Insurance Underwriter

AAA

DEFINITION of 'Insurance Underwriter'

A financial professional that evaluates the risks of insuring a particular person or asset and uses that information to set premium pricing for insurance policies. Insurance underwriters are employed by insurance companies to help price life insurance, health insurance, property/casualty insurance and homeowners insurance, among others.

Underwriters use computer programs and actuarial data to determine the likelihood and magnitude of a payout over the life of the policy. Higher-risk individuals and assets will have to pay more in premiums to receive the same level of protection as a (perceived) lower-risk person or asset.

INVESTOPEDIA EXPLAINS 'Insurance Underwriter'

Insurance underwriting is big business – just ask Warren Buffett, who for years has used insurance and reinsurance premiums to fund his investments at Berkshire Hathaway.

Insurance companies walk a tightrope between being too aggressive or too conservative in their underwriting duties. If they are too aggressive, greater-than-expected claims could cut into company earnings; if they are too conservative, they will be outpriced by the competition and lose business.

RELATED TERMS
  1. Ambulance Chaser

    In insurance, a derogatory term for lawyers and other service ...
  2. Title Binder

    A temporary form of real estate insurance coverage related to ...
  3. Ceding Company

    An insurance company that passes the part or all of its risks ...
  4. American Agency System

    A method of selling insurance policies in which independent insurance ...
  5. Invisible Hard Market

    A property/casualty insurance market phenomenon in which the ...
  6. Underwriting

    1. The process by which investment bankers raise investment capital ...
RELATED FAQS
  1. In what ways does government regulation impact the insurance sector?

    Regulation is not consistent among all forms of insurance. The kinds of regulations imposed on AIG for guaranteeing credit ... Read Full Answer >>
  2. How does insurance underwriting differ from investment underwriting?

    The main difference between investment underwriting and insurance underwriting is the type of financial service being offered. ... Read Full Answer >>
  3. Why is my insurance premium so high/low?

    Insurance premiums can be affected by many factors including: type and amount of risk size of deductible amount of coverage age ... Read Full Answer >>
  4. What kinds of costs are included in Free on Board (FOB) shipping?

    Free on board (FOB) shipping is a trade term published by the International Chamber of Commerce or ICC, that indicates which ... Read Full Answer >>
  5. How do insurance companies use a whistleblower?

    Fraudulent claims are among the most prevalent and serious business risks that insurance companies face. Many consumers have ... Read Full Answer >>
  6. How is maintenance of standard of living for survivors accomplished in estate planning?

    Estate planning is an integral component of comprehensive financial planning, as it allows individuals and couples to maintain ... Read Full Answer >>
Related Articles
  1. Insurance

    Can I Get Life Insurance?

    Find out what you can do to get the coverage you need for the right price.
  2. Home & Auto

    Insure Your Future With A Career As An Actuary

    If you've got excellent math skills, they can add up to a lucrative career as an actuary.
  3. Insurance

    Is Insurance Underwriting Right For You?

    If you have excellent analytical skills and an eye for detail, this may be your calling.
  4. Options & Futures

    The Alphabet Soup Of Financial Certifications

    We decode the meaning of the many letters that can follow the names of financial professionals.
  5. Home & Auto

    When Things Go Awry, Insurers Get Reinsured

    Guru Warren Buffett is making this sector popular. Learn more here.
  6. Entrepreneurship

    Becoming An Insurance Agent

    Few careers match the opportunity for as quick and large a paycheck as does being a life insurance agent.
  7. Insurance

    Who Needs Extortion Insurance?

    Insurance can help mitigate the financial damage of an extortion plot, but it’s important to read the fine print before taking out one of these policies.
  8. Insurance

    Indexed Universal Life Insurance: The Pros & Cons

    What you need to know, to see if these vehicles fit into your financial plan.
  9. Markets

    What Is the Pharmacy Benefit Management Industry?

    PBMs, acting as third party administrators and negotiators, are essential to facilitating transactions between the moving parts of the healthcare industry.
  10. Investing Basics

    6 Books for Millennials Interested in Investing

    Reading books about finance and investing is a great way for millennials to effectively invest their time and pocket money into becoming better investors.

You May Also Like

Hot Definitions
  1. American Dream

    The belief that anyone, regardless of where they were born or what class they were born into, can attain their own version ...
  2. Multicurrency Note Facility

    A credit facility that finances short- to medium-term Euro notes. Multicurrency note facilities are denominated in many currencies. ...
  3. National Currency

    The currency or legal tender issued by a nation's central bank or monetary authority. The national currency of a nation is ...
  4. Treasury Yield

    The return on investment, expressed as a percentage, on the debt obligations of the U.S. government. Treasuries are considered ...
  5. Bund

    A bond issued by Germany's federal government, or the German word for "bond." Bunds are the German equivalent of U.S. Treasury ...
  6. European Central Bank - ECB

    The central bank responsible for the monetary system of the European Union (EU) and the euro currency. The bank was formed ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!