Insurance Underwriters

Significant Points
  • Employment is projected to grow more slowly than average as insurance companies increasingly use "smart" underwriting software systems that automatically analyze and rate insurance applications.
  • Most large insurance companies prefer college graduates who have a degree in business administration, finance, or related fields and possess excellent communications and problem-solving skills.
Nature of the Work [About this section] Index

Insurance companies protect individuals and organizations from financial loss by assuming billions of dollars in risks each year. Underwriters are needed to identify and calculate the risk of loss from policyholders, establish appropriate premium rates, and write policies that cover these risks. An insurance company may lose business to competitors if the underwriter appraises risks too conservatively, or it may have to pay more claims if the underwriting actions are too liberal.

With the aid of computers, underwriters analyze information in insurance applications to determine if a risk is acceptable and will not result in a loss. Applications are often supplemented with reports from loss-control consultants, medical reports, and actuarial studies. Underwriters then must decide whether to issue the policy and the appropriate premium to charge. In making this determination, underwriters serve as the main link between the insurance carrier and the insurance agent. On occasion, they accompany sales agents to make presentations to prospective clients.

Technology plays an important role in an underwriter’s job. Underwriters use computer applications called "smart systems" to manage risks more efficiently and accurately. These systems automatically analyze and rate insurance applications, recommending acceptance or denial of the risk, and adjusting the premium rate in accordance with the risk. With these systems, underwriters are better equipped to make sound decisions and avoid excessive losses.

Most underwriters specialize in one of three major categories of insurance—life, health, or property and casualty. Life and health insurance underwriters may further specialize in group or individual policies. The increased complexity of insurance plans and attention to the "bottom line" is changing the nature of underwriting. In the past, insurance agents acting as underwriters, particularly in the life and health fields, could accept or reject applications. Now this underwriting role is done mostly by full-time underwriters in the home or field office of the insurance company.

Property and casualty underwriters usually specialize in commercial or personal lines and then often by type of risk insured, such as fire, homeowners, automobile, marine, liability, or workers’ compensation. In cases where casualty companies provide insurance through a single "package’’ policy, covering various types of risks, the underwriter must be familiar with different lines of insurance. For business insurance, the underwriter often must be able to evaluate the firm’s entire operation in appraising its application for insurance.

An increasing proportion of insurance sales, particularly in life and health insurance, is being made through group contracts. A standard group policy insures everyone in a specified group through a single contract at a standard premium rate. The group underwriter analyzes the overall composition of the group to assure that the total risk is not excessive. Another type of group policy provides members of a group—a labor union, for example—with individual policies reflecting their needs. These usually are casualty policies, such as those covering automobiles. The casualty underwriter analyzes the application of each group member and makes individual appraisals. Some group underwriters meet with union or employer representatives to discuss the types of policies available to their group.

Working Conditions [About this section]  Index

Underwriters have desk jobs that require no unusual physical activity. Their offices usually are comfortable and pleasant. Although underwriters typically work a standard 40-hour week, more are working longer hours due to the downsizing of many insurance companies. Most underwriters are based in a home office, but they occasionally attend meetings away from home for several days. Construction and marine underwriters frequently travel to inspect work sites and assess risks.

Employment [About this section]  Index

Insurance underwriters held about 97,000 jobs in 1998. The following tabulation shows the percent distribution of employment by industry:

Property and casualty insurance carriers  34
Insurance agents, brokers, and services  31
Life insurance carriers  16
Medical service and health insurance carriers  6
Pension funds and miscellaneous insurance carriers  5
Other industries  8

The majority of underwriters work for insurance companies called "carriers." Of these underwriters, most work for property and casualty insurance carriers, and secondly for life insurance carriers. Most of the remaining underwriters work in insurance agencies or for organizations that offer insurance services to insurance companies and policyholders. A small number of underwriters work in agencies owned and operated by banks, mortgage companies, and real estate firms.

Most underwriters are based in the insurance company’s home office, but some, mostly in the property and casualty area, work out of regional branch offices of the insurance company. These underwriters usually have the authority to underwrite risks and determine an appropriate rating without consulting the home office.

Training, Other Qualifications, and Advancement [About this section]   Index

For entry level underwriting jobs, most large insurance companies prefer college graduates who have a degree in business administration or finance, with courses or experience in accounting. However, a bachelor’s degree in almost any field—plus courses in business law and accounting—provides a good general background and may be sufficient to qualify. Computer knowledge is essential.

New employees usually start as underwriter trainees or assistant underwriters. They may help collect information on applicants and evaluate routine applications under the supervision of an experienced risk analyst. Property and casualty trainees study claim files to become familiar with factors associated with certain types of losses. Many larger insurers offer work-study training programs, lasting from a few months to a year. As trainees gain experience, they are assigned policy applications that are more complex and cover greater risks. These require the use of computers for more efficient analysis and processing.

