Life Insurance Underwriting

Insurance companies safeguard individuals and businesses from monetary loss by assuming billions of dollars in risks each year, including risks of illness, car accident, property damage, and other incidences. Life insurance underwriting is the process of making decisions whether to provide insurance to an individual or association, and if so, under what conditions. The people who do this job are called underwriters. They are the ones that find out who can obtain a policy, identify the suitable premium, determine and compute the risk of loss from policyholders, and write policies that cover this risk. There are individuals and associations with conservative and aggressive financial mindsets, and underwriters should be careful to make risk underwriting too conservative or too aggressive. The former may cause an insurance provider to lose business to a competitor, while the latter may cause the company to pay too much claims.

In life insurance underwriting, information in insurance applications are analyzed to decide whether a risk is satisfactory and will not bring about loss. Insurance applications usually include medical, data vendor and loss-control representative reports, as well as actuarial studies. If issuing a policy is possible, underwriters determine the suitable premium by examining diverse factors about the candidate such as family history, age, lifestyle, and health status, in terms of health insurance. With regard to property-casualty policies, the underwriter would have to look at the grounds for loss to which property is open to, like earthquakes or hurricanes, and the precautions taken by the candidate. It is the underwriters’ role to provide central linkage between insurance providers and insurance agents.

Life insurance underwriting includes the use of advanced computer software, thus, technology has a vital function in the work of an underwriter. They make use of “smart” systems or “automated underwriting systems”, which are computer applications utilized to compute risks more precisely and effectively. These programs examine and assess rate insurance applications as well as endorse acceptance or refusal of a risk. They also modify the premium rate according to the risk. The Internet likewise has a critical role in the job of an underwriter. Numerous insurance companies’ computer systems are connected to different databases on the Internet that permit direct access to information. This information includes credit scores or driving records, among others, which are needed to ascertain a possible client’s risk. Time and paperwork are decreased with the help of the Internet.

Most underwriting work focuses in one of the four broad categories, which are life, health, mortgage, and property-casualty. Life and health insurance underwriters may concentrate in individual or group policies. Life and health insurance sales are most commonly made through group contracts. A normal group policy provides insurance to a particular group through one contract at a standard premium. The group underwriter examines the group structure as a whole to make sure the total risk is not excessive. Senior citizens, for example, benefits from another kind of group policy which provides them with individual policies that represent their specific needs. These needs are commonly casualty policies. The casualty underwriter examines application per group member and forms individual assessments. A number of group underwriters convene with employer representatives or unions to talk about the kinds of policies available to their group.