What is an underwriter?
An underwriter is a professional who evaluates the risks involved in insuring people or assets and determines the coverage of insurance policies and the premiums that should be charged. They play a crucial role in the insurance industry, as their risk assessment and decision-making skills directly influence the profitability of an insurance company.
Their role is pivotal in ensuring that the risks taken on by an insurer are balanced with the premiums being charged. By carefully analyzing information and making informed decisions, underwriters contribute to an insurer’s financial stability and capacity to pay claims. Their work is vital to maintain the delicate balance between making insurance policies affordable for clients and profitable for insurance companies.
Duties and responsibilities
The duties of an underwriter revolve primarily around risk assessment. They review insurance applications, evaluate the degree of risk based on various factors, and decide whether the insurance company should take on the risk. This involves thorough research and analysis, as well as the use of underwriting software to determine appropriate premiums.
Underwriters might specialize in one type of insurance, such as life, health, property, or casualty. These professionals typically work closely with insurance agents and brokers, discussing the details and conditions of policy contracts. They might also review existing policies, considering renewal and cancellation decisions.
In addition, they maintain detailed records of the policies they underwrite and the decisions they make, ensuring transparency and traceability in their work. Professionals in this role must stay informed about insurance regulations and guidelines changes and adapt their practices accordingly.
Underwriters typically work in an office, although remote work has become increasingly common in the industry. Their role is highly analytical, requiring focus, attention to detail, and the ability to interpret complex information. They spend significant time using computers, especially underwriting software, databases, and spreadsheets.
While underwriters often work independently, they also collaborate with insurance agents, brokers, and other professionals in the industry. Their work is often deadline-driven, especially during policy renewal periods, which can be a source of pressure in this role.
Typical work hours
Underwriters generally work standard business hours, Monday through Friday, but may occasionally work overtime to meet deadlines. However, the rise in technology and remote work capabilities has sometimes allowed for more flexible scheduling. The nature of the role requires continuous learning, as these professionals must stay updated on new insurance laws and regulations and evolving industry trends.
How to become an underwriter
Becoming an underwriter requires a combination of education, experience, and skills to effectively assess and manage risk for insurance companies or financial institutions. Here is a step-by-step guide on how to pursue this career.
Step 1: Obtain a high school diploma or equivalent
The first step is to complete your high school education or obtain a GED. This foundation is necessary for pursuing further education and training in the field of underwriting.
Step 2: Pursue a bachelor’s degree
While some entry-level underwriting positions may not require a bachelor’s degree, most underwriter roles do. A degree in business, finance, economics, or a related field will provide you with the necessary knowledge and skills to excel in the underwriting profession. Courses in risk management, statistics, and insurance can also be beneficial.
Step 3: Gain experience in the financial or insurance industry
Before becoming an underwriter, gaining experience working in the financial or insurance industry is essential. Many start their careers as underwriting assistants or in customer service roles, which allow them to learn about the industry and develop relevant skills. This experience will help you understand the underwriting process and how to assess and manage risk effectively.
Step 4: Obtain relevant certifications or licenses
Obtaining professional certifications can enhance your career prospects and demonstrate your expertise in underwriting. For insurance underwriters, consider pursuing the Chartered Property Casualty Underwriter (CPCU) or Associate in Commercial Underwriting (AU) designation.
For banking or mortgage industry underwriters, consider the Mortgage Bankers Association’s Certified Mortgage Underwriter (CMU) certification. Some positions may also require state-specific licenses, so check the requirements for your desired role.
You may also consider this Risk Management Specialization, offered by the New York Institute of Finance via Coursera. It’s completely online with flexible deadlines, and you’ll earn a shareable certificate upon completion.
Step 5: Develop strong analytical and communication skills
These professionals must possess strong analytical skills to assess complex financial data and make informed decisions. They also need effective communication skills to work with various stakeholders, such as agents, brokers, and clients.
Developing these skills through relevant training or on-the-job experience is essential for success in the underwriting profession. Many people have found this Business Communication Skills online course through Udemy helpful.
