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Underwriters


Insurance companies assume billions of dollars in risks each year by transferring the risk of loss from their policyholders to themselves. Underwriters appraise and select the risks their company will insure. The underwriter must analyze informaiton in insurance applications, reports from loss control consultants, medical reports, and actuarial studies (studies that describe the probability of insured loss) and then decide whether to issue a policy. An insurance company may lose career to competitors if the underwriter appraises risks too conservatively, or it may have to pay more claims if the underwriting actions are too liberal. (The term "Life underwriter" is increasingly used in referring to insurance sales workers; see the Career Report on insurance sales workers for a discussion of that occupation.)


When deciding that an applicant is an acceptable risk, an underwriter may outline the terms of the contract, including the amount of the premium. Underwriters frequently correspond with policyholders, agents, and managers about policy cancellations or other matters. On rare occasions, they accompany sales workers on appointments with prospective customers.


Most underwriters specialize in one of three major categories of insurance: Life, property and liability, or health. They further specialize in group or individual policies. The property and liability underwriter specializes by type of risk insured, such as fire, homeowner, automobile, marine, property, or workers' compensation. In cases where casualty companies insure in a single "package" policy, covering various types of risks, the underwriter must be familiar with different lines of insurance. Some underwriters, called commercial account underwriters, handle career insurance exclusively. They often evaluate a firm's entire operation in appraising its insurance application.


An increasing proportion of insurance sales are being made through group contracts. A standard group policy insures all persons in a specified group through a single contract at uniform premium rates, generally for life or health insurance protection. The group underwriter analyzes the overall composition of the group to be sure that the total risk is not excessive. Another type of group policy provides members of a group -- a labor union, for example -- with individual policies reflecting their individual needs. These generally are casualty policies, such as those covering automobiles. The casualty underwriter analyzes the application of each group member and makes individual appraisals. Some group underwriters meet with union or employer representatives to discuss the types of policies available to their group.


Working Conditions


Underwriters have desk jobs that require no unusual physical activity. Their offices generally are comfortable and pleasant. Although some overtime may be required, the normal workweek is 35-40 hours. Underwriters occasionally may attend meetings away from home for several days. Construction and marine underwriters often travel to inspect the work site and assess the risk.


Employment


Insurance underwriters held about 103,000 jobs in 1988. The following tabulation presents the percent distribution of wage and salary jobs by industry.


Percent Total ............................................. 100


Insurance industries .................................. 93


Insurance Agents, Brokers, and Services ............................................... 39


Fire, marine, and casualty insurance ........................................................ 36


Life insurance ................................................................................ 13


Accident & health insurance, medical service plans ................................ 3


Pension funds & insurance, not elsewhere classified .............................. 2


Banks and credit agencies ....................................................................... 5


Real estate and related industries .............................................................. 1


Security and commodity brokers and exchanges, holding and investment offices, and Federal Government ................................... 1


Underwriters worked throughout the country in independent agencies -- firms which represent one or more insurance companies -- and brokers -- firms which may deal with any insurance company but represent none. Small numbers of underwriters worked for credit agencies and other financial institutions and in government.


Training, Other Qualifications, and Advancement


For beginning underwriting jobs, many large insurance companies prefer college graduates who have a degree in career administration with an accounting background. However, a liberal arts degree in almost any field plus courses in career law and accounting provide a good general background. Some small companies hire persons without a college degree for underwriter trainee positions. In addition, some high school graduates who begin as underwriting clerks may be trained as underwriters after they demonstrate an aptitude for the work.


Underwriter trainees begin by evaluating routine applications under the close supervision of an experienced risk appraiser. They study claim files to become familiar with factors associated with certain types of losses. As they develop the necessary judgement, they are assigned policy applications that are more complex and have a greater face value. These often require the use of computers for more efficient processing. Consequently, computer literacy is becoming necessary.


Continuing education is necessary for the underwriter to advance. Insurance companies generally pay tuition for underwriting courses that their trainees successfully complete; some also offer salary increases. Experienced life insurance underwriters who pass a series of examination and complete a paper on a topic in the underwriting field can qualify as a "fellow" of the Academy of Life Underwriters, the education arm of the Home Office Life Underwriters Association and the Institute of Home Office Underwriters. Designation as a fellow is recognized as a mark of achievement and is increasingly sought by employers in the life underwriting field. Independent study programs for experienced property and casualty underwriters are also available. In collaboration with the Society of Chartered Property and Casualty Underwriters, the Insurance Institute of America offers the designation "associate in underwriting<" and the American Institute for Property and Liability Underwriters offers the prestigious designation "CPCU" -- chartered property casualty underwriter.


Underwriting can be a satisfying career for persons who like working with detail and enjoy evaluating information. In addition, underwriters must be able to make prompt decisions and communicate effectively. They must also be imaginative and aggressive, especially when they have to obtain information from outside sources.


Experienced underwriters who complete courses of study may advance to chief underwriter or underwriting manager. Some underwriting managers are promoted to senior managerial jobs.


Job Outlook


Employment of underwriters is expected to rise faster than the average for all occupations through the year 2000 as insurance sales continue to expand. Most job openings, however, are expected to result from the need to replace underwriters who transfer to other occupations or stop working altogether.


A number of factors underlie the expected growth in the volume and complexity of insurance and the resulting need for underwriters. Shifts in the age distribution of the population will result in a large increase in the number of people who assume career and family responsibilities. People in this group have the greatest need for life and health insurance. A growing demand for insurance coverage for working women also is expected. In addition, expanding long-term healthcare and pension benefits for retirees -- an increasing proportion of the population -- will increase the underwriting requirements. Growing security and liability consciousness should contribute to demand for more insurance protection for homes, automobiles, pleasure craft, and other valuables. New or expanding careeres will need protection for new plants and equipment, product liability, and insurance for workers' compensation and employee benefits. In addition, competition among insurance companies and changes in regulations affecting investment profits are expected to increase the need for underwriters.


Since insurance is usually regarded as a necessity regardless of economic conditions, underwriters are unlikely to be laid off during a recession.


Earnings


The following tabulation presents the median salaries of casualty and property underwriters in 1990, according to a survey by the Alliance of American Insurers in collaboration with the American Insurance Association and the National Association of Independent Insurers.


Type of Underwriter


Manager, commercial lines ........................ 51,940


Manager, personal lines............................. 50,900


Supervisor, personal lines ....................... 42,900


Supervisor, commercial lines ..................... 42,600


Senior commercial lines .......................... 34,980


Senior personal lines ............................ 32,500


Commercial lines ................................. 27,500


Personal lines ................................... 24,800


Most insurance companies have liberal vacation policies and other employee benefits. Almost all insurance companies provide employer-financed group life and retirement plans.


Related Occupations


Underwriters make decisions on the basis of financial data. Other workers with the same type of responsibility include auditors, budget analysts, financial advisors, loan officers, credit managers, real estate appraisers, and risk managers.


Source of Additional Information


General information about a career as an insurance underwriter is available from the home offices of many life insurance and property and liability insurance companies. Information about the insurance career in general and the underwriting function in particular also may be obtained from:


Society of Chartered Property and Casualty Underwriters, Kahler Hal, CB#9, 720 Providence Rd., Malvern, PA 19355.





 

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