Life underwriting is the process of assessing risks associated with a customer to determine what kind of life insurance coverage to offer and how much to charge for it. Practitioners of life underwriting usually have college degrees in topics like statistics that they can apply to analysis of customers to protect the financial concerns of the insurance company. Insurers want to keep payouts low and profits high, particularly when they are publicly traded and have a responsibility to their shareholders.
The term “underwriting” appears to originate in the tradition of signing the bottom of risk assessments; the person performing the assessment would outline the available information and sign the document to indicate accuracy and completeness. There are other forms of insurance underwriting to cover different kinds of insurance policies like car, home, and business insurance. Each area requires different sets of skills from underwriters; for life underwriting, an understanding of medical risks and demographic statistics is very important.
In life underwriting, the first step is to get a complete profile of the customer. Underwriters can request medical records in addition to basic demographic information like age, gender, and habits. The insurance representative uses this information to pull together a risk profile and determine where the client fits. A young, healthy woman with no bad habits like smoking or drinking heavily would be a low risk category, as the need for a high insurance payout would be unlikely. Conversely, a older man with a history of smoking would be a higher risk factor, as the insurance company will probably have to pay out for care.
Insurance agents who interact directly with customers can act as life underwriters, collecting the necessary information and using it to generate a policy offer. The offer will include a disclosure of the insurance coverage the company is willing to extend, along with the rate it will charge. Customers can attempt to renegotiate if they feel the offer will not meet their needs. For example, they can ask about paying a higher premium to access a low deductible.
Training in life underwriting is available from some colleges and universities, as well as insurance companies who typically train their personnel to familiarize them with company policies and positions on various issues. People with a strong background in math and data analysis are good candidates for careers in this field. In advanced underwriting, risk assessors can explore issues like preparing to issue group insurance policies or working with other customers who may have unique needs.
