What is an Underwriter?

"What's that?"

It's funny but for people who are probably not related or in financial or insurance industry, they always give me the strange look. Some will reply, "Undertaker?"

The work of an underwriter is actually quite challenging.

In the insurance industry, an underwriter agrees to pay for things like damages to homes and cars, or health insurance, in exchange for regular premiums paid by the person or firm requesting insurance underwriting. The fees for insurance vary, depending on the individual risks that the person being insured represents. Insurance underwriters are trained to assess these risks and to charge accordingly. For example, an insurance underwriter might request an additional premium for fire insurance for a structure in a region which often experiences fires.

Thus, to underwrite means to agree to accept liability, or responsibility for possible losses by clients. You also set the conditions in the contract by reviewing the client's previous losses and other information.

In short, the role of an underwriter is to ensure the profitability of the principal by writing good risk. It is not a pleasant role, especially in competitive market where there will be seasonal price war among the principals.