Insurance Underwriters Overview
Many employers at large insurance companies prefer to hire applicants who have a bachelors degree or other experience in the insurance industry. Those who have a background in finance and strong computer skills should see the best job opportunities. In order to advance in this career, continuing education is mandatory. Job growth is expected to slowly decline as the use of automated underwriting software increases work productivity.
Nature of the Work for Insurance Underwriters
Underwriters are responsible for determining whether insurance is provided to clients and under what terms. Their main duties include establishing who receives a policy, determining the appropriate premium, calculating the risk of loss from policyholders and writing policies that cover risks. An insurance underwriter needs to maintain a balance between conservatism and liberalism as, as they do not want to lose business to competitors or alternatively have to pay unnecessary claims.
Insurance underwriters determine whether the risk is acceptable and will not result in a loss. They must sift through the extra paper work that goes along with an insurance application such as medical reports, reports from loss-control representatives, actuarial salaries and reports from data vendors. Next, they determine whether or not to issue the policy and, if so, in what proportions. Numerous factors are considered when making this determination, depending on the type of insurance offered. The underwriters are the liaison between the insurance carrier and the insurance agent.
Computer applications called “smart systems”, or “automated underwriting systems” help insurance underwriters analyze and rate insurance applications, adjust the premium rate according to the risk and recommend acceptance or denial of the risk. The underwriter will input certain rules into the application in order to screen applicants based on certain factors, including age and family medial history for life insurance or credit score for mortgage applicants. Like many other occupations, the Internet has increasingly helped the underwriter perform their job more effectively. They are linked into an array of databases on the Internet that provide immediate access to different types of information that helps to determine the client’s risk assessment.
Many different types of insurance underwriters exist, however there are four main categories: health, mortgage, life and property and casualty. It is common for life and health insurance underwriters to specialize in group or individual policies. More often than before, insurance sales are being purchased through group contracts. There is a standard premium plan and a single contract that covers everyone in a specific group. A group underwriter might analyze the general composition of the group to make sure that the total risk is insurable. Other types of group underwriters offer individual policies that reflect their needs. Often, these are casualty policies.
Insurance underwriters spend numerous hours at their desk, as they are usually based at a regional branch office or company headquarters. They are sometimes required to go to meetings away from home. However, marine and construction underwriters travel often when they need to inspect worksites to assess risk. They typically work a 40-hour work week, but those in managerial positions may work longer hours.
Training, Other Qualifications and Advancement for Insurance Underwriters
Although a bachelors degree in any field is accepted for some entry-level positions at large insurance companies, a bachelors degree in business administration or a bachelors degree in finance is preferred.
Applicants must be computer savvy, as a large portion of the job requires working with computers. Attaining related experience in insurance or underwriting gives jobseekers an edge in this career.
Often, new trainees will start as an assistant underwriter or an underwriter trainee. They work directly under the supervision of an experienced risk analyst to evaluate routine applications and help gather information on applicants. Trainees in property and casualty are required to study claim files to understand the various factors associated with different types of losses.
Good judgment is key to excelling in this career, as it is required to make sound decisions. Interpersonal skills and good communication are also highly regarded because they often have to interact with other agents and professionals. Changes in tax laws, government benefits programs and other State and Federal regulations have the potential to affect the insurance requirements of clients and business. Some experience underwriters who wish not to return to a traditional school setting choose to take the independent study courses. Those starting their career can take a training program offered by the Insurance Institute of America. Also provided by the Institute is the title of Associate in Commercial Underwriting (ACU) for beginning underwriters, or an Associate in Personal Insurance (API) for underwriting personal insurance policies.
Experience property and casualty underwriters can receive their Chartered Property and asualty Underwriter (CPCU) designation from the American Institute for Chartered Property Casualty Underwriters. This requires having three years of related experience, successfully completing eight exams and abiding by the Institute’s and the CPCU Society’s code of professional ethics. The Registered Health Underwriter (RHU) and the Chartered Life Underwriter (CLU) designations are offered by the American College. Although this professional certificate is for experienced life and health insurance underwriters, those new to the industry can take the Life Underwriter Training Council Fellow (FUTCF), also offered by the American College. This is an introductory course teaching basic insurance concepts.
After continuing their education, experienced underwriters may advance to underwriting managing positions or senior underwriter. Senior management positions typically require a masters degree. Those attracting to sales can go on to earn State licenses to sell insurance as agents or brokers.
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Employment and Job Outlook for Insurance Underwriters
Number of People in Profession
Changing Employment (2008-2018)
Employment is projected to decline slowly or moderately (decrease 3 - 9%)
Insurance underwriters hold about 102,900 jobs. Insurance carriers supply the most avenues for underwriters, employing 67 percent of the total occupation. Many of the other underwriters work in insurance agencies and brokerages. They are usually based in the insurance company’s home office. Others, mostly property and casualty underwriters, work out of the regional branch of the insurance company. Most often, these underwriters have the authority to underwrite most risks without consulting the home office.
Job prospects will remain relatively the same, dropping 4 percent in the next decade. Stagnant employment levels for the past two decades have been caused by technological advancements and automation. Such programs increase the productivity of underwriters while simultaneously reducing the need for them. The recent introduction of this technology to other sectors of insurance, including life and health and long-term care, will continue to negatively effect employment growth. Even so, humans will always be needed to verify information. As insurance carriers attempt to restore profitability, some demand for underwriters may occur. Insurers may place more emphasis on underwriting to generate revenues as the carriers’ returns on their investments have declined. There is a projected increase in sales of health insurance and long-term care insurance. As the baby boomers transition into old-age, it is expected that more people will purchase these types of insurance products.
Those with insurance related experience, strong computer and communication skills and a background in finance should see the best job prospects. Many job openings will be created by the need to replace workers who retire or transfer to another occupation, as the high turnover rate accounts for most job openings. This is a direct result of the limited room for advancement in this career. Insurance carriers are often assessing new risks and creating new kinds of policies to meet changing situations. Many will be needed in product development to assess risks and set the premiums for new lines of insurance.
Earnings and Salary for Insurance Underwriters
The median annual wages of wage and salary insurance underwriters is $56,790. The highest 10 percent earn more than $99,940, while the lowest 10 percent earned less than $35,010. The middle 50 percent earn between $43,490 and $76,700 per year. The median annual wages of underwriters working in agencies brokerages and other insurance-related activities is $54,410, while the underwriters median annual wage working with insurance carriers is $57,480.
Insurance companies most often pay for tuition for underwriting courses that their trainees complete, and in some cases offer salary incentives. They also usually provide above average benefits, such as employer financed group life and health insurance and retirement plans.
Annual Salary for Insurance Underwriters
On average, Insurance Underwriters earn $57,820 per year.
Source: Bureau of Labor Statistics Occupational Outlook Handbook