Step 6: Stay current with industry trends and regulations
Staying up-to-date on industry trends, regulatory changes, and emerging risks is crucial for underwriters. Regularly attend workshops, conferences, and seminars to expand your knowledge and network with other professionals in the field. Joining professional organizations, such as the National Association of Insurance Underwriters (NAIU) or the Mortgage Bankers Association (MBA), can also help you stay informed and connected.
Step 7: Apply for jobs
Once you’ve gained the necessary education, experience, and certifications, you can begin applying for underwriter positions. Tailor your resume and cover letter to highlight your relevant qualifications and achievements, and be prepared to discuss your experiences and knowledge during interviews.
How much do underwriters make?
Several variables can influence salaries. A significant factor is the level of experience. More experienced underwriters, particularly those who have proven their ability to assess risk and make sound decisions accurately, generally earn more than those new to the field.
The specific sector of underwriting also makes a difference. For instance, professionals in health or life insurance may earn differently than those working in property or casualty insurance.
Similarly, underwriters who handle more complex types of insurance, like commercial or specialty insurance, often earn more than those dealing with simpler, standard policies.
Geographic location plays a role as well. Those in areas with a higher cost of living and a strong insurance industry, like New York or Chicago, often earn more than those in other regions.
Education and certification can also influence their salary. While a bachelor’s degree is often enough to enter the field, professionals in this role who pursue further certifications from organizations like The Institutes (formerly the American Institute For Chartered Property Casualty Underwriters) can potentially increase their earning power.
Finally, the size and profitability of the insurance company can impact the salary. Larger companies or those with more underwriting volume often pay their underwriters more.
Highest paying industries
- Securities and Commodity Contracts – $110,560
- Federal Government – $97,670
- Management of Companies and Enterprises – $96,650
- Insurance Agencies – $81,060
- Insurance Carriers – $78,800
Highest paying states
- District of Columbia – $95,587
- New York – $92,580
- Connecticut – $85,450
- New Jersey – $81,250
- Alaska – $79,810
Types of underwriters
We explore the different types and underwriting specializations in this career guide section. These specializations can vary depending on the type of insurance or loan they work with and the specific requirements of their role.
Insurance underwriters evaluate the risks involved in insuring people or assets and use that information to set pricing for insurance premiums. They work in various types of insurance, including life, health, property, and casualty insurance. Their job involves analyzing risk factors and deciding whether the insurance company will provide coverage and under what terms.
Underwriters in this role assess the creditworthiness of individuals who apply for mortgage loans. These professionals review the applicant’s credit history, employment history, income, and the property value to be purchased to determine whether to approve the loan and at what interest rate.
Commercial loan underwriter
Those working as commercial loan underwriters specialize in evaluating the risks associated with business loans. They assess the business’s financial health, the business owners’ creditworthiness, and the business plan’s feasibility. Their decisions influence whether the lender provides the loan and under what terms.
Medical underwriters work specifically in the field of health and life insurance. Their responsibility is to assess the risk of insuring an individual based on their medical history and lifestyle factors. They may also consider genetic information and family history to determine coverage and premium rates.
These underwriters focus on the risks associated with environmental damage or pollution. They may work with businesses that operate in industries with high environmental risks, such as manufacturing or construction. Professionals in this role evaluate the potential risks and determine the terms of coverage for environmental liability insurance policies.
Top skills for underwriters
Strong analytical ability is essential for underwriters, as they need to assess various information, including financial data, medical records, and risk reports, to determine the potential risk of insuring a client. This involves interpreting complex data and identifying patterns to make informed decisions about accepting the risk and the appropriate premium.
Proficiency in using underwriting software will aid these professionals in collecting, analyzing, and storing data, as well as calculating risk and premiums. Familiarity with such software can enhance the efficiency and accuracy of the underwriting process.
Excellent decision-making skills are also vital since they must critically judge whether to provide insurance and under what terms. This involves weighing the potential risks against the benefits and making financially sound decisions for the insurance company.
A high level of attention to detail is required for underwriters, who must meticulously review applications and documents to ensure accuracy. Errors or oversights could result in the company taking on too much risk or charging inadequate premiums, which could lead to significant financial losses.