Continuing education is necessary for advancement. Insurance companies usually pay tuition for underwriting courses that their trainees successfully complete; some also offer salary incentives. Independent study programs for experienced property and casualty underwriters are also available. The Insurance Institute of America offers a program called "Introduction to Underwriting" for beginning underwriters, and the specialty designation, AU, or Associate in Underwriting, the second formal step in developing a career in underwriting. To earn the AU designation, underwriters complete a series of courses and examinations that generally last 2 years.

The American Institute for Chartered Property Casualty Underwriters awards the designation, CPCU, or Chartered Property and Casualty Underwriter, the third and final stage of development for an underwriter. Earning the more advanced CPCU designation takes about 5 years, and requires passing 10 examinations covering personal and commercial insurance, risk management, business and insurance law, accounting, finance, management, economics, and ethics. Although CPCU’s may be underwriters, the CPCU is intended for everyone working in all aspects of property and casualty insurance. The American College offers the Chartered Life Underwriter (CLU) designation and the Registered Health Underwriter (RHU) designation for all professionals working in the fields of life and health insurance.

Underwriting can be a satisfying career for people who enjoy analyzing information and paying attention to detail. In addition, underwriters must possess good judgment in order to make sound decisions. Excellent communication and interpersonal skills are also essential, as much of their work involves dealing with agents and other insurance professionals.

Experienced underwriters who complete courses of study may advance to senior underwriter or underwriting manager positions. Some underwriting managers are promoted to senior managerial jobs. At some carriers, a master’s degree is needed to achieve this level. Other underwriters are attracted to the earnings potential of sales and therefore obtain State licenses to sell insurance and insurance products as agents or brokers.

Job Outlook [About this section]  Index

Employment of underwriters is expected to increase more slowly than the average for all occupations through 2008. Computer-assisted software that helps underwriters analyze policy applications more quickly and accurately has made underwriters more productive and capable of taking on a greater workload. Mergers and acquisitions of insurance companies are also expected to continue to result in more downsizing of insurance carriers. Most job openings will result from the need to replace underwriters who transfer or leave the occupation, although several new job openings are being created for underwriters in the area of product development. These underwriters help set the premiums for new insurance products, such as in the growing field of long-term care insurance.

The best job prospects will be for underwriters with the right skills and credentials, such as excellent computer and communication skills, coupled with a background in finance. Job prospects may be better in health insurance than in property and casualty and life insurance. As Federal and State laws require health insurers to accept more applicants for insurance, the number of policies sold will increase. Also, as the population ages, there will be a greater need for health and long-term care insurance.

Because insurance is considered a necessity for people and businesses, there will always be a need for underwriters. It is a profession that is less subject to recession and layoffs than other fields. Underwriters who specialize, though, may have difficulty transferring to another underwriting specialty if downsizing were to occur.

Earnings [About this section]  Index

Median annual earnings of insurance underwriters were $38,710 in 1998. The middle 50 percent earned between $29,790 and $51,460 a year. The lowest 10 percent earned less than $23,750; while the top 10 percent earned over $77,430. Median annual earnings in the industries employing the largest number of insurance underwriters in 1997 were:

Medical service and health insurance  $40,000
Life insurance  39,800
Fire, marine, and casualty insurance  39,100
Insurance agents, brokers, and service  32,200

Insurance companies usually provide better than average benefits, including employer-financed group life, health, and retirement plans.

Related Occupations [About this section]  Index

Underwriters make decisions on the basis of financial data. Other workers with the same type of responsibility include auditors, budget analysts, financial advisers, loan officers, credit managers, real estate appraisers, and risk managers.

Sources of Additional Information [About this section]  Index

Disclaimer: Links to other Internet sites are provided for your convenience and do not constitute an endorsement.

Information about a career as an insurance underwriter is available from the home offices of many life insurance and property-liability insurance companies. Information about careers in the property-casualty insurance field can be obtained by contacting:

  • The Insurance Information Institute, 110 William St., New York, NY 10038. Internet: http://www.iii.org

Information on the underwriting function, in particular, and the CPCU and AU designation can be obtained from:

  • The American Institute for Chartered Property and Casualty Underwriters, and the Insurance Institute of America, 720 Providence Rd., P.O. Box 3016, Malvern, PA 19355-0716. Internet: http://www.aicpcu.org

An industry employing insurance underwriters that appears in the 2000-01 Career Guide to Industries: Insurance

O*NET Codes: 21102 About the O*NET codes

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