Secure success

Usha Albuquerque

When you go to insure your house, or car, you are often left wondering how much premium you will have to pay, what risk does that cover, and how can you reduce the amount and yet get the maximum benefit. The person who reviews and evaluates your  insurance cover is an insurance underwriter. 

When someone applies for insurance and submits the information, the underwriter is the one who performs a risk analysis to determine whether it is in the company’s best financial interest to issue a policy. The decision-making process on whether to approve insurance policies, is handled by an insurance underwriter. 

Role

Underwriters calculate the financial risk of insuring a business or an entity, for prospective and current clients. They work in different lines of the insurance business, such as auto, home, commercial and farm insurance, individual, life and  health insurance. Underwriters review new or renewal applications for insurance coverage — both for individuals and companies. This involves identifying, evaluating, and estimating the level of risk involved, establishing premiums matched to the risk and recommending coverage. 

Underwriters must approve applications so that the insurance company can collect premiums. This is how insurance companies make their money.  

Work

Working as an underwriter differs depending on the type of insurance because of the types of clients the underwriter will work with and the risks that are assessed. In general, the tasks undertaken by an underwriter include: 

Risk management: Underwriters measure risk exposure and determine the premium that needs to be charged to insure that risk

Screen applicants: Underwriters review applications for insurance and screen them based on the criteria of the insurance company. Applicants who do not meet the basic requirements are normally denied insurance.

Analyze Risk: An insurance underwriter analyses the risks associated with applications that meet the minimum criteria. Health insurance underwriters consider medical risks such as a family history of cancer or heart disease, or an individual with a history of smoking. They may communicate with doctors, and other agencies  for information regarding the applicant 

Approve applications:  An underwriter evaluates an applicant’s exposure to risk and decides whether an applicant meets an insurer's standards. 

Write policies: Insurance underwriters write insurance policies explaining client coverage and premiums, while minimising potential losses for the insurance company. An underwriter may also become involved in setting prices for insurance applicants.

Getting in

College graduates having a degree in finance or business administration, with courses in accounting are more likely to find opportunities for employment with large insurance companies. However, those with a bachelor’s degree in any field can also enter this field. Having a specialisation in property or mortgage underwriting, an additional course in finance, actuarial science, accounts or computer applications is an added advantage. 

Insurance of  certain niche areas such as technical, industrial, marine and other such fields may require subject-matter experts  with a training in finance and insurance.  For health and life insurance underwriting, a degree in medical or paramedical field is important, as health and life insurance underwriters have to assess the medical risk along with the financial risk involved with an individual. 

Job prospects 

Underwriters work in insurance agencies or for organisations that offer insurance services to insurance companies and policyholders. A small number of underwriters work in agencies owned and operated by banks, mortgage companies, and real estate firms. The four main categories of jobs are:

• Life insurance
• Health insurance
• Mortgage insurance
• Property/casualty insurance

Most underwriters start their careers as underwriting assistants or junior underwriters, doing routine work like collecting customer data and analysing customer applications. They can advance to senior underwriter or underwriting manager positions after some years of experience.  

Moving into core areas of insurance like risk management, broking etc., after gaining sufficient experience as underwriters is common in this career. 

Underwriters operate as the main link between an insurance company and insurance agents, often working along with the insurance agent and as the agents’ trusted advisor.  Where the agent is required to sell and understand multiple lines of insurance and financial products, the underwriter is there to provide guidance and expertise, while determining  rates and premiums on the policies.

With the growth of the insurance sector and the entry of multi-national insurance companies there is good scope for insurance underwriters.

Skills needed 

Most insurance underwriters use computer programmes and actuarial data to estimate the possibility and amount of payout over the life of the policy. Persons with excellent communication and computer skills along with a strong background in finance will therefore have the best opportunities for employment in this field.  Skills required include:

• analysing financial data
• evaluating degree of financial risk
• inspecting property
• decision making
• use of computers and knowledge of underwriting software designed to aid in the risk assessment process 
• writing business correspondence
• Relationship-building skills

The most important underwriting skills are learnt on the job. As such, many underwriters begin their careers as trainees or assistant underwriters.

— The writer is Director, Careers Smart Pvt Ltd., New Delhi