Lastly, communicating clearly and professionally is critical to maintaining positive relationships and ensuring the smooth operation of the underwriting process. Professionals in this role often need to liaise with insurance agents and brokers, explain their decisions to clients, and sometimes negotiate the terms of coverage.
Underwriter career path
The career path for an underwriter often starts with an entry-level position in the insurance or finance industry. This could be as an underwriting assistant or a junior underwriter, where you’ll learn about risk assessment, policy terms, and industry regulations. You’ll also gain experience analyzing applications, understanding insurance policies, and working with more experienced professionals.
With a few years of experience and a track record of accurate and efficient underwriting, you may progress to a full underwriter role. In this position, you’ll handle more complex applications, work with higher-value policies, and make more significant policy acceptance and pricing decisions.
Further progression can lead to a senior underwriter or underwriting manager role, where you’ll oversee a team of underwriters, make final decisions on high-risk or high-value policies, and potentially work on developing underwriting policies and guidelines.
Beyond the role of underwriting manager, you could aim for executive roles such as director of underwriting or chief underwriting officer, where you’ll have strategic oversight over all underwriting activities within an organization.
Alternatively, some professionals specialize in a specific type of insurance, such as life insurance, property and casualty insurance, or commercial insurance, and can become subject matter experts or consultants in these areas.
Position trends and outlook for underwriters
Underwriting is an essential function in the insurance and financial sectors, assessing risks and determining terms for coverage or loans. This role is evolving due to advancements in technology and changing market dynamics.
One of the significant trends impacting these professionals is the advent of automated underwriting systems powered by artificial intelligence and machine learning. These technologies are increasingly used to analyze data and make initial risk assessments, streamlining the underwriting process. However, human underwriters still play an important role in handling complex cases and making final decisions.
Another major trend is the growing emphasis on data analytics. Professionals in this role are expected to leverage data analytics to gain a more accurate understanding of risk, which can lead to more informed underwriting decisions.
In addition, regulatory changes and increased scrutiny on lending practices have emphasized the importance of compliance in underwriting. They must stay up to speed with regulatory developments and ensure that underwriting practices comply with relevant laws and regulations.
Finally, the demand for specialized knowledge is growing. Those with expertise in specific sectors or types of risk are increasingly sought after, reflecting the complexity and diversity of risks in the modern world.
Employment projections for underwriters
According to the Bureau of Labor Statistics (BLS), employment for underwriters is projected to decline by 4 percent through 2031. This decline is primarily due to the increasing automation of underwriting tasks.
However, while automation is used for simple applications, they are still needed for more complex cases. Those with strong analytical skills, a background in data analysis, and specialized knowledge will likely have the best job prospects.
Underwriter career tips
Understand risk assessment principles
Underwriting revolves around risk assessment. A solid understanding of risk assessment principles will allow you to make informed decisions about whether to accept or reject an application and what terms to set.
Stay updated with industry regulations
Regulations in the insurance industry change frequently. Staying updated with these changes is crucial for ensuring compliance and accurate decisions. Review industry news and updates regularly, attend webinars, and participate in relevant training sessions.
Develop attention to detail
Underwriting involves reviewing and analyzing a lot of information. Strong attention to detail will help you spot important details, avoid errors, and make more accurate decisions.
Build a professional network
Networking can provide valuable insights, learning opportunities, and potential collaborations. Consider joining professional associations and communities such as:
- The National Association of Professional Insurance Agents (PIA)
- The National Association of Insurance and Financial Advisors (NAIFA)
- The American Association of Managing General Agents (AAMGA)
Improve decision-making skills
You’ll often need to make difficult decisions under pressure in this role. Developing your decision-making skills can help you make informed decisions quickly and confidently, even when dealing with complex or uncertain situations.
Implement continuous learning
Continuous learning is essential for staying updated with changes in the insurance industry, risk assessment techniques, and regulatory requirements. Areas of focus could include:
- Emerging risks and trends in the insurance industry
- Advances in risk modeling and predictive analytics
- Regulatory updates and changes
- New insurance products and coverages
Master relevant technology
Professionals in this role often use specialized risk assessment, decision-making, and document management software. Proficiency in these tools can significantly enhance your efficiency and effectiveness.
