Insurance companies protect individuals and organizations from financial loss by assuming billions of dollars in risk each year. Underwriters are needed to identify and calculate the risk of loss from policyholders, establish appropriate premium rates, and write policies that cover this risk. An insurance company may lose business to competitors if the underwriter appraises risks too conservatively, or it may have to pay excessive claims if the underwriting actions are too liberal.
With the aid of computers, underwriters analyze information in insurance applications to determine whether a risk is acceptable and will not result in a loss. Applications often are supplemented with reports from loss-control consultants, medical reports, reports from data vendors, and actuarial studies. Underwriters then must decide whether to issue the policy and, if so, the appropriate premium to charge. In making this determination, underwriters serve as the main link between the insurance carrier and the insurance agent. On occasion, they accompany sales agents to make presentations to prospective clients.
Technology plays an important role in an underwriter's job. Underwriters use computer applications called "smart systems" to manage risks more efficiently and accurately. These systems automatically analyze and rate insurance applications, recommend acceptance or denial of the risk, and adjust the premium rate in accordance with the risk. With these systems, underwriters are better equipped to make sound decisions and avoid excessive losses.
The Internet also has affected the work of underwriters. Many insurance carriers' computer systems are now linked to different databases on the Internet that allow immediate access to informationsuch as driving recordsnecessary in determining a potential client's risk. This kind of access reduces the amount of time and paperwork necessary for an underwriter to complete a risk assessment.
Most underwriters specialize in one of three major categories of insurance: life, health, and property and casualty. Life and health insurance underwriters may further specialize in group or individual policies.
Property and casualty underwriters usually specialize in either commercial or personal insurance and then by type of risk insured, as in fire, homeowners', automobile, marine, or liability insurance, or workers' compensation. In cases where casualty companies provide insurance through a single "package" policy covering various types of risks, the underwriter must be familiar with different lines of insurance. For business insurance, the underwriter often must be able to evaluate the firm's entire operation in appraising its application for insurance.
An increasing proportion of insurance sales, particularly in life and health insurance, is being made through group contracts. A standard group policy insures everyone in a specified group through a single contract at a standard premium rate. The group underwriter analyzes the overall composition of the group to ensure that the total risk is not excessive. Another type of group policy provides members of a groupa labor union, for examplewith individual policies reflecting their needs. These usually are casualty policies, such as those covering automobiles. The casualty underwriter analyzes the application of each group member and makes individual appraisals. Some group underwriters meet with union or employer representatives to discuss the types of policies available to their group.
Underwriters have desk jobs that require no unusual physical activity. Their offices usually are comfortable and pleasant. Although underwriters typically work a standard 40-hour week, more are working longer hours due to the downsizing of many insurance companies. Most underwriters are based in a home or regional branch office, but they occasionally attend meetings away from home for several days. Construction and marine underwriters frequently travel to inspect worksites and assess risks.
For entry-level underwriting jobs, most large insurance companies prefer college graduates who have a degree in business administration or finance with courses or experience in accounting. However, a bachelor's degree in almost any fieldplus courses in business law and accountingprovides a good general background and may be sufficient to qualify an individual. Because computers are an integral part of most underwriters' jobs, computer skills are essential.
New employees usually start as underwriter trainees or assistant underwriters. They may help collect information on applicants and evaluate routine applications under the supervision of an experienced risk analyst. Property and casualty trainees study claims files to become familiar with factors associated with certain types of losses. Many larger insurers offer work-study training programs, lasting from a few months to a year. As trainees gain experience, they are assigned policy applications that are more complex and cover greater risks. Analyzing and processing these applications efficiently requires the use of computers.
Underwriting can be a satisfying career for people who enjoy analyzing information and paying attention to detail. In addition, underwriters must possess good judgment in order to make sound decisions. Excellent communication and interpersonal skills also are essential, as much of the underwriter's work involves dealing with agents and other insurance professionals.
Continuing education is necessary for advancement. Insurance companies usually pay tuition for underwriting courses that their trainees complete; some also offer salary incentives. Independent-study programs for experienced property and casualty underwriters are available as well. The Insurance Institute of America offers both a program called "Introduction to Underwriting" for beginning underwriters, and the specialty designation of Associate in Commercial Underwriting (ACU), a formal step in developing a career in underwriting business insurance policies. Those interested in developing a career underwriting personal insurance policies may earn the Associate in Personal Insurance (API) designation. To earn either the ACU or API designation, underwriters complete a series of courses and examinations that generally last 1 to 2 years.
The American Institute for Chartered Property Casualty Underwriters (AICPCU) awards the Chartered Property and Casualty Underwriter (CPCU) designation, the final stage of development for an underwriter. Earning the CPCU designation requires passing 10 exams, meeting a requirement of at least 3 years of insurance experience, and abiding by the AICPCU's code of professional ethics. Exams cover risk management; insurance operations and regulations, business and insurance law, and financial management and financial institutions. In conjunction with the Insurance Institute of America, the AICPCU offers 22 insurance-related educational programs, including associate designation programs in claims underwriting, risk management, and reinsurance. The American College offers the Chartered Life Underwriter (CLU) designation and the Registered Health Underwriter (RHU) designation for all life and health insurance professionals.
Experienced underwriters who complete courses of study may advance to senior underwriter or underwriting manager positions. Some underwriting managers are promoted to senior managerial jobs. Some employers require a master's degree to achieve this level. Other underwriters are attracted to the earnings potential of sales and, therefore, obtain State licenses to sell insurance and related financial products as agents or brokers.
Insurance underwriters held about 101,000 jobs in 2004. Approximately 2 out of 3 underwriters work for insurance carriers. Most of the remaining underwriters work in insurance agencies or for organizations 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.
Most underwriters are based in the insurance company's home office, but some, mainly in the property and casualty area, work out of regional branch offices of the insurance company. These underwriters usually have the authority to underwrite most risks and determine an appropriate rating without consulting the home office.
Employment of underwriters is expected to grow more slowly than average for all occupations through 2014. Underwriting software will continue to make workers more productive; however, because computer software does not do away with the need for human skills, employment will increase as economic and population growth result in increased insurance needs by businesses and individuals. Job opportunities should be best for those with a background in finance and strong computer and communication skills. In addition to openings arising from some job growth, openings will be created by the need to replace underwriters who transfer to another job or leave the occupation.
Insurance carriers always are assessing new risks and offering policies to meet changing circumstances. Underwriters are needed particularly in the area of product development, where they assess risks and set the premiums for new lines of insurance. One new line of insurance being offered by life insurance carriers that may provide job opportunities for underwriters is long-term care insurance.
Demand for underwriters also is expected to improve as insurance carriers try to restore profitability to make up for an unusually large number of underwriting losses in recent years. As the carriers' returns on their investments have declined, insurers are placing more emphasis on underwriting to generate revenues. This renewed interest in underwriting should result in job opportunities for underwriters.
Because insurance is considered a necessity for people and businesses, there will always be a need for underwritersa profession that is less subject to recession and layoffs than other fields.
Median annual earnings of insurance underwriters were $48,550 in May 2004. The middle 50 percent earned between $37,490 and $65,450 a year. The lowest 10 percent earned less than $30,410, while the highest 10 percent earned more than $86,110. Median annual earnings of underwriters working with insurance carriers were $49,280, while earnings of these in agencies, brokerages, and other insurance related activities were $46,750.
Insurance companies usually provide better-than-average benefits, including retirement plans and employer-financed group life and health insurance.