What Is an Insurance Underwriter?

Insurance underwriters are professionals who assess and investigate the risks involved in insuring people and assets.

Insurance underwriters typically work for an insurance company. They establish pricing for insurable risks using specialized software and actuarial data to determine the likelihood, size, and scale of risk.

What Does an Insurance Underwriter Do?

Insurance underwriters must consider numerous variables when rating a policy.

For example, for homeowners insurance, insurance agents act as field underwriters, inspecting homes for problems such as decayed roofs or cracked foundations. They report hazards to the home office underwriter, who also considers risks that may cause a liability claim.

Such risks include unsafe swimming pools, uneven sidewalks, or power lines near trees. These all represent risks to an insurance company, which may be held responsible and required to make payments.

The underwriter then considers any other relevant factors and determines the premium for the insurance policy.

Insurance Underwriter Examples

Outside of the homeowner insurance example above, there are several different fields in which an insurance underwriter may work.

Investment Banking Underwriters

During an initial public offering (IPO), an investment banking underwriter will guarantee a share price to a company. Additionally, they may buy the shares at a set price and hope to sell them at the higher IPO price.

Life Insurance Underwriters

Insurance underwriters assume the risk involved in a contract with an individual or entity purchasing a life insurance policy. Evaluating an insurer's risk before the policy period and at the time of renewal is a vital function of an underwriter. Life insurance qualifications often include health exams, blood tests, and even DNA testing.

Commercial Banking Underwriters

When an individual or business applies for a loan or mortgage, underwriters assess the credit-worthiness of the borrowers. Credit checks, income assessments, and banking data dives are all a part of this process.

Medical Stop-Loss Underwriters

Stop-loss insurance protects groups that pay their own health insurance claims for employees rather than paying premiums to transfer it all over to an insurance carrier. Health exams and wellness checks are a part of this process.

Why an Insurance Underwriter is Important

Insurance underwriters assess the risk involved in insuring an individual or business. An insurer assumes the risk of any number of hazards in return for a premium, or annual payment. An insurance underwriter’s job is to evaluate the risk of insuring a person, business, or asset and the cost of that risk for the insurer.