Loans are the bridges between dreams and reality, while insurance makes the journey feel more secure. As a finance professional, an Underwriter facilitates the application process for business and personal loans and insurance policies by assessing the risk level and suitability of applicants. Their findi... Continue Reading
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Explore Career Loans are the bridges between dreams and reality, while insurance makes the journey feel more secure. As a finance professional, an Underwriter facilitates the application process for business and personal loans and insurance policies by assessing the risk level and suitability of applicants. Their findings help lenders and insurers decide whether to accept the applications.
What are the typical responsibilities of an Underwriter?
An Underwriter would typically need to:
Work concerning consumer loans is typically office-based. If you deal with mortgages and commercial loans, you may need to meet with clients at their workplaces or homes or visit properties, in which case they may need to spend some time on the road commuting.
More extensive travel may be required depending on your speciality. While Underwriters may interact with agents online or over the phone, they may also need to travel to attend meetings. International firms may send you to manage overseas work, particularly if you speak at least one foreign language.
Underwriters typically work full time, 40 hours a week, Monday to Friday, 9 am to 5 pm. You may need to put in additional hours if the volume of applications is high. If you work on commercial loan and mortgage applications, you may also keep variable hours to meet clients. You will likely spend considerable time dealing with paperwork, research, underwriting software, clients, agents, and staff.
Finding a new job might seem challenging. Underwriters typically work in the lending and insurance industry. They may work for large insurance companies that offer various general insurance policies or smaller ones that provide specific policies, such as motor insurance. They can boost their job search by asking their network for referrals, contacting companies directly, using job search platforms, going to job fairs, leveraging social media, and inquiring at staffing agencies.
Underwriters are generally employed by:
Professional associations and organisations are crucial for Underwriters interested in pursuing professional development or connecting with like-minded professionals in their industry or occupation. Membership in one or more adds value to your resume while bolstering your credentials and qualifications.
While not mandatory, pre-entry work experience in banking, insurance, sales, or customer service gives you a competitive edge in the job market. If you land a part-time job as a teller, it will help you chalk up experience in the banking industry and build a network while earning your degree. Look out for summer internships or work placement opportunities offered by insurance providers. You may apply directly to financial institutions demonstrating your interest.
Another way of acquiring experience is to land an entry-level job in a bank or other financial services firm. You may begin as an Underwriter’s Assistant or an Underwriter working under a Senior Underwriter’s supervision. The aim is to become familiar with data analysis and risk assessment.
Organisations that cater to a niche area of insurance or loans may prefer candidates with experience in the specific field.
Read about the profession and interview or job shadow experts in underwriting to prove your commitment to course providers and prospective employers.
Aspiring Underwriters typically acquire a bachelor's degree in finance, business or economics. However, some employers may accept sufficient and related work experience in place of a formal degree, such as in banking, customer service, or sales.
Commercial loan underwriters must know about general business accounting and how to read financial statements.
While not mandatory for Underwriters, certification, such as the CMA (Certified Management Accountant), demonstrates a Loan Underwriter’s competence in a skill set, typically through work experience, training and passing an examination. When acquired from objective and reputed organisations, such as banking associations, it can help you stand out in a competitive job market, carry a significant salary premium of up to 18 per cent, increase your chances of advancement, and allow you to become an independent consultant. Successful certification programs protect public welfare by incorporating a Code of Ethics.
Depending on location and if you deal with mortgage loans, you will need the relevant license. Individual government entities conduct the licensing process. Typically, licensure requires an application, processing fees, an examination, and appropriate education and experience and must be renewed periodically. Check with local or national insurance, lending and underwriting organisations to determine specific licensure requirements.
An employment background check can include but is not limited to a person’s work history, education, credit history, motor vehicle reports (MVRs), criminal record, medical history, use of social media, and drug screening.
Performance, experience, and the acquisition of professional qualifications drive career progression. Employees with consistently high levels of performance may be eligible for promotion every two to three years.
If you do not have a degree, you may land the entry-level roles of an assistant or junior Underwriter or an insurance technician in a team of Underwriters. You could also enter the field as a trainee or insurance apprentice, working under experienced Underwriters. You may begin working independently once you acquire insurance industry qualifications supplemented by experience, and relevant certification, if mandatory.
If you approach underwriting from a field other than finance, you may first take on finance-related roles, such as budget analysts, actuaries, cost estimators, sales agents, and claims adjusters.
