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Insurance Underwriter: Definition, What Underwriters Do

But do you ever wonder which professionals assess the risk behind credit and lending decisions? When an individual or business entity seeks funding for a real estate project or purchase, the loan request is scrutinized by an underwriter to determine how much risk the lender is willing to accept. These types of underwriters are not to be confused with securities underwriters, who determine the offer price of financial instruments. Real estate underwriters take into consideration both the land and the borrower. Underwriting refers to the process lenders use to determine the creditworthiness of a potential customer. It’s a very important part of the financial business because it helps determine how much of a premium someone will pay for their insurance, how fair borrowing rates are set, and also sets prices for investment risk.

  1. The average salary for an insurance underwriter was $76,390 as of May 2021.
  2. In most real estate loans, the property itself is used as collateral against the borrowed funds.
  3. If you get the right education and experience and follow the steps laid out in this article, you may find yourself rising up the ladder and end up among the top 10% with a pretty decent salary.
  4. The Bureau of Labor Statistics (BLS) expects an average of 8,400 insurance underwriting job openings each year between 2021 and 2031, despite a predicted decline in employment of 4% during this time period.

Evaluating an insurer’s risk before the policy period and at the time of renewal is a vital function of an underwriter. Insurance underwriters are professionals who evaluate and analyze the risks involved in insuring people and assets. The term underwriting means receiving remuneration for the willingness to pay a potential risk.

Commercial banking underwriters assess the creditworthiness of borrowers to decide whether the individual or entity should receive a loan or funding. The borrower is typically charged a fee to cover the lender’s risk if the borrower defaults on the loan. Inputting a number of factors, which often includes an applicant’s credit rating, homeowner insurance underwriters employ an algorithmic rating method to pricing. The system generates an appropriate premium based on the platform’s interpretation and the combination of all data reported from the observations of the field underwriter. The lead underwriter also subjectively considers answers submitted by the applicant on the policy application when arriving at a premium.

You’ll also be able to access and sharpen the computer skills that will help you advance in your career. On the other hand, an insurance advisor also represents the insurance company’s best interests at the same time. In this capacity, the advisor is responsible for accurately communicating the risks to the insurer and also to perform some field underwriting (sometimes referred to as frontline underwriting).

Insuranceopedia Explains Field Underwriting

Underwriters evaluate and assess whether a financial risk is worth taking. You can find underwriters in different parts of the financial industry, including lending, insurance, equity markets, and even security trading. Some help companies launch their initial public offerings (IPOs) while others review your application whenever you apply for a personal loan, health insurance policy, or mortgage. Underwriters for self-insured entities must thus assess the individual medical profiles of employees.


A bachelor’s degree with coursework in math, accounting, economics, and any other related field helps. Make sure you have the right skills, including analytical and communication skills, and get certified. Once you have all that under your belt, look for entry-level jobs that can provide you with the training you need to advance in your career.

How to Become an Underwriter

You can expect to work through the ranks within about five to seven years. Along with looking at the truthfulness of an individual’s application, underwriters research how risky it will be to lend to or insure that person before doing business with that individual or company. So, in essence, underwriting is the fact-checking and due diligence on the insurer or lender’s part before assuming any risk.

Most life insurance producers haven’t been adequately trained in field underwriting. On one hand, they represent the client’s best interests, advises them on the coverage they need, breaks down policy terms, and ultimately helps their clients find the best coverage possible for their needs and budget. The underwriter orders the appraisal and uses it to determine if the funds from the sale of the property are enough to cover the amount lent. For example, if a borrower wants to purchase a home for $300,000 that an appraisal deems to be worth $200,000, the underwriter is unlikely to approve the loan or, at least, a loan for the full $300,000.

Requirements to Become an Underwriter

As an underwriter, you’ll find work in retail and commercial banking, insurance, and securities. If you get the right education and experience and follow the steps laid out in this article, you may find yourself rising up the ladder and end up among the top 10% with a pretty decent salary. The easiest way to start a career in underwriting is to get an education.

Each path also has a different timeline from entry-level to management jobs. Once hired, you typically train on the job while supervised by senior underwriters. As a trainee, you learn about common risk factors and basic applications used in underwriting. As you become more experienced, you can begin to work independently and take on more responsibility. A good underwriter is also detail-oriented and has excellent skills in math, communication, problem-solving, and decision-making.

There are a few things you’ll have to check off your list if you want to become an underwriter. The requirements often vary based on the subsector and the jurisdiction in which you work. We’ve listed some of the common steps you’ll have to follow on your road to becoming an underwriter.

The advisor likely knows the client personally and would therefore have a better grasp on the client’s personal reputation, business reputation, and other personal information. Insurance underwriters assume the risk involved in a contract with an individual or entity. For example, an underwriter may assume the risk of the cost of a fire in a home in return for a premium or a monthly payment.

Apply for Entry-Level Job/Training

Underwriters use specialized software and actuarial data to determine the likelihood and magnitude of a risk. Insurance brokers and other entities submit insurance applications for their clients, and insurance underwriters look over the application and make a decision on whether coverage will be offered or not. As such, insurance underwriters review applications for coverage, and ultimately make the decision to accept or reject an applicant through the use of risk analysis. field underwriting refers to the initial decision an insurance agent or producer makes about a potential client’s ability to meet the insurer’s underwriting requirements.

For example, homeowners insurance underwriters must consider numerous variables when rating a homeowner’s policy. Property and casualty insurance agents act as field underwriters, initially inspecting homes or rental properties for conditions such as deteriorated roofs or foundations that pose a risk to the carrier. The home underwriter additionally considers hazards that may trigger a liability claim. Besides increasing sales, field underwriting also serves as a way to prevent adverse selection. The agent also gets an opportunity to explain to the potential client what they are to expect from the insurance company so that realistic goals are set.

The agent decides after performing an initial evaluation of the asset or person. Lloyd’s of London is credited as the entity that came up with the term underwriting. The English insurance broker, which dates back to the 17th century, gathered individuals to issue coverage for risky ventures such as sea voyages. In the process, each risk-taker literally wrote their name under text describing the venture and the total amount of risk they were willing to accept in exchange for a specified premium. In this position, you help the lender assess whether the borrower will repay their loan and ensure there is enough collateral in the property if the homeowner defaults. From there, you may move up to become a senior underwriter in your division before you become an underwriting manager.

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