INSURANCE UNDERWRITING PROCESS

The underwriting process is associated with insurance, the same way it is associated with other financial services. It is all about measuring the chances of risks as also the premium needed to cover that risk.

What is the role of an underwriter?

The underwriter's job is to scale the risks and probabilities that may refer to their prospective clients. They are needed to ascertain the worth of your insurance coverage. They would also help you to decide the amount of premium that you need to pay.

The processes of underwriting & segmenting the insured risks may be clear, only after studying the pool of risks associated with them. This is also essential in order to understand the uneven distribution of risks. The underwriting guidelines defined by an insurance company may vary towards deciding the fate of an insurance application. The underwriter may choose to reject an application or may also choose to offer a quote referring the different premium levels. This might also indicate circumstances that involve a variety of exclusions, which mandate certain conditions towards the payment of claims. The underwriting process necessitates prospective clients to pay their premiums to that extent as is required by the insurer towards meeting the unforeseen risks associated with such individuals, in the event that they might occur. Hence, the procedure of identifying risks & explaining them to a client becomes the sole obligation of the insurer.

At times, the insured might just succeed in making the insurer see no reason towards properly justifying the associated risks, thereby inviting a higher expectancy of losses arising out of it. Under such circumstances, the insurer might just need to charge higher premium rates in order to fill the lower returns & save him from insolvency. The insurance companies are subject to huge risks worth billions every year in terms of financial losses arising out of protecting an insured person or a group. Underwriters are there fore needed to focus on every minute detail while arriving at a premium rate for a certain individual or even at offering a policy for that purpose. While doing these the underwriters would also need to keep a track of the steps and measures undertaken by their competitors towards achieving their goals, failing which they might lose their business to their rivals.

The different areas of operation:

The underwriters would certainly like to focus at any of the main branches of insurance namely – life, property & casualty and health.

It is common for the life & health underwriters to specialize at group or independent policies depending on their areas of operation and qualification. In order to decide about the functions of a group policy, the group underwriters would often resort to representatives of the union or the employer. For the property and casualty underwriters, it is quite normal that their operational areas would depend on the nature of insurance they are associated with (eg. personal or commercial insurance), as also the nature of the risk involved. The group underwriter has to keep a check on the overall risk, so that it never crosses the limits. This is dependent on his study of the group patterns. In contrast, the casualty underwriter has to study the contribution of the individual group members and then forward his feedbacks based on his report. With the advent of the modern computers, it has become easier for the underwriters to figure out the different risk factors associated with a prospect & then arrive at a quicker decision regarding their approval of a policy. This fast-track decision-making process is contributing largely towards the overall growth of the capital fund of the modern insurers.