What does an Insurance Underwriter do?

An insurance underwriter works for an insurance company, deciding whether or not to insure an individual or a group of individuals. The underwriter will also determine insurance rates or how much an applicant should pay for a policy. Underwriters rely on risk management assessments and statistical data surveys to make these decisions.

The transfer of risk is what insurance is all about. When a person purchases car insurance, for example, he is transferring the risk of being involved in a car accident to the insurer. If a car accident occurs, the insurance company is responsible for his financial losses.

To be profitable, insurance companies must determine the likelihood that the applicant will cause an accident. They will be able to charge an appropriate price for transferring the risk as a result of this. The underwriter assists the business in making this decision.

When a person applies for an insurance policy, he gives personal information and data about himself. The underwriter examines this data and compares it to statistics gathered on people who are similar to you. The underwriter then determines whether this person is so likely to cause an accident that insuring him, no matter how much he paid, would be unprofitable. If the underwriter grants insurance, he also determines how much that person should pay in order for the company to avoid losing money.

An insurance underwriter needs to be able to perform statistical analysis. He must be able to predict the risk of insuring a given individual or group of individuals using the numbers and data at his disposal. The information could be a compilation of existing policyholder and claim information. Insurance companies frequently have vast databases containing thousands of statistics on everything from insureds’ ages to the vehicles they drive. Based on a variety of factors, the demographic statistics on the pool of insured clients are compared to determine which individuals are most likely to cause accidents.

An insurance underwriter may set the price of all policies for a specific type of person. Alternatively, the insurance underwriter may examine a single application and determine the price solely for that individual. Underwriters who set general policy prices for all groups of similar insureds are held to a higher standard.

An insurance underwriter can work for a variety of different insurance firms. He could, for example, work for a life insurance company, a homeowners insurance company, or a car insurance company. Depending on the type of insurance being priced, the underwriter will review different types of data.