Wondering what exactly an insurance underwriter does?

We got you!

Whether you’re a casual reader curious about the industry, a business owner looking to protect your assets or someone exploring insurance options, understanding the underwriter’s role can help you appreciate how your coverage comes together.

Let’s jump in to know what underwriters do, why their work is critical and how it impacts you.

What Is an Insurance Underwriter?

An insurance underwriter is a professional who evaluates the risks associated with insuring a person, business or asset. 

Think of them as the gatekeepers. They assess applications, crunch data and decide whether to offer coverage, under what terms and at what price. 

Their goal? To balance the needs of the customer with the financial stability of the insurer.

As an insurance broker, we work closely with underwriters to find policies that suit you. 

While we advocate for you, the underwriter’s job is to ensure the insurer can cover potential claims without taking on too much risk. 

What Does an Underwriter Do?

Underwriters have a lot on their plate. Their day-to-day work involves a mix of analysis, decision-making and collaboration. 

Here’s a closer look at their key responsibilities:

1. Assessing Risk: Underwriters review applications to determine the likelihood of a claim. 
   
   For example, if you’re insuring a car, they’ll look at your driving history, the car’s make and model and where you park it. 
   
   For a business, they might examine your industry, revenue and safety measures.

2. Analysing Data: They use data from various sources, including your application, credit reports or industry statistics, to build a risk profile. 
   
   After all, insurance policies are risk-based products, so access to external and traditional data sources, as well as analytical tools, is crucial for risk management and pricing decisions.

3. Setting Policy Terms: Underwriters decide the coverage limits, exclusions and conditions of your policy. 
   
   They might, for instance, exclude flood damage for a property in a high-risk area unless you pay a higher premium.

4. Determining Premiums: They calculate how much you’ll pay based on the risk level. 
   
   The Insurance Council of Australia notes that premiums have risen throughout the years. 
   
   Say, the Comprehensive Motor Insurance premiums in Australia saw a 42% increase since 2019 due to increased claim costs, which underwriters factor into their pricing.

5. Collaborating with Insurance Brokers: Brokers provide underwriters with detailed information about your needs.
   
   They use this to tailor policies, ensuring you get coverage that fits your situation.

Why Are Underwriters So Important?

Underwriters play an important role in the insurance process. Without them, the system wouldn’t work smoothly. 

Here’s why their work matters to you:

Underwriters ensure your policy matches your specific needs. 

For example, a small business in Sydney might need a different coverage than a rural farm, and underwriters make that distinction.

By carefully assessing risk, they help keep premiums reasonable. 

If they overestimate risk, you might pay too much. But if they underestimate, the insurer could face losses, which might lead to higher premiums for everyone.

Underwriters help insurers stay financially sound. 

For example, insurers paid out over $34 billion in claims since 2010. 

Underwriters ensure these claims can be met without destabilising the industry.

Underwriters stay on top of trends, be it about climate change or cyber threats. 

For instance, underwriters are increasingly factoring cyber threats into business policies, especially since calls to the Australian Cyber Security Hotline surged by 12% from 2022-23 indicating increase in cyber crimes. (Edit later)

How Underwriters Impact You

Underwriters help shape your insurance experience. 

Here’s how their work affects you:

• Tailored Policies: When an insurance broker submits your application, underwriters review it to create a policy that fits your unique situation. 
  
  Think if you’re a tradie, they might include coverage for tools and equipment based on your work environment.

• Faster Approvals: Modern underwriters use technology (e.g., artificial intelligence (AI) or automated underwriting tools) to speed up decisions. 
  
  This means you get quotes faster.

• Transparency and Affordability: Underwriters ensure that they clearly explain their decisions to insurance brokers, so brokers can also clarify why certain terms or premiums apply. 
  
  In addition, by accurately assessing risk, underwriters help insurance brokers find you competitive rates. For instance, if you’re a low-risk driver, they’ll ensure your car insurance reflects that.

How We Work with Underwriters to Help You

As your trusted insurance broker in Sydney, our team at Tank works toward bridging the gap between you and the underwriter. 

We gather your details, answer your questions and present your case to the underwriter in the best possible light. 

Here’s how we make it work:

1. Understanding Your Needs: We listen to what you need, whether it’s Home, Business, or Motor Vehicle Insurance, and collect the right information.
   
   
2. Negotiating with Underwriters: We advocate for terms that suit you, such as lower premiums or broader coverage, based on the underwriter’s assessment.
   
   
3. Explaining the Outcome: Once the underwriter sets the policy terms, we break it down for you in plain English, so you know exactly what you’re getting.
   
   
4. Ongoing Support: If your circumstances change, like moving to a new place or expanding your business, we work with underwriters to update your policy.

Why This Matters to You

Whether you’re insuring your home, car or business, underwriters ensure your policy is built on a solid foundation. 

Their expertise means you’re covered for the risks that matter most, without paying for things you don’t need. 

As an insurance broker, we closely work with them to deliver policies that give you peace of mind.

If you’re curious about how insurance works or want to explore coverage options, we’re here to help. Contact us at Tank Insurance or discover more with our blog. 

Let’s make insurance simple and stress-free together!