Let’s start this discussion with the definition of an underwriter, just in case some are not familiar with the term (if that’s you, don’t worry, that was me not so long ago too). An insurance underwriter is defined as a person who evaluates the risk and exposures of potential clients. They decide how much coverage the client should receive, how much they should pay for it or whether even to accept the risk and insure them.
As you have seen through our various discussions, life insurance has become a must have, particularly for those who have families who will be left behind. This growing desire for the protection that life insurance provides, has kept these policies in demand, though it has raised the costs at the same time.
Insurance companies operate not because of charity or any other reason, but for profit. They profit by investing the premiums, paid by the policy holders, in various financial markets. The insurance company is known as the underwriter, as it underwrites or manages the risks paid for by the insured or the policy holder.
By underwriting an insurance policy, an insurance company makes itself responsible for the risks being insured by the policy holder. In some cases, underwriters or insurance companies also have their companies insured and this is called re-insurance.
Underwriting is a big business that is very risky, as underwriters promise to provide protection to individuals or companies, who may suffer financial losses at some future point in time. To make underwriting a profitable business, the insurance companies must make use of underwriters who are able to analyze risk factors, as well as insurability factors.
Underwriters are the front liners who decide on the insurability of a certain individual or company. These underwriters are responsible for determining the proper premiums to be paid, the calculation of the policyholder’s risk and the writing of the insurance policies that are aimed at covering these risks.
There are professionals who work as risks analysts and they collaborate with the underwriters when deciding on the insurability of a client. Sometimes the risk analyst will work as an underwriter him/herself also.
Underwriters are the people who know the ins and outs of an insurance business and they can give good advice to prospective policyholders, who would like to be guided in getting the right insurance plans. Underwriters are, however, guided by computers in assessing the risks involved for their particular clients.
Underwriters are very influential people and they can sway an insurance company into approving the insurance policy of a person. They are the main people behind the approval of thousands, if not millions of policy loans. They have been responsible for the rise and fall of many insurance companies.
Underwriters sometimes have specializations, but they are highly trained to work in all insurance categories. Property underwriters can be further divided into the areas of automobile, fire, liability, homeowners or marine insurance.
A good underwriter must be a good analyst with good research skills and a keen eye for detail. Many in the underwriting business earn a high salary because of the tremendous amount of knowledge needed along with the extreme pressure that they are under to not make mistakes.
Underwriters study a potential policy holder’s life history, hobbies, preferences and even his family and friends, just so they can arrive at a safe estimate or conclusion of that person’s insurability. Otherwise, the insurance company suffers the effects of a wrongful underwriting analysis. In other words, they could lose a tremendous amount of money.
Growing safety and health concerns all around the world are expected to make the insurance business a bigger industry than it ever has been. Don’t get caught up in the problems that have hurt many others in the past, consult your independent insurance agent today and get the most up-to-date information available, to help you make the best possible decisions!