Enhance negotiation skills
Negotiation skills are often crucial, particularly when setting terms with brokers or agents. Negotiating effectively can help you reach mutually beneficial agreements while maintaining the profitability and risk level acceptable to your company.
Where the underwriting jobs are
- State Farm
- Liberty Mutual
- New York
Top job sites
What skills are necessary for an underwriter?
These professionals need a combination of analytical skills and attention to detail to assess risk and make informed decisions. Strong numerical and statistical skills are often required to evaluate financial data. They must also possess excellent judgment and decision-making skills and make complex risk assessments.
Communication skills are vital, as they often work with various professionals, including brokers, risk and compliance officers, and claim handlers. Proficiency in using underwriting software or other relevant computer systems is also beneficial.
What are the typical duties of an underwriter?
Their typical duties include assessing insurance applications to determine the level of risk involved. They review various factors, such as the applicant’s financial status, health, or property condition, depending on the type of insurance.
These professionals then decide whether to provide insurance and on what terms, including setting the appropriate premium rates. They may also review existing policies and determine whether to renew them based on any changes in risk.
What is the role of an underwriter in the insurance industry?
In the insurance industry, these professionals are crucial in determining which applicants are accepted for coverage and at what premium rate. They assess the risks associated with insuring a person or a property and decide if it aligns with the company’s risk appetite. In doing so, they help ensure the insurance company’s financial stability by minimizing the risk of costly claims.
How does an underwriter assess risk?
Underwriters assess risk by evaluating various factors related to the applicant or the item to be insured. For example, in life insurance, they might consider the applicant’s age, health, occupation, and lifestyle habits.
In property insurance, they might look at the condition and location of the property, among other factors. They use statistical data, actuarial tables, and underwriting software to help make these assessments. The goal is to determine the likelihood of a claim being made and the potential cost of that claim to the insurance company.
What is the difference between an underwriter and a broker?
While both work in the insurance industry, their roles and responsibilities are quite different. Brokers represent insurance buyers and work to find the best insurance coverage for their clients’ needs at the best price.
Underwriters, on the other hand, work for insurance companies. They assess the risks associated with insuring a person or property and decide whether to provide insurance and on what terms.
What kinds of decisions does an underwriter make?
Underwriters decide whether to provide insurance to an applicant and on what terms. This includes deciding on the premium rate, exclusions or conditions, and the policy limit. They also decide whether to renew existing policies based on changes in risk. These decisions are based on a careful risk assessment and the insurance company’s risk appetite.
How does an underwriter work with other professionals in the insurance industry?
They often work closely with a range of professionals in the insurance industry. This can include brokers, who submit applications on behalf of their clients; risk and compliance officers, who ensure the underwriting process complies with regulations; claim handlers, who deal with claims when they arise; and actuaries, who develop the statistical models that underwriters use in their risk assessments.
What challenges might an underwriter face?
Underwriters might face several challenges, such as:
- The need to make complex risk assessments under time pressure
- The responsibility for decisions that can have significant financial consequences
- The need to keep up with changes in regulations and industry practices
They may also need to deal with difficult negotiations with brokers or clients and explain their decisions to people who may not be happy with them.
What is the role of an underwriter in a mortgage lending institution?
In a mortgage lending institution, these professionals assess the creditworthiness of applicants who want to secure a mortgage loan. They evaluate the borrower’s credit history, employment stability, income, and the property value to be mortgaged.
Based on this assessment, they will decide whether to approve the loan and under what terms. Their role is essential in ensuring that the lender does not take on too much risk, which could lead to financial loss if a borrower defaults on their loan.
What does career progression look like for an underwriter?
Career progression often involves gaining experience and expertise in more complex types of underwriting, possibly specializing in a specific type of insurance or financial product. Many professionals start in junior or assistant roles and progress to senior or lead underwriter positions.
Some may go on to managerial or supervisory roles, overseeing a team of underwriters. There are also opportunities to move into related areas such as risk management or compliance.