Insurance Underwriter

What is an Insurance Underwriter?

An insurance underwriter analyzes and assesses the risks of providing insurance to individuals and companies and establishes insurance premiums.

Underwriters use software, actuarial data, and statistical analysis to evaluate the risk of a future event that would require the insurance company to compensate an insured individual. For example, an underwriter would analyze the risk of a fire damaging an individual’s home and calculate the cost associated with paying out an insurance claim.

Insurance underwriters play an important role in an insurance company because they determine whether the insurer should decline to take on a risk by assessing the likelihood of payout. Using their risk analysis, underwriters decide how much to charge an individual for the insurance premium.

What Does an Insurance Underwriter Do?

The role of an insurance underwriter includes responsibilities such as:

• Evaluating information about the potential client (i.e., age, marital status, medical history, driving record, etc.)
• Using underwriting software to analyze the risk profile of the potential client
• Deciding whether or not insurance coverage should be offered to an individual
• Calculating costs to provide coverage and establish the pricing for the premium
• Developing solutions to reduce the risk of paying future insurance claims
• Analyzing actuarial tables, which are the data provided by actuaries

Although some of the work is automated and carried out by insurance software, an insurance underwriter will still be involved with a potential client if there is a change in risk or in the conditions of the insurance policy. The underwriter will determine whether the insurance company will continue providing insurance coverage or establish new insurance terms with the client.

Insurance underwriters usually specialize in one specific area of insurance, such as healthcare, property, or car insurance. Depending on the area of insurance they work in, underwriters can use specific information about an individual to determine whether the client should be offered insurance.

Example of Insurance Underwriting

For example, a health insurance underwriter would assess an individual’s health background, including age, family history, and current illnesses. With such information, underwriters would then enter the data into underwriting software to analyze the individual’s health-related risks and calculate the appropriate premium. If an individual has a longstanding history of an illness, they pose a greater risk to the insurance company.

Different coverages would require the underwriter to look at different pieces of personal information. For auto insurance, factors such as an individual’s credit score, driving record, and history of driving violations are considered when determining the risk of providing coverage to the individual.

Another example is underwriting in a homeowners’ insurance policy. If an individual is purchasing a new property, underwriters will assess the property’s quality and condition, including its location, age, and evidence of roof deterioration.

Underwriters also factor in hazards near the property that could cause injuries resulting in an insurance claim. Personal information, such as credit history, is also taken into account when calculating the premium.

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Additional Resources

CFI is the official provider of the global Financial Planning & Wealth Management Professional (FPWMP®) certification program, designed to help anyone become a world-class financial planner. To keep advancing your career, the additional resources below will be useful:

• Actuarial Life Table
• Insurance Deductible
• Mutual Insurance Company
• Underwriting

See all Wealth Management resources