What Does An Underwriter Do? Underwriting Through The Eyes Of An Underwriter

Wondering about what role an underwriter plays? An underwriter is the person who decides if your insurance application will be accepted or denied. Read more to get to know the importance of underwriters.

In the world of finances, various professionals play diverse roles. Bank tellers, insurance agents, financial advisors, and portfolio managers are among the many positions in this industry. But have you ever wondered who assesses the risks involved in credit and lending decisions? These experts are known as underwriters.

Underwriters are responsible for evaluating and analyzing whether a financial risk is worth taking. They work in different financial industry sectors, such as lending, insurance, equity markets, and security trading. Some underwriters assist companies in launching their initial public offerings (IPOs), while others review applications for personal loans, health insurance policies, or mortgages.

If being an underwriter intrigues you as a potential career path, you might wonder about the required educational and professional qualifications. In this article, we’ll explore what an underwriter does and explore the various aspects of underwriting. So, let’s dive in and take a peek at the lives of an underwriter.

What are the types of underwriters, and what roles do they play?

There are many types of underwritings, and only a handful of them are discussed here:

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Security underwriters

For the sake of security, underwriting is required. Investment banks utilize this method to issue securities such as stocks and bonds. They sometimes accept the risk of distributing securities due to a lack of investors. Underwriters benefit by purchasing bonds and reselling them at a higher price to investors or broker-dealers.

Insurance underwriters

The insurance sector is known for its underwriting. Underwriters assist insurance firms in avoiding unprofitable business. They calculate the premium price by measuring the risk boundary to insure a risk. The underwriter’s job is to ensure that the company’s book of business is protected and losses are kept to a minimum.

Each business has its own set of underwriting standards. Whether or not the firm takes risks, the underwriter can change policies depending on guidelines. The applicant’s driving record will be considered regarding auto insurance. In the case of health insurance, underwriting may be required to assess the applicant’s health.

Banking underwriters

In bank underwriting, credit investigation extends beyond the issuance of a loan. When customers apply for a loan, bank underwriters evaluate their credit risk. Salary, work history, and financial statements are all submitted to the borrower.

The lender evaluates the borrower’s financial needs as well as their ability to repay the loan. Banks purchase commercial papers, municipal bonds, government securities, and corporate bonds for resale to investors or for their own benefit.

Underwriter for real estate

Real estate investors need underwriting professionals to determine the genuine value of an asset. The underwriter must do a property analysis that takes into account the property’s age, location, appearance, market value/rent, and accessibility.

Underwriters must be aware of the construction, neighboring structures, potential hazards, and distance. The probability of damage from winds or water, as well as the risk to local wildlife, should be factored into real estate underwriting.

Underwriter for sponsorship

The term “sponsorship underwriting” is commonly used in the media to characterize television and radio broadcasts. It refers to the revenue streams supplied to television or radio stations in exchange for the airing of advertising promoting a company’s or organization’s products or services. The profit will rise if the odds are in the underwriter’s favor.

Underwriters in investment banking

During an initial public offering (IPO), an investment bank’s underwriters frequently guarantee a certain amount of cash to a company, an amount that investors theoretically provide as a source of capital. Despite the fact that the bank is just acting as a “facilitator” in the transaction, they have taken on an “underwriting risk” by pledging to give the proceeds of the sale to the client regardless of whether the sale of its company’s shares succeeds or fails.

Underwriters in commercial banking

Underwriters in commercial banking evaluate borrowers’ creditworthiness to determine if they should be given a loan or funding. A fee is usually imposed on the borrower to cover the lender’s risk in the event that the borrower fails on the loan.

Underwriters of medical stop-loss insurance

Medical stop-loss underwriters evaluate risk based on self-insured employer groups’ individual health situations. Stop-loss insurance covers companies that pay their own employee health insurance claims rather than paying premiums to transfer all risk to an insurance company.

Medical and prescription medicine claims, as well as administration costs, are paid out of business reserves, and self-insured companies incur the risk of big or catastrophic losses, such as organ transplants or cancer treatments.

As a result, self-insured businesses’ underwriters must evaluate each employee’s medical profile individually. Underwriters also assess the group’s overall risk and determine an acceptable premium level and aggregate claims limit, which, if exceeded, might result in irreversible financial harm to the employer.

