters complete a series of courses and exams that generally takes 1 to 2 years.
The National Association of Insurance and Financial Advisors offers the Life Underwriter Training Council Fellow (LUTCF) designation, which consists of a three-part curriculum in basic insurance concepts.
The American College of Financial Services offers the Chartered Life Underwriter (CLU) certification. This certification consists of five core courses and three electives, and candidates must have 3 years of related work experience.
Important Qualities for Insurance Underwriters
Analytical skills. Underwriters must be able to evaluate information from a variety of sources and solve complex problems.
Decision-making skills. The core function of an underwriter is making decisions, such as whether to offer insurance coverage and at what level to set premiums.
Detail oriented. Underwriters must pay attention to detail, because each individual item on an insurance application can affect the coverage decision.
Interpersonal skills. Underwriters need good communication and interpersonal skills because much of their work involves dealing with other people, such as insurance agents.
Math skills. Determining the probability of losses on an insurance policy and calculating appropriate premiums require mathematical ability.
SALARY AND JOB OUTCOME
Employers prefer to hire candidates who have a bachelor’s degree. However, insurance-related work experience and strong computer skills may be enough for some positions. Certification is generally necessary for advancement to senior underwriter and underwriter manager positions.
Salary: The median annual wage for insurance underwriters is $69,380.
Job Outlook: Employment of insurance underwriters is projected to decline 5 percent over the next ten years. Automated underwriting software allows workers to process applications more quickly than before, reducing the need for as many underwriters.
Related Careers: Compare the job duties, education, job growth, and pay of insurance underwriters with similar occupations.
Careers Related to Insurance Underwriters
Actuaries analyse the financial costs of risk and uncertainty. They use mathematics, statistics, and financial theory to assess the risk of potential events, and they help businesses and clients develop policies that minimize the cost of that risk. Actuaries' work is essential to the insurance industry.
Budget analysts help public and private institutions organize their finances. They prepare budget reports and monitor institutional spending.
Claims adjusters, appraisers, examiners, and investigators evaluate insurance claims. They decide whether an insurance company must pay a claim, and if so, how much.
Cost estimators collect and analyse data in order to estimate the time, money, materials, and labour required to manufacture a product, construct a building, or provide a service. They generally specialize in a particular product or industry.
Insurance sales agents contact potential customers and sell one or more types of insurance. Insurance sales agents explain various insurance policies and help clients choose plans that suit them.
Loan officers evaluate, authorize, or recommend approval of loan applications for people and businesses.
DUTIES AND RESPONSIBILITIES OF INSURANCE UNDERWRITERS
Insurance underwriters typically do the following:
Analyse information stated on insurance applications
Determine the risk involved in insuring a client
Screen applicants on the basis of set criteria
Evaluate recommendations from underwriting software
Contact field representatives, medical personnel, and others to obtain further information
Decide whether to offer insurance
Determine appropriate premiums and amounts of coverage
Review and update the rules that govern automation software
Underwriters are the main link between an insurance company and an insurance agent. Insurance underwriters use computer software programs to determine whether to approve an applicant. They take specific information about a client and enter it into a program. The program then provides recommendations on coverage and premiums. Underwriters evaluate these recommendations and decide whether to approve or reject the application. If a decision is difficult, they may consult additional sources, such as medical documents and credit scores.
For simple and common types of insurance, such as automobile insurance, underwriters can typically rely on automated recommendations. For more specific and complex insurance types, such as workers' compensation, underwriters need to rely more on their own analytical insight.
Underwriters analyse the risk factors appearing on an application. For instance, if an applicant reports a previous bankruptcy, the underwriter must determine whether that information is relevant to the policy being applied for. The underwriter would likely consider how far in the past the bankruptcy occurred and how the applicant's financial situation has changed since the applicant filed for bankruptcy.
Insurance underwriters must achieve a balance between risky and cautious decisions. If underwriters allow too much risk, the insurance company will pay out too many claims. But if they don't approve enough applications, the company will not make enough money from premiums.
