If you are hunting for a suitable insurance policy, you must be aware of the term Underwriters. Do you know who these Underwriters are? Are they the same as the insurance companies, or are they completely different from each other? If you are being nagged by these questions, then look no further. This article will tell you all you need to know about underwriters, and what part they play in your insurance scheme.
By definition, an underwriter is a third party between the insurer and the insured party. In many cases, underwriters may also be the policy issuer. The process of underwriting, itself, is used by the financial service provider, which may be a bank, insurance company or an investment house. These large companies use underwriting to find out if the consumer is eligible and credible enough to avail their services.
Underwriting started off with the maritime industry. The financial institutions would accept the risk of a particular voyage by writing their names under the risk taker's information on a slip. However, in terms of insurance, underwriters simply measure the exposure to risks, of potential customers. They calculate the coverage a client deserves, as well as the premium to be paid and they decide whether the risk can be accepted or not. The purpose of these underwriters is to select, or write, the business that is profitable for the insurance company and to protect them from clients who are risky and pose a loss to them.
Every insurance company develops its own set of rules and regulations for determining risks. Underwriters must comply by these rules when selecting clients and calculating premiums. They look into a lot of information when judging customers. But for each type of insurance a customer applies for, the information studied by an underwriter is different. For example, when a client approaches the insurance company for auto-insurance, underwriters evaluate their driving record, among many other things. The client's health and age is also considered when requesting life insurance. The information sorted out and weighed up by underwriters may depend on a lot of factors, but the purpose remains the same: to protect the interests of the insurance company.
Today, technology has made the job of underwriters a lot easier. Computer software, called "smart" systems calculate risks accurately and very efficiently. These applications are also called Automated Underwriting Systems. These systems analyze customer applications according to certain factors, such as total income, credit score, age, family history and medical history. This software helps the insurance companies to determine whether to accept or reject a clients' application and also decide the premium. Underwriters then view the results and make the final decision and even ask for more information, if required.