Your company may employ Underwriters across several managerial roles. Career progression across the levels will likely occur as you build experience and a network.
You may also diversify into other areas of insurance, including risk management, loss adjusting, claims or broking. The breadth of experience that Underwriters chalk up qualifies them for roles in general management.
Other avenues include reinsurance that deals with complex and high-risk cases, specialisation in areas such as marine or aviation insurance, or sales once you have built relationship-building expertise to help you achieve insurance sales targets for specific policies.
Candidates with the necessary skills, relevant experience in the insurance and lending industry, and a master’s degree have the best job prospects.
Continuing professional development (CPD) will help an active Undertaker build personal skills and proficiency through work-based learning, a professional activity,
formal education, or self-directed learning. It allows you to upskill continually, regardless of your age, job, or level of knowledge.
Newly hired Undertakers typically receive on-the-job training for a few months in the form of formal company-sponsored training and training under senior Underwriters. You learn about typical risk factors and basic underwriting applications. If you train with an insurance provider, you may also receive exposure to claims and broking.
Certification may be part of your training or required for career progression. It helps you stay current with insurance policies, legislation and technologies, which is vital for Underwriters as they must anticipate changing trends or stagnation and even predict what insurance carriers will do.
Your employer may encourage you to acquire professional qualifications or pursue a master’s degree, choosing modules relevant to your current work or where you aspire to work in the future. An advanced diploma in insurance or another professional qualification provides in-depth knowledge of insurance practices and may be a useful starting point for aspiring Underwriters.
The Roots of Underwriting
In the late 17th century, Edward Lloyd opened Lloyd’s Coffee House on London’s Tower Street. In addition to being the venue for intellectual debates, Lloyd’s became a place where sailors, ship owners and merchants exchanged shipping news and information, and maritime auction prices were announced. When bankers began charging premiums in return for assuming shipping risks on scheduled routes, they also physically wrote their names under the names of the ships and the information about their destination, cargo and crew, as well as expected weather listed on the blackboards that covered the walls. Thus was born the term “underwriting”.
Underwriter vs Loan Officer
Both facilitate the loan application process and check the eligibility of applicants in compliance with regulations. However, loan officers work with potential borrowers to assess their loan needs and match products that meet them, while Underwriters collect and evaluate information about the financial standing of the applicants to help banks and lending institutions judge the risk involved in loaning money to them.
Underwriter vs Agents & Brokers
Agents and brokers are salespersons and typically the point of contact for customers, selling them a product and conveying the Underwriter’s recommendation to them. Underwriters have a more significant say in approving or rejecting a loan or insurance application as the decision is largely based on their recommendation. While Underwriters are the experts, agents and brokers may be able to explain just the basics of a company’s underwriting policies to their customers to help them prepare for the outcome.
Underwriter vs Actuary
Risk assessment and analysis of the pros and cons of working with a client lie at the core of underwriting and actuarial work. However, while Underwriters evaluate individual loan or insurance applications and recommend approval or rejection, actuaries assess the general risks, liabilities and vulnerabilities within a business and recommend ways to minimise them. The original research that actuaries conduct and the statistical models they create to reflect the general trends for common business risks helps Underwriters carry out their work.
An Underwriter’s Skill Set
Underwriters must exercise analytical, logical and strategic thinking to arrive at practical, prudent and optimal business decisions. Research and data analysis skills form the basis of underwriting as they help you collect information, evaluate it and conclude how to tackle risks. Using mathematical and statistical models requires Underwriters to possess quick and accurate calculation skills that factor in the diverse variables of an application. Attention to detail is critical to pinpoint red flags in a high-risk contract and identify risk-mitigating solutions. Given the number of clients at any point, Underwriters must ensure efficiency by coordinating their tasks in an organised manner.
Automated vs Manual Underwriting
Automated underwriting using software programs that assess applications offers the benefits of speed and accuracy as compared to manual underwriting. However,
it may not be able to tackle unique situations, such as inconsistent income, which manual underwriting can deal with better. In some cases, Underwriters combine the outputs of automated and manual underwriting to estimate risk and arrive at well-considered conclusions.
Debt-to-Income Ratio
The debt-to-income ratio is derived by dividing a borrower's total monthly debt by their gross monthly income and expressed as a percentage. The debt includes the proposed mortgage principal, interest, taxes & insurance and recurring monthly debt (including credit card payments, student loan, mortgage, and auto loan).
