Have you ever filed an application to receive insurance? If so, then you have already faced the questions that insurance companies utilize to evaluate the level of risk you pose. After applications are presented, insurance underwriters carefully review and evaluate each response to either accept or reject applicants on behalf of the insurance company. In most cases, insurance underwriters will specialize in evaluating applicants for receiving insurance based on their financial history. These types include:
- life
- health
- commercial
- car
- marine
- homeowners
Underwriters are prominent players in the insurance industry. They must achieve a happy balance between risky and cautious decisions to ensure the carrier remains profitable.
Salary
Based on reports from the Bureau of Labor Statistics, the 92,540 insurance underwriters working in the United States earn an average annual salary of $70,110, which can be translated into a mean hourly wage of $33.71. The largest percentage of underwriters employed by insurance carriers earns $70,550 each year. The highest paid in the profession work for securities brokerages at an average of $84,630 annually.
Beginning Salary
Insurance underwriters just getting started in their career can expect to earn an average annual beginning salary of $39,410. While this may seem low, remember that additional years of work experience in insurance underwriting can lead to a very satisfying six-figure salary of over $111,750 each year.
Key Responsibilities
Underwriters are a vital link between the insurance carrier and an insurance agent. Underwriters evaluate insurance applications to make the decision of whether to provide insurance to certain applicants and under what terms. Most insurance underwriters are responsible for:
- analyzing applicant information
- assessing the risk of each client
- screening applicants based on established criteria
- reviewing recommendations created by automated underwriting software
- contacting field representatives to collect more client data
- making the final decision of whether to offer insurance
Based on the clients’ financial situation and level of risk, insurance underwriters are also in charge of determining an appropriate amount of coverage and settling on an appropriate premium.
Necessary Skills
On a daily basis, insurance underwriters use their analytical skills to evaluate crucial information about applicants from a variety of sources. Insurance underwriters must have strong skills in:
- critical thinking
- decision-making
- problem-solving
They use these to consider the costs and benefits for making appropriate choices in providing insurance coverage. Math skills are very helpful for underwriters. They use math to determine the probability of losses on insurance policies and calculating an appropriate premium price for the newly insured. Every item on an insurance application can have a positive or negative impact on the insurance carrier. It is essential for underwriters to have organizational skills for paying close attention to detail. Having solid interpersonal skills to communicate with insurance agents and the public is also a must.
Degree and Education Requirements
Employers usually prefer to hire applicants who have earned a bachelor’s degree from an accredited institution underwriting positions. Most underwriters choose to build the essential academic foundation by earning a four-year undergraduate degree in:
- business administration
- finance
- economics
- mathematics
- statistics
In some cases, there will be entry-level job opportunities available for insurance underwriters who have years of work experience in insurance-related firms and strong computer skills. However, post-secondary education is a must-have for individuals seeking advancement into senior underwriter or underwriter manager positions.
Pros and Cons of this Position
One of the best advantages of becoming an insurance underwriter is the vast opportunities that the career offers for upward mobility into senior-level leadership positions in insurance carriers. Insurance underwriting is often a great career choice for detail-oriented people who thrive when using their analytical abilities to put pieces of a puzzle together in solving a problem. Varied day-to-day responsibilities also help keep the workday fresh.
As with any other career though, insurance underwriters face a number of challenges in their field. Since there is a less than stellar job outlook for the position, competition for job openings can be extremely heated. Underwriters may also deal with high levels of pressure to avoid taking too few or too many risks in their applicant decisions.
Getting Started
Entry-level underwriters tend to get started on acquiring work experience in the field by working as trainees under the supervision of more senior underwriters. Fulfilling entry-level positions will involve evaluating basic applications and learning about the most common risk factors to look out for.
As time progresses, underwriters can advance to work independently and become responsible for more complex applications with many factors to analyze. Employers will often expect their underwriters to pursue certification after getting at least three years of insurance experience to advance further. Through the Institutes, individuals can become designated as a:
- Chartered Property and Casualty Underwriter (CPCU)
- Associate in Commercial Underwriting (ACU)
- Associate in Personal Insurance (API)
In the American College of Financial Services, beginning underwriters can also complete training programs that lead to credentials as a:
- Chartered Life Underwriter (CLU) or
- Registered Health Underwriter (RHU).
Future Outlook
Due to the amazing technological advancements of the last decade, automated underwriting software is becoming more commonplace. It can process applications quicker than ever before and reduce the need for underwriters. As a result, the Bureau of Labor Statistics is projecting that the employment of insurance underwriters will decline by 6%. This will lead to the loss of nearly 6,500 positions in the finance field. While the outlook remains gloomy, there is still expected to be some new job openings as current underwriters reach retirement age or seek better job opportunities in another occupation. Prospects will likely be the best for job candidates with a strong background in finance to use their expertise in insurance underwriting for:
- insurance carriers
- brokerages
- credit intermediation agencies
- private corporations
Overall, insurance underwriters play an important role in the life cycle of an insurance policy to:
- analyze risk
- quantify premiums
- attract financially stable clients
Insurance companies continue to assume billions of dollars in risk each year. It’s essential for underwriters to use their intellectual and people skills in accepting liability for possible losses by newly insured clients.
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