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(D.O.T. 169.267-046)
Nature of the Work
Working Conditions
Employment
Training, Other
Qualifications, and Advancement
Job Outlook
Earnings
Related
Occupations
Sources of Additional Information
- Most large insurance companies prefer college graduates who have a degree in business administration or finance, with courses or experience in accounting.
- Employment is projected to grow more slowly than average as insurance companies use "smart" underwriting software systems that automatically analyze and rate insurance applications, and as more businesses self-insure.
Insurance companies protect individuals and organizations from financial loss by assuming billions of dollars in risks each year. Underwriters identify and analyze the risk of loss from their policyholders, establish appropriate premium rates, and write policies that cover that risk. 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.
Technology plays an increasingly important role in an underwriter's job. Underwriters use computer applications called "smart systems" to manage risks more efficiently and accurately. They enter into the computer various information relating to a person or organization whose application for insurance is pending. These systems automatically analyze and rate insurance applications, then recommend acceptance or denial of the risk, or they adjust the premium rate in accordance with the risk. Underwriters are then better equipped to make sound decisions in an effort to avoid excessive losses in the future.
With the aid of computers, underwriters analyze information in insurance applications, reports from loss control consultants, medical reports, and actuarial studies—reports that describe the probability of insured loss. They then decide whether to issue a policy and outline the terms of the contract, including the amount of the premium. Underwriters sometimes correspond with policyholders, agents, and managers about policy cancellations or other matters. On rare occasions, they accompany sales representatives on appointments with prospective clients. (Life insurance agents and brokers are increasingly called "life underwriters;" they are included in the section on insurance agents and brokers elsewhere in the Handbook.)
Most underwriters specialize in one of three major categories of insurance—life, property and casualty, or health. They further specialize in group or individual policies. Property and casualty underwriters often specialize by type of risk insured, such as fire, homeowners, automobile, marine, property, liability, or workers' compensation. In cases where casualty companies insure in a single "package'' policy, covering various types of risks, the underwriter must be familiar with different lines of insurance. Some underwriters, called commercial account underwriters, handle business insurance exclusively. They often evaluate a firm's entire operation in appraising its application for insurance.
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 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 generally 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.
Underwriters have desk jobs that require no unusual physical activity. Their offices generally are comfortable and pleasant. Although overtime may be required, underwriters generally work from 35 to 40 hours a week. They occasionally attend meetings away from home for several days. Construction and marine underwriters often travel to inspect work sites and assess risks.
Insurance underwriters held about 95,000 jobs in 1996. The following tabulation shows the percent distribution of employment by industry in 1996.
Fire, marine, and casualty insurance carriers 37 Insurance agents, brokers, and service 33 Life insurance carriers 15 Pension funds and miscellaneous insurance carriers 4 Medical service and health insurance carriers 4 Other industries 7 Most underwriters worked for insurance companies, often called "carriers." Most of the remaining underwriters worked in independent insurance agencies (firms which represent one or more insurance companies) and brokers (firms which may deal with any insurance company and represent the interests of the buyers of insurance, known as "insureds.") A small number of underwriters worked in agencies owned and operated by banks, mortgage companies, and real estate firms.
Office underwriters in the life insurance industry are most likely to work in an insurance company's home office. In some large general agencies, underwriters help life insurance agents, or "producers," determine if the risk will be accepted or rejected by the home office. However, most local life insurance offices deal predominantly with sales, not underwriting. Property and casualty underwriters also work in home offices, but more work for agencies or regional branch offices, where they have the authority to underwrite risks and determine an appropriate rating without consulting the home office.
For beginning 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.
Beginners typically 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 may study claim files to become familiar with factors associated with certain types of losses. Many larger insurers offer a training program, lasting from a few months to a year, that combines study with work. 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 generally 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 Underwriting, the second formal step in developing a career in underwriting. To earn the AU designation, underwriters complete a series of courses and examinations; it usually takes about 2 years to earn the AU designation. 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 generally 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 Society of Chartered Life Underwriters provides the Chartered Life Underwriter (CLU) designation, intended for underwriters working in life insurance.
Underwriting can be a satisfying career for people who enjoy working with detail and analyzing information. In addition, underwriters must possess good judgment in order to make sound decisions. They must also be imaginative and aggressive, especially when they have to obtain information from many outside sources.
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. Others are attracted to the earnings potential of sales and obtain State licensing to sell insurance and insurance products as agents or brokers.
Employment of underwriters is expected to increase more slowly than the average for all occupations through the year 2006. Most job openings are expected to result from the need to replace underwriters who transfer to other occupations or stop working altogether.
A number of factors underlie the continuing need for underwriters. As people acquire assets and take on family responsibilities, the need for life, health, and property and casualty insurance grows. For example, concerns for financial security and liability contribute to demands for more insurance protection for homes, automobiles, pleasure craft, and other valuables. Expanding long-term healthcare and pension benefits for retirees—who are an increasing proportion of the population—also will increase underwriting opportunities. And, new or expanding businesses will need protection for new factories and equipment, and product liability, workers' compensation, and employee benefits insurance.
Employment of underwriters, however, is not expected to keep pace with growth in demand for insurance. Increased use of underwriting software systems will slow the demand for new underwriters. As more businesses self-insure—by setting a rate for their own company and paying premiums into a contingency fund—demand for some property and casualty underwriters will decline. Additionally, many property and casualty companies are foregoing personal lines of insurance—especially automobile and homeowners—and are concentrating on commercial lines of business.
Underwriters specializing in certain lines of insurance may find it difficult to transfer to another type of insurance if their jobs are threatened by corporate downsizing. Because insurance is usually regarded as a necessity, regardless of economic conditions, underwriters are unlikely to be laid off because of a recession.
Median annual earnings of full-time wage and salary underwriters were about $31,400 in 1996. The middle 50 percent earned between $24,000 and $41,000 a year. The lowest 10 percent earned less than $18,400; the top 10 percent, more than $52,400.
In addition to typical benefits, almost all insurance companies provide employer-financed group life, health, and retirement plans.
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.
General 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 the insurance business in general and the underwriting function in particular also may 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.
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