What is the role of an insurance underwriter?

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Insurance underwriters take on the risk of a contract with a person or a company. For example, in exchange for a premium or a monthly payment, an underwriter may bear the risk of the expense of a fire in a property. An important role of an underwriter is to assess an insurer’s risk prior to the policy period and at the time of renewal.

When assessing a homeowner’s policy, for example, underwriters must take into account several factors. Property and casualty insurance brokers serve as field underwriters, initially checking homes or rental properties for issues that could constitute a danger to the carrier, such as deteriorating roofs or foundations. Hazards are reported to the house underwriter by the agents.

Hazards that could result in a liability claim are also considered by the home underwriter. Unfenced swimming pools, crumbling walkways, and the presence of dead or dying trees on the property are all potential hazards. These and other dangers pose a risk to an insurance company, which may be forced to pay liability claims in the event of drowning or slip and fall injuries.

Homeowner insurance underwriters use an algorithmic scoring system to price policies based on various parameters, including an applicant’s credit score. Based on the platform’s interpretation and integrating all data from the field underwriter’s observations, the system creates a suitable premium. When determining a premium, the lead underwriter subjectively considers the applicant’s replies on the insurance application.

What is underwriting?

Imagine you’re buying a house and need a mortgage from a bank. The bank needs to ensure it’s a good idea to lend you the money. This is where an underwriter comes in. An underwriter is like a financial detective who assesses risks and decides whether to approve loans or insurance.

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Underwriters work for banks, insurance companies, and other financial institutions. They review applications and research to determine if someone is a safe bet to lend money to or insure. They look at factors like credit history, income, and the value of what’s being bought.

How to Become an Underwriter

Here’s how you can become an underwriter:

  • Education: Start with a high school diploma or equivalent. Then, a bachelor’s degree in finance, business, economics, or a related field is a good path. Some companies might require a more specialized degree.
  • Skills: Develop strong analytical skills. You’ll need to dig into details, understand financial data, and make smart decisions.
  • Learn About Underwriting: While studying, learn about underwriting through books, online resources, and courses. Understand the basics of risk assessment and the industry you’re interested in (like insurance or banking).
  • Internships: Look for internships at banks, insurance companies, or financial firms. This hands-on experience will give you a taste of what underwriters do.
  • Certifications (Optional): Some industries might require certifications, like Chartered Property Casualty Underwriter (CPCU) for insurance underwriters. These can boost your credibility.
  • Networking: Build connections in the industry. Attend career fairs and industry events and join professional associations related to finance and underwriting.
  • Job Search: Start applying for entry-level underwriting positions. These roles might be titled “underwriting assistant” or “junior underwriter.”
  • On-the-Job Training: Once you land a job, you’ll receive training from experienced underwriters. This is where you’ll learn the ropes of real-world underwriting.

Requirements to Become an Underwriter:

Here are just some of the requirements you’ll need to fulfill when you want to step into the world of underwriting:

  • Education: A bachelor’s degree in finance, economics, business, or a related field is commonly required. Some employers might ask for a master’s degree for higher-level positions.
  • Analytical Skills: You should enjoy working with numbers and know how to analyze data to make informed decisions.
  • Attention to Detail: Underwriting involves scrutinizing lots of information, so detail-oriented is crucial.
  • Communication Skills: You’ll need to explain your decisions to colleagues and clients, often in clear and straight forward terms.
  • Problem-Solving: Underwriters solve financial puzzles. You’ll need to assess risks and find solutions to complex situations.
  • Ethical Judgment: You’ll be making decisions that affect people’s finances. Integrity and ethical judgment are vital.
  • Industry Knowledge: Understand the industry you’re underwriting for, whether it’s insurance, mortgages, or something else.
  • Licensing/Certification: Depending on the industry and region, you might need specific licenses or certifications.

Remember, becoming an underwriter takes time and dedication. It’s a rewarding career that combines finance, analysis, and decision-making to help individuals and businesses make financially sound choices.

