Who is an Insurance Underwriter?
An insurance underwriter is a professional who analyzes the risks associated with insuring people and assets. They determine the terms and fees for coverage, which may be charged as a commission, premium, or interest.
Underwriters are commonly found not only in the insurance sector but also in industries such as mortgages, equity markets, and debt security trading. In these contexts, a lead underwriter is often referred to as a book runner.
Insurance underwriters analyze the applications for insurance and rate them according to the outcome of the risk analysis. Some of their duties are as follows:
- Advising on issues of risk management.
- Determine the available cover for specific clients.
- Reviewing risks associated with existing clients to decide on extended coverage.
Other Types of Underwriters
- Marine Insurance Underwriters: The concept of underwriters originated in marine insurance. Shipowners sought coverage for their ships and cargo against potential loss. The value of the ship and the cargo were assessed based on the description of the ship, its content, crew, and destination. Risks are assessed using actuarial data and specialised software.
- Mortgage Underwriters: Mortgage underwriters evaluate loan applications based on an applicant’s income, credit history, debt ratios, and overall savings. They ensure the applicant meets all requirements and verify the property’s appraisal to confirm that it is worth the loan amount and purchase price.
The other types of underwriters include equity underwriters and debt security underwriters.
More About Insurance Underwriters
Insurance underwriter assumes the risk of a future event and calculates the premium covering the risk of damage. The premium calculated forms a consideration for the promise to reimburse the insured in the event of damage.
The risk is evaluated before the end of the term of the policy period and at the time of renewal. In the case of a home insurance underwriter, the underwriters inspect the homes or properties for any apparent insurance risks. These include cracked sidewalks, deteriorating roofs and so on.
