Underwriter Job Description, Skills, and Salary
Get to know about the duties, responsibilities, qualifications, and skills requirements of an underwriter. Feel free to use our Underwriter job description template to produce your own. We also provide you with information about the salary you can earn as an underwriter.
Who is an Underwriter?
Underwriters are individuals or firms that take financial risks on behalf of others. The term is applied across a variety of industries; it can refer to an insurance company, an investment bank, or an individual event sponsor. Generally, the individual or business receives favorable terms in exchange for its services; these terms frequently include a financial stake in the thing that the business agrees to underwrite.
The term originates with Lloyds of London, a significant historical insurer that used to insure ocean-going ships. Lloyds agreed to assume responsibility for the inherent risks of sailing in exchange for a fixed premium paid by the ship’s owner and, frequently, a share of the voyage’s profit. The underwriters or backers of a voyage would sign directly beneath the listed risks, hence the slang term “underwriter.”
In the insurance industry, this company agrees to pay for things like damage to homes and cars, as well as health insurance, in exchange for regular premium payments from the individual or business seeking coverage. Insurance premiums vary according to the unique risks that the insured person represents. Underwriters are trained to evaluate these risks and charge appropriately. For instance, one might request a higher fire insurance premium for a structure located in an area prone to wildfires.
In financial securities, an underwriter, such as an investment bank, assists a business in going public with its stock. It collaborates with the business to determine a fair price and then purchases the stock in bulk at a predetermined price, thereby providing the business with instance capital. The bank is expected to profit from the sale of the stock. If a firm overestimates the value of a stock, it may be forced to absorb the difference or hold the stock until prices rise.
Additionally, the term is used to refer to individuals who sponsor events or charities. Underwriters can be wealthy individuals or businesses wishing to contribute to the event’s success. It is not uncommon for such individuals to retain significant control over an event or charity, and as a result, many organizations seek multiple sponsors to maintain greater flexibility. In exchange for sponsoring the event, the business or individual receives complimentary promotions and accolades, which can help boost positive public perceptions of it.
Each industry has its underwriters, who must be familiar with the intricacies of their particular field. They employ their knowledge and expertise to determine an applicant’s risk to the greatest extent possible. Underwriters determine whether lending money or issuing insurance policies will benefit their company. If, however, the contract proves to be excessively risky, the underwriter is liable for the loss.
The majority of underwriters hold a bachelor’s degree and have completed training. They typically hold an academic degree in their field of specialization. Finance, business, and economics are all popular majors.
Underwriters determine whether a contract is worth the risk based on their expertise in their field. For instance, underwriters who work for health insurance companies assess applicants’ health risks.
The underwriter will examine the applicant’s information, which will include his or her age, current health status, and prior medical and family history. An underwriter will enter the data into underwriting software using this information and other factors. The software will calculate the premium and terms that should be included in the policy. Additionally, this assessment determines whether the policy is too risky to proceed with.
The information that is provided to various underwriters is case-by-case. For instance, a health insurance underwriter will review medical records, whereas a loan underwriter will consider factors such as credit history.
The job of an underwriter is intricate. They must establish an acceptable level of risk and determine what activities are approved based on their risk assessment. When evaluating complex situations, underwriters may be required to conduct research and gather a large amount of information.
Underwriters analyze risk and determine the cost (the insurance premium) of insuring against it in the context of insurance. Organizations that act as underwriters have internal policies governing how risks are analyzed and which risks the company should accept. Risk criteria vary by industry – smoking, for example, is a risk factor for medical insurance. Organizations are increasingly relying on automated systems to assess risk and calculate a premium that is proportionate to the level of risk.
Underwriters do not always deal directly with customers – many insurance companies act as agents for third-party underwriters. Agents can offer a broader range of insurance products, underwriters gain access to a larger market, and potential clients benefit from a more competitive market and product selection.
Underwriter Job Description
Below are the Underwriter job description examples you can use to develop your resume or write an underwriter job description for your employee. Employers can also use it to sieve out job seekers when choosing candidates for interviews.
The duties and responsibilities of an underwriter include the following:
- Examining loan, mortgage, insurance, and initial public offering applications (IPOs)
- Calculating risk using the data provided during the application process
- Researching to determine the merits of an application
- Using computer software to assist in the approval decision-making process
- Approving or denying each application based on the level of risk
- Determining the degree of risk associated with a person or investment.
- Establishing reasonable interest rates on loans
- Determining the appropriate premiums to cover the true cost of insurance for policyholders
- Ascertaining adequate assessment and coverage
- Assisting investors in making sound investment choices
Other important tasks include the following:
- Data collection and interpretation
Underwriters must understand the data that will be required to conduct an accurate assessment within their industry. They will then need to understand how to interpret that data in terms of risk.
- Making educated judgments
After compiling and analyzing data, underwriters make a final determination. Generally, this assessment will take the form of a recommendation to accept or avoid the risk. In the insurance industry, for example, they will approve or deny an application for coverage based on the applicant’s likelihood of filing a claim. In the mortgage industry, they approve or reject mortgage applications based on the risk of the borrower defaulting on the loan.
- Analyzing data with software
Underwriters must be proficient in the software used by the majority of underwriters in their industry. This can assist in automating a portion of the evaluation process, which is particularly beneficial for insurance or mortgage underwriters who may be required to review large volumes of applications each day.
- Preparing policies or terms and conditions with care
Certain risks associated with various financial products can be mitigated by carefully wording the policies or terms and conditions agreed to by the applicant or buyer. The underwriter is responsible for ensuring that those agreements contribute to the financial institution’s risk minimization efforts to the greatest extent possible.
