When a person decides to buy life insurance, he fills out an application and submits it to a life insurance company. A life insurance underwriter is a person at the insurance company who reviews the application and determines whether the company should provide coverage for the applicant. If the applicant is found to be an acceptable risk, the life insurance underwriter also determines how much the applicant must pay for the coverage and specifies the exact terms of the policy.
A life insurance policy provides protection against financial loss caused by death. It is a contract between the owner of the policy and the insurance company. The owner agrees to make regular payments, called premiums, to the insurance company, and the insurance company promises to pay a sum of money to the owner’s designated beneficiary upon the owner’s death.
The insurance company cannot stay in business if it consistently pays out more than it brings in through premiums. On the other hand, if the premiums are too high, the company may lose business to competitors. It is the life insurance underwriter’s job to collect and study data about each applicant, determine the potential risk of providing coverage, and set appropriate rates so that the company makes a profit.
A life insurance underwriter collects and analyzes various pieces of information to help determine an applicant’s level of risk. Along with the information on the policy application, an underwriter studies medical reports, information about the applicant’s job, and details about participation in dangerous sports or hobbies. Life insurance underwriters also consult actuarial tables, which show statistics about actual losses of certain groups of people over an extended period of time. Underwriters study the applicant’s credit report and financial statement to make sure the applicant is financially able to pay the insurance premiums.
Instead of writing individual policies, a life insurance underwriter can choose to specialize in writing group policies. A group policy is one standard contract that insures all members of a specified group under the same terms and at the same premium. Group underwriters study and analyze data for the group as a whole, rather than on an individual basis, to determine the conditions of the policy and amount of the premiums.
The work of a life insurance underwriter is complex and demanding, and requires strong analytical skills, attention to detail, and responsible judgment. Underwriters rely heavily on the use of computers and technology in their work, making strong computer skills essential. Effective communication and good interpersonal skills are also necessary, because an underwriter’s work frequently involves dealing with agents, policyholders, applicants, and other professionals.