Most insurance underwriters specialize in one of three broad fields: life, health, and property and casualty. Although the job duties in each field are similar, the criteria that underwriters use vary. For example, for someone seeking life insurance, underwriters consider the person's age and financial history. For someone applying for car insurance (a form of property and casualty insurance), underwriters consider the person's driving record.
Within the broad field of property and casualty, underwriters may specialize even further into commercial (business) insurance or personal insurance. They may also specialize by the type of policy, such as for automobiles, boats (marine insurance), or homes (homeowners' insurance).
FREQUENTLY ASKED QUESTIONS
WHAT IS SOME GOOD ADVICE FOR INSURANCE UNDERWRITER STUDENTS?
Underwriters need good communication and interpersonal skills because much of their work involves dealing with other people, such as insurance agents. Math skills. Determining the probability of losses on an insurance policy and calculating appropriate premiums require mathematical ability.
WHAT IS LIKE BEING AN INSURANCE UNDERWRITER?
An underwriter must have demonstrable solid judgment and excellent communication and interpersonal skills to work with clients to develop innovative risk management strategies based on a client's unique risk profile. With experience, trainees are given greater responsibilities.
HOW DIFFICULT IT IS TO BECOME AN INSURANCE UNDERWRITER?
To become an insurance underwriter, you typically need a bachelor's degree. However, some employers may hire you as an underwriter without a degree if you have relevant work experience and computer proficiency. To become a senior underwriter or underwriter manager, you need to obtain certification.
IS IT WORTH TO STUDY INSURANCE UNDERWRITER?
Job Outlook for Insurance Underwriters [About this section] [To Top] Employment of insurance underwriters is projected to decline 5 percent over the next ten years. Automated underwriting software allows workers to process applications more quickly than before, reducing the need for as many underwriters
SHOULD I BECOME AN INSURANCE UNDERWRITER?
Work environment for underwriters was scored 46.4, while stress levels scored 16.87. Hiring outlook for underwriters significantly underperformed when compared to agents, however (-6.13). A career as an insurance agent has also improved slightly since last year's report. To become a senior underwriter or underwriter manager, you need to obtain certification. ... Insurance underwriters also advise on risk management issues, make decisions about coverage for individuals, and decide if existing clients should continue receiving coverage, and at the same level.
WHAT ARE INSURANCE UNDERWRITERS LIKE?
Insurance underwriters are professionals who evaluate and analyse the risks involved in insuring people and assets. Insurance underwriters establish pricing for accepted insurable risks. ... Underwriters use specialized software and actuarial data to determine the likelihood and magnitude of a risk.
WHAT ARE THE BEST COLLEGES FOR INSURANCE UNDERWRITING?
There are tons of colleges that you can apply for. Here is the list of a few most recognised colleges that comes with an assured good placement but that doesn’t mean that you would not need to study or score well. It just means that these colleges are reputed ones and would work as an advantage for you while getting a job. - Financial Planning Academy (FPA), Mumbai, Colaba, Mumbai - Delhi Degree College, Janakpuri, Delhi - TKWs Institute of Banking & Finance, New Rajendra Nagar, Delhi - Symbiosis Centre for Distance Learning, Pune (SCDL), Indore - Aizaz Rizvi College of Journalism & Mass Communication, Lucknow - Symbiosis Centre for Distance Learning (SCDL) - Pune, Model Colony, Pune - University of East Anglia, Norwich - Swansea University, Wales - International Council for Management Studies, Chennai - College of Insurance & Risk Management (CIRMS), Hyderabad - International Institute for Insurance and Finance, Hyderabad - Bhavans Centre for Inter-Disciplinary Studies (BCIDS), Mumbai - DS Actuarial Education Services Private Limited, Vile Parle West, Mumbai - College of Insurance & Risk Management (CIRMS), Mumbai
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