Additionally, they are partially responsible for ensuring that all agreements adhere to any applicable laws governing that financial product. If an insurance policy, for example, does not adhere to certain legal standards, the entire agreement may be declared invalid, resulting in the financial institution losing money on the policy.
Qualifications
Education
In most cases, an underwriter requires a bachelor’s degree. While there is no specific major in underwriting, there are other degrees that will assist you in finding work, including finance, accounting, mathematics, and business. Because an underwriter’s job requires research and data analysis, any courses that teach computer and mathematical skills are beneficial. Certain employers may seek out underwriters with relevant work experience and superior skills.
Training
Training is typically required for entry-level underwriting positions with banks, credit unions, brokers, and other financial institutions. During on-the-job training, an underwriter will become familiar with the company’s standard processes and procedures for evaluating applications. Additionally, an underwriter will receive training on any specialized computer programs or software required to complete tasks.
Since loan regulations are constantly changing, an underwriter should maintain up-to-date knowledge of state and federal guidelines. They can attend seminars or conferences to stay current on industry developments and to gain knowledge about the various facets of underwriting.
Certifications
While certification is not required to work as an underwriter, earning one demonstrates your commitment to your role and broadens your job opportunities. Three of the most frequently held underwriter certifications are as follows:
- Certified Residential Underwriter (CRU)
This Mortgage Bankers Association (MBA) program leads to certification as a residential mortgage loan underwriter. Three progressive levels are available, each with its certification. The Residential Underwriter Achievement Certificate is awarded upon successful completion of the Basic level. Additionally, it qualifies you to advance to the next level if desired. The Residential Underwriter Professional Certificate is awarded upon successful completion of the Intermediate level. Following that, you can enroll in the Advanced level course, which will earn you the CRU Specialist Designation. All courses and exams are available online.
- Chartered Life Underwriter (CLU)
This designation, offered by the American College of Financial Services, is for individuals interested in insurance underwriting. The fundamentals of insurance and estate planning are covered, as well as life insurance law, income taxation, and investments. You can complete the program either on your own or via live online classes. To earn the designation, you must complete eight courses, pass examinations, and meet certain experience and ethical standards. Additionally, you must recertify every two years via their re-certification program.
- The American Institute of Chartered Property Casualty Underwriters
This Institutes offer the designations of Chartered Property Casualty Underwriter (CPCU) and Associate in Commercial Underwriting (ACU). Courses at the intermediate and advanced levels are available for both. The ACU program takes nine to fifteen months to complete, while the CPCU program takes two to three years. Additional requirements include passing foundation courses, adhering to ethical standards, and completing a minimum number of experience hours to earn these designations.
Essential Skills
- Computer skills
Computers perform the majority of underwriters’ statistical analysis work. Each industry has its own unique set of software requirements that underwriters must learn and master. It can be helpful to learn spreadsheet software like Microsoft Excel. They may also need to use a computer to conduct research.
- Analytical skills
Many factors determine an applicant’s risk. A good underwriter can examine each factor, assess it appropriately and come to a decision. Computer software can be a useful tool to help make that decision. They must, however, consider those results when determining whether to approve the application.
While a computer will perform the majority of the math required for an application, underwriters must verify the accuracy before making a decision. They frequently use statistics and probability to determine an appropriate rate or the likelihood that an applicant will file a claim.
- Communication skills
An underwriter’s research work requires him or her to communicate with customers. Not only must they communicate clearly, but they must also ask the appropriate questions in a friendly and professional manner. Additionally, it is critical that they carefully listen to the responses to respond appropriately. Underwriters frequently engage in negotiations with customers and investors, necessitating their confidence in their communication abilities. Additionally, professional communication skills may entice potential clients.
How to Become an Underwriter
- Completion of a bachelor’s degree
Earning a bachelor’s degree is the first step toward becoming an insurance underwriter. Although there is no formal degree program in underwriting, individuals interested in pursuing a career in underwriting typically earn a Bachelor’s degree in business, economics, mathematics, statistics, finance, or accounting.
- Apply for entry-level positions
You can begin applying for entry-level positions after earning a bachelor’s degree in a related field. Underwriter positions are available in a variety of environments, including brokerage firms, insurance companies, corporations, and credit intermediation. To determine which work environment provides the best opportunities, conduct research on potential employers, their company values, and career advancement opportunities.
- Successful completion of training
Once you have been hired as an underwriter, you will almost certainly undergo extensive training as part of the onboarding process. Given that your formal education will provide you with a foundation of skills, this training period will focus on assisting you in applying those skills to the insurance industry. You can gradually increase your responsibilities under the supervision of a senior underwriter until you are trusted to complete your job requirements unsupervised.
- Establish career objectives
After devoting the necessary time to learning the underwriter’s responsibilities, you can consider your career objectives in the industry. There are numerous insurance sectors in which you can specialize, and if you wish to apply for promotion, you must possess one or more certifications.
- Acquire accreditation(s)
Certifications assist you in demonstrating your underwriting expertise. Additionally, they are a means of advancing your career beyond entry-level positions. Through the acquisition of one or more of these credentials, you demonstrate your commitment to the industry.
- Submit applications for advanced positions
After obtaining the necessary certifications, you can begin looking for advanced positions within your company or outside of it. You might be surprised at the variety of job titles available in the underwriting industry.
Where to Work as an Underwriter
The majority of underwriters work in the financial services industry, typically for a bank, credit union, insurance agency, or investment firm.
Underwriter Salary Scale
In the United States, the average annual salary of an Underwriter is $67,169.