Insurance companies protect individuals and organizations from financial loss by assuming billions of dollars in risk each year—risks of car accident, property damage, illness, and other occurrences. Underwriters decide whether insurance is provided and, if so, under what terms. They identify and calculate the risk of loss from policyholders, establish who receives a policy, determine the appropriate premium, and write policies that cover this risk. An insurance company may lose business to competitors if risk underwriting is too conservative, or it may have to pay excessive claims if the underwriting actions are too liberal.
Using sophisticated computer software, underwriters analyze information in insurance applications to determine whether a risk is acceptable and will not result in a loss. Insurance applications often are supplemented with reports from loss-control representatives, medical reports, reports from data vendors, and actuarial studies. Underwriters then must decide whether to issue the policy and, if so, determine the appropriate premium. In making this determination, underwriters consider a wide variety of factors about the applicant. For example, an underwriter working in health insurance will consider age, family history, lifestyle, and current health, whereas an underwriter working for a property-casualty insurance company is concerned with the causes of loss to which property is exposed, such as hurricanes or earthquakes, and the safeguards taken by the applicant. Therefore, underwriters serve as the main link between the insurance carrier and the insurance agent.
Technology plays an important role in an underwriter's job. Underwriters use computer applications called “smart” systems to calculate risks more efficiently and accurately. Such systems—also known as “automated underwriting systems”—analyze and rate insurance applications, recommend acceptance or denial of the risk, and adjust the premium rate according to the risk. To start the process, underwriters create software rules to screen applicants based on certain criteria, such as income and credit score for mortgage applicants or age and family medical history for life insurance applicants. After the software completes its assessment, underwriters can either approve or refute the decision, or, if it is questionable, request additional information from the applicant. These automated systems allow underwriters to quickly make decisions and, in most cases, effectively make sound judgments and minimize losses.
The Internet also has aided underwriters in their work. Many insurance carriers' computer systems are linked to various databases on the Internet that allow immediate access to information—such as driving records and credit scores—necessary in determining a potential client's risk. This kind of access reduces the time and paperwork needed for an underwriter to complete a risk assessment.
Although there are many lines of insurance work, most underwriters specialize in one of four broad categories: life, health, mortgage, and property and casualty. Life and health insurance underwriters may further specialize in individual or group policies.
An increasing proportion of insurance sales, particularly in life and health insurance, are being made through group contracts. A standard group policy insures everyone in a specified group through a single contract at a standard premium. The group underwriter analyzes the overall composition of the group to ensure that the total risk is not excessive. Another type of group policy provides members of a group—senior citizens, for example—with individual policies that reflect their particular 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.
Property and casualty underwriters specialize in either commercial or personal insurance and then by type of risk insured, such as fire, homeowners', automobile, or marine. In cases where property-casualty companies provide insurance through a single “package” policy covering various types of risks, the underwriter must be familiar with different types of insurance. For business insurance, the underwriter should be able to evaluate the firm's entire operation in appraising its application for insurance.
Insurance underwriters held about 119,400 jobs in 2020. The largest employers of insurance underwriters were as follows:
- Direct insurance (except life, health, and medical) carriers - 44%
- Insurance agencies and brokerages - 21%
- Other insurance related activities - 6%
- Direct health and medical insurance carriers - 4%
- Credit intermediation and related activities - 4%
Underwriters work indoors in offices. Although underwriters spend most of their time working alone on applications at a computer, they sometimes must handle customer inquiries.
Some property and casualty underwriters may travel to assess properties in person.
Most underwriters work full-time.
Education & Training Required
For entry-level underwriting jobs, most large insurance companies prefer college graduates who have a degree in business administration or finance. 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 entry-level jobseekers. Because computers are an integral part of most underwriters' jobs, some coursework with computers is also beneficial. Still, many employers prefer to hire candidates who have several years of related experience in underwriting or insurance.
New employees usually start as underwriter trainees or assistant underwriters. Under the supervision of an experienced risk analyst, beginning underwriters may help collect information on applicants and evaluate routine applications. Property and casualty trainees study claims files to become familiar with factors associated with certain types of losses. Many larger insurers offer work-study training programs, which generally last from a few months to a year. As trainees gain experience, they are assigned policy applications that are more complex and cover greater risks.
The computer programs many underwriters use to assess risk are continually being updated, so on-the-job computer training may continue throughout an underwriter's career.
Other Skills Required
Underwriters must pay attention to detail and possess good judgment to make sound decisions. Additionally, good communication and interpersonal skills are beneficial because much of the underwriter's work involves dealing with agents and other professionals.
How to Advance
Continuing education is necessary for advancement, because changes in tax laws, government benefits programs, and other State and Federal regulations can affect the insurance needs of clients and businesses. Independent-study programs for experienced underwriters are also available. The Insurance Institute of America offers a training program for beginning underwriters. The Institute also offers the designation of Associate in Commercial Underwriting (ACU) for those starting a career in underwriting business insurance policies, or an Associate in Personal Insurance (API) for those interested in underwriting personal insurance policies. To earn either the ACU or API designation, underwriters complete a series of courses and examinations that generally last 1 to 2 years.
The American Institute for Chartered Property Casualty Underwriters awards the Chartered Property and Casualty Underwriter (CPCU) designation to experienced underwriters. Earning the CPCU designation requires passing eight exams, having at least 3 years of insurance experience, and abiding by the Institute's and CPCU Society's code of professional ethics.
The American College offers the equivalent Chartered Life Underwriter (CLU) designation and the Registered Health Underwriter (RHU) designation for life and health insurance professionals. For those new to the industry, the American College also offers the Life Underwriter Training Council Fellow (FUTCF), an introductory course that teaches basic insurance concepts.
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, but these managers often need a master's degree. Other underwriters are attracted to the earnings potential of sales and, therefore, obtain State licenses to sell insurance and related financial products as agents or brokers.
Employment of insurance underwriters is projected to decline 2 percent from 2020 to 2030.
Despite declining employment, about 8,300 openings for insurance underwriters are projected each year, on average, over the decade. All of those openings are expected to result from the need to replace workers who transfer to other occupations or exit the labor force, such as to retire.
Automated underwriting software allows workers to process applications more quickly than before, reducing the need for as many underwriters. As this technology improves and becomes more widely adopted in the insurance industry, more underwriting decisions will likely be made automatically.
However, there still will be a need for underwriters to review and update the criteria that run the automation. In addition, their analytical insight will still be needed in complex or specific insurance fields, such as workers’ compensation, marine insurance, or health insurance.
The median annual wage for insurance underwriters was $76,390 in May 2021. The median wage is the wage at which half the workers in an occupation earned more than that amount and half earned less. The lowest 10 percent earned less than $47,330, and the highest 10 percent earned more than $126,380.
In May 2021, the median annual wages for insurance underwriters in the top industries in which they worked were as follows:
- Credit intermediation and related activities - $78,060
- Direct health and medical insurance carriers - $77,290
- Insurance agencies and brokerages - $76,450
- Direct insurance (except life, health, and medical) carriers - $76,040
- Other insurance-related activities - $62,320
Most underwriters work full-time.