The topic of life insurance can be a confusing one. Having an understanding of the people involved in the process helps. We’ll cover what an insurance underwriter is, what they do and if you’ll ever need to interact with them.
What is an Insurance Underwriter?
Insurance underwriters are considered the unsung heroes of the insurance industry because they’re the people who figure out the risks associated with insuring individuals or businesses which helps decide coverage and premium rates. Their goal is to strike a balance between protecting policyholders and ensuring the financial sustainability of the insurance company.
Responsibilities of an Insurance Underwriter:
Assessing Risk
Underwriters carefully evaluate insurance applications and analyze various factors to assess the level of risk involved. These factors may include an applicant’s age, health condition, driving record, credit history, occupation and more. By correctly assessing risk, underwriters help insurance companies avoid unpleasant financial outcomes.
Evaluating Policies
Underwriters review insurance policies to ensure they align with the company’s underwriting guidelines and regulatory requirements. They assess the coverage limits, exclusions, deductibles and other policy terms to determine the level of protection offered to policyholders.
Calculating Premiums
Based on the risk assessment, underwriters calculate premium rates which is what someone pays for their insurance policy. They consider the probability of someone filing a claim and the potential cost of that claim. The underwriter wants to provide fair premiums to customers but also balance what’s needed for the insurance company to make enough money to stay afloat.
Approving or Denying Applications
Underwriters have the authority to approve or deny insurance applications for individuals or businesses. Their decisions are based on risk, policy guidelines and for a business the overall business strategy.
What to Expect During the Underwriting Process
The Application Process
The process is kicked off with your application. You’ll likely need to sign forms giving the underwriter access to your health records, and you may need to take a health exam. The health exam will take into account basic medical information, such as height and weight, and may even include physical and mental fitness tests, as well as blood and urine tests.
Reviewing Your History
The life insurance underwriting process also takes into account things such as your driving history, public records about you, and even your credit history. For most insurance products, credit history is a prime rating factor, as it directly relates to your ability to pay your premiums on time. They’ll also take into account your occupation, marital status, and will want detailed background on your medical history, such as your doctor’s name, prescriptions you are taking, and significant medical events in your history.
How Long Will the Underwriting Process Take?
How long the process takes depends on the underwriting company, but most results typically come within a week. During this time, the underwriter will determine your maximum coverage level, as well as your monthly premium.
Will You Ever Interact with an Underwriter?
Most likely, no. Most insurance customers rarely interact with them though underwriters may request additional information or documentation from a customer to do their job assessing risk. Underwriters work with other professionals in an insurance company like agents and brokers.
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