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What is an Underwriter?

An underwriter is an employee of an insurance company tasked with determining the risk level associated with issuing a specific insurance policy. They look at specific elements to determine if the insurance company should insure the applicant and, if so, how much they should charge for the policy.

Factors an underwriter considers

Underwriters look at different factors depending on the type of insurance policy they’re underwriting. But when it comes to traditional life insurance (i.e., policies other than no-exam life insurance), they generally evaluate:

  • Age. The younger you are, the more likely you are to have plenty of years ahead of you. As a result, life insurance underwriters are more hesitant to insure older individuals. When they do approve life insurance applications for older adults, those policies generally come with higher premiums.

  • Gender. Because women are statistically likely to live longer than men, they usually pay less for life insurance.

  • Health history. Underwriters will evaluate both the applicant’s personal and family health history as part of the underwriting process. If they’ve been diagnosed with any serious health conditions or have a family history of a specific, life-shortening illness, the underwriter will determine that the applicant is higher risk.

  • Current health. Traditional life insurance often requires the applicant to undergo a medical exam. During this process, a physician gathers data to report to the underwriter, such as the applicant’s BMI, along with any current treatments and medications they’re using.

  • Substance use. As part of the medical exam, the applicant usually needs to submit a blood and urine sample. This allows the underwriter to check for a wide range of medical conditions, along with tobacco and drug use. Heavy alcohol intake, smoking cigarettes, or using drugs will all lead the underwriter to deem the applicant riskier.

  • Financial situation. An underwriter isn’t just tasked with deciding if it makes sense to issue a policy or not. They also need to determine if the applicant has applied for a death benefit that makes sense based on their current financial situation. As a result, the underwriter will gather information about the application’s income, net worth, and assets.

  • Past insurance applications and current coverage. Based on the answers to the questions on the application and the database maintained by the MIB Group, the underwriter takes into account any information that other life and health insurance companies have on the applicant. This will show the underwriter if the applicant has applied for any other life insurance policies and, if so, for how much. It will also alert them to any medical details the applicant has reported on previous life or health insurance applications.

  • Occupation. Generally, the underwriter simply checks to see if the applicant is engaged in a profession that’s safe or high-risk, like construction work or firefighting.

  • Driving and criminal history. The underwriter pulls a motor vehicle report to see if the applicant has a history of traffic violations and accidents, which would make them higher-risk. The underwriter also looks into their criminal background to see if they have been cited with any serious offenses.

  • Insured interest. Insurers will only issue life insurance if the policy’s beneficiary would financially suffer when the insured dies. This is called insurable interest. The life insurance underwriter will check to see that any beneficiaries on the policy are monetarily linked to the insured. Spouses and business partners, for example, almost always have sufficient insured interest to check out as beneficiaries.

Once they gather data for all of the key underwriting elements, the underwriter uses actuarial tables to determine how likely the applicant is to die at any given age. These tables basically give statistical likelihoods of mortality at specific ages once the underwriter plugs in the data that they’ve gathered.

They then arrive at a rating for the applicant. The life insurance company uses that rating to determine how much to charge for the life insurance policy for which the applicant has applied.

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