Who is an Insurance Underwriter & when do you need one?

Insurance underwriters are the expert professionals who analyze the risk which is associated with the investors. They evaluate the investors and make an assessment about the people getting insured. The underwriters set pricing for the insurable risk. Underwriting fee is the returns paid to the underwriters for the services for analyzing the capable risk. They use special data software for finding out the risks. 

Insurance underwriters take the risk factor which is related to the contract for a particular entity. For instance, the underwriting person may make an assessment of risk which is related to the expense of fire damage at a home wherein the insured will pay a premium amount for the risk coverage. 

The main duty of the underwriting person is to find out the magnitude of risk which is associated with property prior the policy period and also during the time of renewal of insurance. 

While rating a house insurance policy the underwriter will consider many factors. There are inspection teams, field underwriters, insurance agents  who assess the property and find out the casualty of the property. This is done to assess the condition of the roofs, foundation, property condition and other aspects of the building. 

The insurance agent will present all the information to the home underwriter and then the underwriter will assess the hazards which will create a liability to the insurance company. Based on the underwriter’s report, the risk of loss to the insurance company is ascertained. 

What insurance underwriters do?

There are various factors that insurance underwriters will assess the property condition and these include damages to the walls, unsecured swimming pool, unfenced staircase,  mucus on the building, dying trees at the property. There are other risks to the insurance company which are required to be ascertained. The insurance company will take the inputs from the underwriter and make an estimation of liability to be paid to the insured. If the parameters are good for the insurance company and fall within their affordable limits, then the insurance company will provide the insurance. 

The insurance underwriters will take the inputs and primarily the credit rating inputs where the financial repayment status of the insurance holder can be assessed. Other system generated analysis and algorithms are used for the rating of the insurance holder. 

The system will generate a premium amount which will take into consideration all the data, analysis, risks and observations given by the insurance underwriter. It will also take into account the answers given by the policyholder during the application process.  

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Why are insurance underwriters required?

Once we understand what an insurance underwriter does, it is easy to identify why insurance underwriters are required.

Below are a few aspects where it tells why insurance underwriters are required. 

  • Insurance underwriters are required for analyzing and finding out the risk associated with the applicant.
  • Screening the applicants based on certain parameters
  • Evaluation of the applicants based on recommendation from the software
  • Working with the inspections teams, field agents, health care units for getting more reliable data
  • Help in deciding whether to approve or disapprove the insurance application
  • Ascertaining the premium amounts and premium cover for the insurance applicant
  • Updation and review of the procedures or rules for the automated software
  • Providing judgemental decisions which are useful for paying the claims 

Insurance underwriters work for the insurance company and they are the professional experts who are at the headquarters of the company. Many underwriting agents use technology, software systems for risk assessment. Based on the data they provide the insurance premium. The underwriters will assess the applications and they suggest risk on the profiles. 

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How does an insurance underwriter work?

In today’s tech world, the insurance underwriters use the software and they assess the client risk based on the information. This information is obtained from the field, application forms, historical data, policy requirements, coverage and other factors. 

They will decide on approving the insurance application or rejecting the insurance application. General insurance policies like home insurance, automobile insurance, the system generated information is reliable and they provide the inputs to the insurance company. 

For ascertaining the business income, workmen compensation and other areas where more complex analysis is required insurance underwriters will depend on the analytical assessment. The higher the risk, the higher is complex work because an insurance policy may be taken just to avoid risk of loss by the insurance holder. Based on the insurance risk, the underwriters work with the technology and the field data. 

Importance of Insurance Underwriter

Insurance underwriters decide the risk of the applicant. They will report how risky it is to give an insurance policy to the applicant once approved. The insurance policyholder can make claims once the insurance is approved based on the circumstances. If the policyholder has the intention to deceit and it is not ascertained by the underwriting team then it is a loss to the insurance company. 

If coverage needs re-evaluation and policy change or increase in the claim amounts then the insurance underwriter will step into the process and provide inputs to the insurance company. Insurance underwriters will work with the agents or brokers for creating a policy which is good for the insurance company and the policyholder. 

Meet the author
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Vinay Kumar Goguru is a finance professional with more than 8 years of diverse experience as a researcher, instructor and Industry work experience with both public and private entities. Prior to MyMoneySouq, he spent 6 years in Berkadia, It’s a commercial mortgage banking company. He has a “Doctoral Degree in Commerce” and two master’s degrees with a specialization in Finance, one as Master of Commerce and other as Master of Business Administration. He has written several articles on personal finance, published by different International journals. He loves traveling, reading and writing is his passion. He has a dream of writing a book on his favorite finance topics.



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