What do Underwriters do?
Submitted by bht on Wed, 09/11/2013 - 00:12
Insurance underwriters help evaluate whether the insurance company should insure a client, depending on how much risk they represent.
They are also responsible for calculating a prime (what the client should pay in exchange for the insurance), based on many factors that might increase the risk for the insurance company.
Let's say that the underwriter is evaluating an applicant that wants a health or life insurance. These are the factors that might increase the risk of disease or death:
1)Current Health: Diabetes, cancer, HIV/AIDS and other diseases obviously increase the risk of death or further complications. Most of the time, people with one of these diseases is not even eligible for a health or life insurance.
2)Family History: Underwriters try to find health patterns in the family, to evaluate possible health problems in the future.
3)Age: People younger than 40 is less likely to die from a disease than those who are 40 and older.
4)Substance abuse/addiction: Addictions increase the risk of the applicant dying from an accident
or a disease that was caused by substance abuse increase dramatically.
5)Occupation: This is not a factor in many cases, but some occupations and professions that involve physical activity are considered risk factors.
6) Over-insurance: If an applicant has more insurance that he could possibly need, this might be indicative of a health problem that is already there, but that the candidate has not reported. Regular candidates would not hire a lot of insurances for the same thing, so candidates need
For all this, insurance underwriters use modern software. However, they still need to have an eye for detail and be careful about their decisions. One mistake (accepting an application when it is too risky) could cost the company thousands of dollars.
On the other hand, if they are too selective (compared to other insurance companies) they end up losing market share, so underwriters need to find an equilibrium.
In short, underwriters are professionals that are trained to evaluate variables, determine whether those variables represent an acceptable risk or not, and, based on that, make sound decisions about which applications can be accepted.