Have you ever wondered how your insurance provider is able to provide insurance covers at a relatively low price? In simple terms, insurance is all about predicting future. The insurance companies calculate the probability of an event and based on the calculated probability, they calculate the risk and the cost of covering that risk in terms of insurance premium and deductibles.
For doing all these calculations, insurance companies employ individuals known as underwriters. The job of underwriters is to use statistical tools to determine the probability of happening of an insurance event and arrive at a premium. In simple terms, it is the underwriter who determines your premium and whether the insurance company will provide you with an insurance cover you desire.
The Difference between an Insurance Broker and Underwriter
An insurance broker is an individual or Procom Insurance Company Miami, that sells insurance policies to business owners or individuals. There are many different types of insurance brokers or agents. Some companies directly employ insurance brokers to sell their insurance products. There are captive insurance brokers that advise clients regarding their insurance needs, but they sell insurance products only from a particular company. There are also independent insurance brokers that provide insurance products from a variety of companies.
In simple terms, the primary focus of a broker is to sell insurance policies. A broker also obtains important information from insurance prospects to allow the underwriters to figure out whether those prospects are eligible for insurance coverage. In most cases, brokers are compensated on commission basis as they receive commission from insurance companies for every policy sold by them.
An insurance broker does not create insurance policies, set insurance rate or perform under writing. In other words, they do not have any control over the insurance policy issued by an insurance company. All of these tasks are done by the underwriters employed by the insurance company. An insurance broker has absolutely no control over the prices set by the insurance companies.
The job of an insurance underwriter is to evaluate the risk of insuring an individual, a car, your home, business or any other product that the insurance company wants to sell. Underwriters use a variety of statistical tools, software packages and a lot of math to determine the risk associated with insuring a particular thing or an individual. Then, they set a price in order to establish the insurance premium for taking on that risk.
In simple terms, their job is to figure out the amount of insurance that can be offered as well as whether the insurance company should offer insurance based on their risk assessment. You can also say that they work behind the scenes in an insurance company.
Job of an Insurance Underwriter
They review risk information in order to figure out the actual risk and the kind of policy coverage the insurance company can provide. They also sometimes negotiate with the insurance broker to offer insurance in special cases when the standard policy doesn’t suffice.
They are professionals with training in statistics, mathematics and actuarial calculations. They have specialized knowledge of risk assessment and they carry out calculations to figure out whether the insurance company should insure something or someone, and at what cost.
Need for an Insurance Underwriter
If you’re wondering why insurance companies need to employ the services of an underwriter, consider the fact that insurance is a gamble but it’s a calculated gamble. If you do not buy insurance for your business or your home, you are assuming that nothing is going to happen to your business or your home and you have absolutely no need for any protection.
On the other hand, when you buy insurance from an insurance provider, it is the job of the insurance underwriter to figure out the amount of risk they can underwrite and how much money they need as insurance premium in order to underwrite that much risk. If their calculations suggest that the risk is too high, the insurance company won’t take on the risk. The calculation of the risk assessment is based on calculation of probability of an event happening. The premium calculation is based on this probability and underwriters do all the calculation to determine the premium.
Insurance Underwriter vs Broker
The job of an insurance broker is to sell the risks. All insurance brokers are provided an underwriting manual that outlines the standard situations and rules. All insurance companies have standard policies that are sold by insurance brokers. They don’t have any decision-making authority and they cannot change rates or clauses in the insurance policy. They cannot make any special arrangements or bend the rules to offer specific insurance to a client without the consent of the underwriter.
The insurance agent represents clients by advocating on the behalf of the clients in order to get them the required insurance. An insurance broker will answer all your queries when you are trying to buy insurance. They are there to explain various types of coverage and help you get adequate cover for your particular needs.
The job of an insurance underwriter is to protect the company by assessing risks and by enforcing the underwriting rules. An underwriter has a lot of decision-making power which means they can make exceptions or bend the rules. They are also free to cancel your policy, or they can refuse to offer insurance in case they determine that a particular situation carries too high risk.
An insurance underwriter reviews insurance policies based on the risk information available to them. Typically, an insurance underwriter comes into picture if there is a material change in the insurance conditions or risk. They will reassess the policy to make sure that the company will continue the insurance policy on current terms or whether the company should issue a new policy based on new terms. New insurance terms may include increase or decrease in coverage as well as deductibles.
As an insurance buyer, you are unlikely to deal with an insurance underwriter. You will be dealing with an insurance broker who will suggest the right type of insurance coverage for your particular requirements. An underwriter will only speak with the insurance agent as their job is to review the risk associated with insurance and to set specific conditions of acceptance. If you want to discuss the decision made by the underwriter at the insurance company, you may only speak with your insurance broker and not with the underwriter directly.