As a property insurance company underwriter, your number one job is to accurately assess the amount of insurance risk represented by a prospective policyholder, utilizing a number of different tools. Typically, this process may include:
- Analyzing insurance application information submitted
- Determining the amount of insurance risk involved with this particular applicant
- Screening the applicant against a predetermined set of criteria
- Consulting various underwriting computer software
- Reviewing the property inspection report submitted by your field inspector
- Making a decision as to whether or not to offer this applicant insurance coverage
- Determining appropriate coverage and premium amounts
It's All About The Risk
All of the above steps revolve around the presence of insurance risk. Risk may be defined as something that has the potential of causing a loss. Relating to the insurance business, a loss specifically means a financial loss.
Insurance can be bought as protection against property risk (property insurance or vehicle insurance), personal risk (health insurance or life insurance) or liability risk (liability insurance). Buying insurance is a pooling of risk among a large group of people, with the insurer collecting money in the form of premiums and paying out claims from this pool of money when a covered loss occurs to one of the group of policyholders. As an underwriter, your job is to further your company's profitability by approving policies where the risk of the policy owner making a claim appears low.
Insurance companies also earn money from investing the money they collect as premium. Between the premiums collected and the investment interest earned, an insurer must collect enough funds to pay claims and to operate their company at a profit. This means insuring risks that are predictably low and charging premiums that are low enough to attract business.
Insurance companies utilize various risk assessment tools in order to calculate the advisability of permitting the writing of a policy, the correct amount of coverage and how much premium to charge in return for the coverage. Using computer software that incorporates a predetermined algorithm, you can gauge the chances of a claim being filed by the policyholder. This whole process is a fine balancing act weighing the company's profitability against the insured's potential for using the policy.
As an insurance underwriter, you want to protect a prospective policyholder with an accurate amount of coverage at a premium price commensurate with the amount of risk they present. High risk applicants may still be offered coverage, but at a premium cost that's proportionate to their amount of risk.