What is an Underwriter?

- The role of underwriters in insurance companies.

Surprisingly, many people do no know that there is a profession out there called underwriting. After working in two reputable insurance companies for eight years, I've always found myself trying to explain what I did as an underwriter. So if you are interested, here is a brief description of the role of an underwriter in insurance companies ...

Insurance Underwriters

The role of an underwriter is to find the intricate balance between the needs of the shareholders and the needs of the customers. To perform this, one must learn the technical skills required in underwriting.

The cornerstone of successful underwriting at is the ability to select risks. A risk is a property or a liability that a customer wishes to insure. An underwriter must know what the favorable risks are, or the risks that are known to bring profit and growth to the company. One should always consider writing the favorable types of risks and to limit those that are not.

Writing the best risks in its class is one of the challenging tasks of an underwriter. To do so, an underwriter must gather pertinent information about the risks such as:
- sustainability of the client's business
- claim history
- hazards or potential for loss
- the location of risks.

Once these are determined, the underwriter must follow the company's guideline to ensure the acceptability of the risk and to appropriately rate the risk. The rule of thumb is to make sure that the premium (or the cost of insuring a risk) should commensurate with the exposure.

Knowing the products and services that the company provides is another skill that an underwriter must practice. After assessing the risks, it is important to apply the the appropriate coverages for such risks. This helps guarantee customer's satisfaction and could encourage retention of risks.

Another challenging undertaking is pricing. As mentioned above, the premium should commensurate with the exposure. However, another important aspect of pricing is profit. To successfully price for profit, the underwriter must understand the insurance market (i.e. soft and hard market). The underwriter should maximize profit so long as the market permits.

Once the risk is in the books, the next task is to work on loss prevention and to maintain retention. The underwriter should review the risks regularly to ensure that the risk is still profitable and sustainable. The underwriter should consistently study the trends in the businesses and to apply this knowledge in managing the risk.

Another important skill is broker management. Maintaining a good relationship with brokers is paramount as they are the link between the underwriters and the customers. Communication is vital as this helps for gathering information regarding the risks. It also serves as a tool in understanding the needs of the brokers. It is important to communicate that their interests (i.e. growth in their business, satisfying their clients' needs) are also the underwriter's interests. Subsequently, this will satisfy the objective of an underwriter, which is to balance the needs of the shareholders and the needs of the customers.

I hope that the above information helps. So the next time to meet an underwriter, or if you wish to pursue a career in underwriting, you'll know what this profession is all about.