Loan-to-Value Ratio
Expressed as a percentage, the loan-to-value (LTV) ratio is used in mortgage lending to determine down payment amounts and decide whether a lender will accept a candidate’s loan application. Dividing the mortgage amount by the appraised property value yields the LTV ratio. Lenders prefer lower LTVs, but borrowers must then discharge larger down payments. Typically, an LTV at or below 80% would be charged the lowest possible interest rate. Higher LTVs make mortgages more expensive for borrowers.
Types of Underwriters
Insurance Underwriters, typically insurance professionals with extensive knowledge of the industry, assess the risk of insuring homes, cars or drivers or individuals applying for life insurance policies. They evaluate the insurer’s profitability in engaging with a particular client based on established policy criteria and accordingly recommend the policy for which a client qualifies and the policy terms as well. Finally, they provide an outline of what the policy covers for the applicant’s unique circumstances. Depending on the case, the Underwriter may use manual or automated underwriting or a combination.
Life insurance underwriting assesses factors such as an applicant’s age, health, lifestyle, occupation, family medical history, and hobbies.
Loan Underwriters conduct risk assessments to judge the suitability of applications for diverse loans, such as auto loans and even business loans, and whether granting the loan is safe for all stakeholders. Typically, large banks rely on a combination of the inputs provided by Underwriters and underwriting software to evaluate the risk of lending funds in the case of each applicant. Depending on the size of their firm, Loan Underwriters may work with several banks simultaneously.
Mortgage Underwriters, typically in high demand in the loan industry, specifically deal with loans to buy homes, which are risky propositions despite a prospective buyer’s good income and credit score. They conduct a detailed assessment of the applicant’s credit score and history, proof of steady income, debt-to-income ratio, overall savings and other significant factors. They may review internal company information, such as the number of mortgages given, and also factor in aspects beyond the applicant’s control, including the value and type of property in consideration. On completing the assessment, Mortgage Underwriters can conclude the viability of the loan for the applicant and the lender.
Securities Underwriters, different from the others, deal mainly with initial public offerings (IPOs). They typically work for potential investors, usually investment banks, and determine an appropriate price for an IPO based on a risk assessment of the investment. Depending on the outcome of the underwriting process, the bank decides to buy (or underwrite) the securities under consideration and then sell them in the market. The tricky part is the sales period because if a security sells for less than the recommended price, the bank holds liability for the difference. However, there are overall benefits. Companies can meet their targets to raise capital through IPOs, investment banks can receive a premium or profit for their underwriting services, and investors can feel reassured by the vetting process to make informed investment choices.
What is Refinancing?
A refinance, or "refi", involves revising an existing credit agreement in connection with loans or mortgages. If there is a positive change for borrowers in the interest-rate environment, individuals or businesses may wish to get a new contract improved with the revised terms, such as a more favourable interest rate or payment schedule, likely leading to savings on debt payments.
Potential Pros & Cons of Freelancing vs Full-Time Employment
Freelancing Underwriters have more flexible work schedules and locations. They have full ownership of the business and can select their projects and clients. However, they experience inconsistent work and cash flow, which means more responsibility, effort and risk.
On the other hand, a full-time Underwriter has company-sponsored health benefits, insurance, and retirement plans. They have job security with a fixed, reliable source of income and guidance from their bosses. Yet, they may experience boredom due to a lack of flexibility, ownership, and variety.
When deciding between freelancing or being a full-time employee, consider the pros and cons to see what works best for you.
Underwriters are critical components in the lending and insurance industry, reviewing and assessing the risks inherent in insurance and commercial or personal loan applications, including mortgages. Your risk assessment report can be what sends applicants on a roller coaster ride of emotions, from sheer joy to utter despair, because it is based on your recommendations that insurers and lenders decide if they should enter a financial arrangement with the applicants. Therefore, you must always remain fair, objective and responsible.
Focus on long-term profitability instead of short-term premium volume when evaluating accounts that fall below underwriting standards. Build customer relationships by innovatively and profitably taking on new business opportunities. Maintain a balance between technology and person-to-person connections. Earn credentials to build and solidify your reputation, clientele and career in a constantly changing industry.
In Scotland, people paint the front door of their house red once they have finally paid off the mortgage.
What do Underwriters do?
An Underwriter would typically need to:
Accredited
$42,359