Job Description of an Underwriter

An underwriter plays a crucial role within the insurance and lending sectors. Their primary responsibility involves making critical choices about whether to grant approvals for policies or financial assistance. The U.S. Bureau of Labor Statistics clarifies that roles in insurance, business, and personal loan underwriting generally demand higher education degrees and are closely governed by state regulations. Many states mandate that underwriters must hold a valid and renewable license to sustain their employment status.

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Job Description of a Loan Underwriter

Aspiring loan underwriters typically attain a bachelor’s degree in finance, business, or economics. Once employed, they receive hands-on training from experienced members of the lending institution.

Across all states in the U.S., mortgage loan underwriters are required to uphold a mortgage loan originator license. Hondros College outlines that this entails completing 20 hours of coursework and passing a written examination. Additionally, underwriters undergo fingerprinting, background checks, and annual credit assessments.

Job Description of an Insurance Underwriter

An insurance underwriter is intimately involved in determining whether insurance policies should be approved. Upon receiving an application and relevant information, the underwriter conducts a risk assessment to ascertain if issuing a policy aligns with the company’s financial interests.

This involves utilizing specialized underwriting software designed to facilitate the risk evaluation process. If an applicant qualifies, an insurance underwriter might offer recommendations concerning premium amounts and coverage extent.

Becoming an Accomplished Insurance Underwriter

According to the BLS, insurance companies typically prefer underwriters to possess a bachelor’s degree in a business or financial discipline. However, employers may also consider candidates with a bachelor’s degree in an unrelated field, provided they have relevant underwriting experience. Additionally, employers anticipate insurance underwriters to attain and uphold certifications in the area.

The Insurance Institute of America provides training programs for aspiring underwriters seeking an Associate in Commercial Underwriting or an Associate in Personal Insurance. Individuals who make decisions regarding health insurance are referred to as medical underwriters.

What does a mortgage underwriter do?

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A mortgage underwriter is a specialist who evaluates the credit risk of potential borrowers by analyzing their financial profile and loan applications. They look for signs of repayment ability, credit history, employment history, property value, and other factors. The primary goal of an underwriter is to determine the borrower’s likelihood of repaying their loan. Underwriters are also responsible for protecting lenders from risks, fraud, and losses.

Mortgage underwriters are responsible for verifying the financial information provided by clients and assessing their capacity to pay back a mortgage. A career as an underwriter can be a great fit for someone who is detail-oriented and interested in banking, finance, or accounting.

Underwriters must be able to quickly understand basic accounting and finance concepts, as well as understand the rules of many different types of loans so they can decide if a client is eligible for a specific loan. Underwriters must also have good communication skills in order to negotiate with clients over outstanding issues or concerns.

What is mortgage underwriting?

Mortgage underwriting is the process of evaluating a mortgage loan application to determine whether or not the borrower is a good fit for the lender. The mortgage underwriter will consider factors such as the borrower’s credit, income, and assets to determine whether or not the borrower will be able to repay the loan.

How long does mortgage underwriting take?

The process of mortgage underwriting typically lasts between two and four weeks, but the timing depends on many factors.

For example, it can depend on how much information you provide at the outset; if you have all the necessary paperwork in order, your application will likely be processed more quickly than if you don’t.

It also depends on whether or not your lender has enough staff to process applications in a timely fashion. If there are few employees, your application may take longer to review because each employee has more work to do.

Additionally, if there are any issues with your credit score or financial history that require special attention from an underwriter, this will add time to the process as well.

How strict is mortgage underwriting?

The underwriting process for mortgages is pretty strict. To be approved for a mortgage loan, your lender will check that you have sufficient income, excellent credit and a down payment for the home you want to buy.

Mortgage underwriting is the process of approving or denying a loan application based on the analysis of a borrower’s creditworthiness. Most financial lenders have strict guidelines for their mortgage underwriters to follow, and most applicants are rejected.

A mortgage underwriter will approve or deny a loan application based on an analysis of a borrower’s credit history, employment history, savings and assets, and the type of property being purchased.

Applying for a mortgage: What to expect?

Applying for a mortgage can be intimidating. It’s a big deal to ask someone to lend you hundreds of thousands of dollars, and it involves lots of paperwork and the potential for heartache.

So, how do you ensure you get the best terms? And what is actually involved in applying for a mortgage?

