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Insurance Underwriters: Keeping The Company Profitable

Written by Michele Wilmonen. Posted in Definitions Last Updated: 05/02/2011

An insurance underwriter is responsible in deciding what risks the insurance company should take on that won’t result in a large claim that has to be paid out later.

An Underwriter Looking Over Numbers

Underwriters analyze data to determine if an applicant is a good insurance risk.

While agents are essential to gaining clients for an insurance company so that the company can make money, it is the insurance underwriters who keeps the insurance company from making bad insurance investments and losing money on clients.

Underwriters are a vital part of an insurance company and a larger part of peoples insurance than they realize as the only parts of the insurance company that most people have dealings with are their agent and a customer service agent. While there are underwriter’s in all fields of insurance, we are going to concentrate on what an auto insurance (personal and commercial) underwriter does.

What is an Underwriter?

An underwriter is an employee of an insurance company that decides whether the company should insure certain people and situations. First, they gather all of the information about the person applying for insurance, such as their driving record with the Department of Motor Vehicles, their CLUE report that contains their claims history with past insurance companies and also their credit report.

Next, they look at the information and statistics of the field they have their business in (for commercial insurance), the area that they live in (for weather claims, theft rates, ect) and any other pertinent information that may need.

Finally, after they have gathered all of the information that they need, an underwriter makes a decision as to the level of risk that this potential insured presents to the company. Level of risk just means how likely the applicant would end up filing a claim that the insurance company would have to pay out on and also the extent and monetary value of how much would end up being paid out for a claim.

If the risk is low, the underwriter approves the application and the premium. If the risk is too high, the underwriter denies the application and the person applying for insurance either has to make certain changes before they are approved or they move on and apply with another insurance company.

While no one can ever predict the chance of a claim being filed, it is very important that an underwriter be vigilant and make the best decisions possible in who the insurance company insures or it could cost the insurance company a lot of money in claims later down the road.

What Is Required To Be An Underwriter?

The requirements to become an underwriter all depends on the insurance company. One requirement that is usually seen with all companies though is that the applicant has at least a Bachelor’s Degree and experience working with computers. Other education that is helpful to obtain a position and also advance in the field once you are hired there are courses through the Insurance Institute of America and also The American Institute for Chartered Property and Casualty Underwriters.

Where Are Underwriters Located?

Underwriters are usually located in the main corporate and regional offices of insurance companies, but as technology continues to advance, more and more they can also work from their homes. Because everything is being stored on computers all that an underwriter now needs is a computer and a desk to be able to do their job.

For simple underwriting situations, underwriters can even be a piece of computer software that makes a decision based on the records of the person applying for insurance and also the statistics.

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Michele Wilmonen

Michele's first introduction to insurance was working for a major insurance company as a file clerk and a mailroom supervisor in a regional office. She learned insurance directly from underwriters and claims adjusters from questions and also watching them do their job. Since then, she's earned a number of insurance certifications from the Insurance Institute of America and also a Bachelor’s degree from the University of Idaho. She blogs at Car Insurance Guidebook.

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