Insurance Underwriting Procedures
- Property and casualty insurance usually is handled by an underwriter who specializes in the kind of property (personal or commercial) and the type of risk (fire, flood).fire element disaster power image by Rybaev from Fotolia.com
Insurance underwriters are the liaison between insurance carriers and insurance salesmen. Salesmen find the clients and make them aware of their options, while carriers are the people who assume the risk of insurance. Underwriters are the people in between, who determine whether someone is a valid client and, if so, what the client should pay for insurance. - The common thread for underwriters is they try to determine whether, when and how much the company may have to pay out. For health and life insurance, this means assessing the health and lifestyle of a potential customer. An older customer who smokes heavily is going to have to pay more for health insurance than a younger customer who does not smoke, as the older one is more likely to develop a health problem (in the case of health insurance) or die suddenly (in the case of life insurance).
Underwriters assess all this information, using actuarial tables and statistics to try to examine every part of the client's life for its potential risk. - Some insurance companies offer discount rates by offering a fixed rate to a particular group of people. For example, some auto companies offer the same rate to everyone over a certain age who has not had an accident for a certain amount of time (usually three to five years). In this case, an underwriter will not evaluate each individual but will instead be involved in the pricing for the group. This requires evaluating the average amount of risk the overall group represents, then pricing the insurance accordingly. Some people in the group will pay more than they would have for individual insurance, and others will pay less. Most will pay less due to the economies of scale of a group program.
- Property and casualty insurance usually is done on an individual basis. An underwriter who specializes in the kind of property (personal or commercial) and the type of risk (fire, flood) involved handles the policy. An underwriter will use weather and news reports and statistics about different areas to determine how likely a property is to suffer a problem. This information will be used to determine whether the insurance company can cover the property and at what price.
