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If you've tried to get a loan or an insurance policy recently, you know how stressful it can be to try and get approval. Mortgages and insurance have to go through rigorous processes to get approval. Who's the one behind the scenes making the decision of whether to approve it or not?

That would be an underwriter. The position of underwriter has become more important as insurance companies have become exponentially larger and there is more at stake for them if a risky policy is given out.

The work of an underwriter can be more varied than you think, though. What is an underwriter, what do they do and where might they work?

What Is an Underwriter?

An underwriter is the party that assesses and evaluates the risk of whatever their particular field has (mortgage, loan, health policy, investment, etc.) and whether or not it is worth it for their company to assume that risk.

Underwriters are most common in environments that most consistently bring risk with them. If you as an individual are dealing with an underwriter, you're likely dealing with a major deal in your life - trying to get insurance for a major purchase, trying to get a specific health insurance or loan, etc. Each risky industry has their own underwriter with a firm understanding of the specialized knowledge of that field, as well as a general knowledge of finance.

The position of underwriter is itself risky. Assessing risk means determining if there is a way for the loans, policies et al to work out for their company. If the risk proves to be too much at a cost to that company, the underwriter is someone who can be held accountable for it.

What Are an Underwriter's Job Functions?

Using the specifics of the field, an underwriter will use relevant information to determine if the inherent risk is worth it and how it should impact the deal, should it go through at all.

Say you are an underwriter for a health insurance company trying to determine whether to approve of offering someone an insurance policy or what their specific coverage should be. You would look into relevant information like their age, past medical history and family history. Using this information, among others, they can input everything into an underwriting software that will help determine what premium should be offered - or, if it's deemed too risky, to not offer them a policy.

The specific information varies based on the claim. Naturally an underwriter for a health insurance company looks into medical history; an underwriter assessing the risk of a car loan will likely look at your credit score and history, among other things.

Being an underwriter can mean walking a fine line. They can't give out loans or policies to parties with too much risk since it's their employer that will be taking on that risk, but the degree of riskiness that is acceptable, and what they can be given based on their specific riskiness, is what the underwriter has to determine. Can the party you're giving this loan to realistically pay you back - and if so, at what rate?

Each new case has its own set of details that must be assessed, especially in fields with more complex policies. A simple medical history will make determining the risk of a health insurance policy simple, but finding out all the intricacies of a workers' compensation case means having to find a lot of information before a decision can be made.

Some cases are very simple and don't require too much analysis and research. Even in these cases, though, underwriters are still needed to help walk people through the loan and be available in case sudden extenuating circumstances change the situation.

Types of Underwriter

So what are these various industries underwriters can work in? What are these risky environments? Here are some of the more common forms of underwriters.

Mortgage Underwriters

Mortgage underwriters are the most frequently used sort among loan underwriters, and with good reason. Buying a house by itself is risky, even for someone with great credit and high income.

So underwriters in the mortgage industry have to be incredibly thorough to make sure the risk is not unmanageable considering how many of the mortgages given out are, at minimum, above six figures. Credit score and history will be factored in again, but there are so many other factors that must be looked at. Is there verifiable proof of a job and steady income? How much does the mortgage seeker have in debt compared to their income? Was the home they want to purchase appraised accurately?

There are many factors, both in and out of the mortgage seeker's control, that must be looked into to ensure that the mortgage is fair for everyone involved.

Loan Underwriters

Though a mortgage is the most common sort of loan underwriting, other loans also need a party looking through the details to ensure it isn't too risky for anyone. As previously mentioned, underwriters and underwriting software are generally used when determining the risk of giving someone an auto loan.

Banks will often use underwriters as well when determining the risk in giving out a loan. This goes for both big and small banks alike; in the case of large banks, underwriters may be needed not just for loans given out to individuals, but much larger commercial loans given to businesses. Depending on the size of the business, it's possible they'll be requesting a loan large enough that part of the loan underwriter's job is to work with multiple banks.

Insurance Underwriters

Insurance underwriters are another particularly common group, looking into how risky the party seeking this insurance policy is.

Should you be looking into a car insurance, health insurance, life insurance, or property and casualty insurance policy, the underwriter in your case has specialized knowledge in their respective field to work with you and the insurance company. As opposed to merely determining if your risk levels are acceptable for paying off a loan, the information in insurance underwriter will help determine, should you qualify for a policy, the kind you would be entitled to and what it will cover.

Securities Underwriters

A different form of underwriter from all of these are securities underwriters, who work frequently with initial public offerings (IPOs). They will assess the investment's riskiness to help determine the appropriate price for an IPO, buy securities and then sell them. Often, the underwriter for securities is the investment bank and the specialists they employ. One of the bigger risks here is that should there not be as much fanfare for these securities, the investment bank may be stuck owning more of it than they anticipated.

How Do You Become an Underwriter?

Though you're expected to have a bachelor's degree to become an underwriter, you're not likely to find an underwriter 4-year program, so you should find a major and courses relevant to underwriting. Finance, economics, business and mathematics would be excellent programs to consider for this line of work. More relevant education will come while you're already on the job and looking to get more specific certification.

In addition to related education, you'll want to make sure you have excellent computer proficiency and attention to detail, two particularly important elements of the underwriting profession.

Entry-level positions don't require certification yet, but at least in the world of insurance underwriting, new employees receive extensive on-the-job training from their superiors as they train to become underwriters in their specialized field.

Underwriter's Salary

According to the U.S. Bureau of Labor Statistics, the median annual salary for insurance underwriters was $69,760 in May of 2017. Those in the top 90% could make as much as $123,660. The highest salaries for insurance underwriters can be found along the East coast; New Jersey is No. 1 with a mean annual wage of $97,110 with New York close behind at $96,570. District of Columbia and Massachusetts are third and fourth, respectively.

Loan officers, which include loan underwriters, have a median annual wage of $64,660, with a mean annual wage of $77,920 (per the BLS). Loan officers in the 90th percentile made $135,590. The securities and investment industry was the one with the highest annual mean wage: $107,900. Loan officers in New York and the District of Columbia made the most money with respective mean annual wages of $108,410 and $104,960.

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