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There are 4 steps to getting a mortgage:

  1. Researching lenders and comparing rates
  2. Confirming your finances
  3. Completing a mortgage application
  4. Being approved and closing on your loan

Applying for a mortgage can initially seem intimidating, but it doesn’t have to be. You just need to know your budget and what you can afford, as well as how much house you want to buy.

Here are some tips for making the mortgage process easier:

  1. Decide on the type of home you want and what you’re willing to pay for it. You should also factor in other fees, such as closing costs and homeowner association dues, before deciding on a price range.
  2. Figure out what kind of mortgage is right for you: fixed-rate or adjustable-rate? What about terms like 15 years or 30 years? Each one will affect the total amount paid at closing and how much interest accrues over time so, it’s important to understand all these options before choosing one that fits your financial goals!
  3. Get pre-approved by your bank or credit union so they can give you an estimate of how much money they’ll lend based on income and assets (such as property). This helps ensure there won’t be any surprises when applying for financing because lenders will know exactly what type of loan they’re willing to offer upfront.

What to look for in mortgage underwriting services when selecting one?

Organizations that provide home loans require mortgage underwriting services. They can also be purchased by those who work as freelance loan processors. Those who process a significant or small number of loans might make more money with the help of independent underwriters.

They can focus on attracting new loan applicants and marketing their services. Outsourced underwriters can be found on the internet. Their services should be carefully chosen to ensure that they are both dependable and effective.

One of the main reasons why a business owner would use mortgage underwriting services is to save time and money. Those who provide these services have access to more underwriters than a small business could. As a result, they are noted for being swift to complete their tasks.

If you purchase mortgage underwriting services now, you will put an end to delays and erroneous findings. There will no longer be stacks of pre-approved files waiting for one or two underwriters to review them. Above all, you’ll be able to approve or reject these files for a fraction of the cost of hiring full-time underwriters.

Consider the types of home loans that the owners deal with before obtaining your mortgage underwriting services. There are a variety of house loans available in the United States, however, most people are eligible for FHA loans. If your small business or freelancing firm processes these loans, you should seek out an underwriter who specializes in these types of loans.

You should also inquire about a company’s loan processing procedures before hiring it. Is the underwriting process manual or automated? Many sellers of mortgage underwriting services use both strategies. An automated underwriting system is a computer-based method for calculating the risks of loan approvals using a formula.

It has the authority to accept or deny a loan application based on strict adherence to predetermined criteria. An underwriter’s job is ensuring the system is fed with accurate data. They should cross-reference information on customer documents with information already stored in the automated system.

If there is a mismatch between the two forms of data, the underwriter must return the loan file to the processing department’s loan officers. They must specify what the customer needs to do in order for their file to be accepted. Mortgage underwriting service providers sometimes require manual processing.

When a loan file is placed in the gray section, it signifies that the automated system is unable to deal with it. This is when manually underwriting loan files becomes necessary. As evidence, this strategy necessitates a large amount of paperwork.

The loan officers’ and processors’ job is to acquire as much proof as possible. This information includes, among other things, employment history, savings, income, obligations, justifications for loan pass-through defaults, and sources of down payment and cash reserves.

As you can see, mortgage underwriting services are critical to the success and growth of your small business. Sellers of these services do their best to underwrite files to the best of their abilities.

Why are mortgage loans denied in underwriting?

When a prospective homebuyer applies for a mortgage, there are many potential reasons for their mortgage loan to be denied in the underwriting process. Here are some of the most common ones:

  1. Low credit score
  2. Too much debt
  3. Inadequate reserves
  4. Lack of documentation
  5. Employment gaps and job changes
  6. High loan-to-value ratio (too little equity)
  7. Insufficient income to qualify for the loan amount

You may be denied at the underwriting stage when applying for a mortgage loan.

Underwriting is the last process before the loan is approved. It’s also the most scrutinized part of the application. The underwriter will check to see if you meet all of the lender’s requirements for the loan. In general, your credit score and debt-to-income ratio matter most when it comes to getting approved for a mortgage.

Specifically, if you have too much debt, are missing payments, or have poor credit, an underwriter could deny your mortgage application.

Why do lenders refuse loans?

Lenders refuse loans because of the risk that borrowers pose. Lenders must balance their desire to lend money against the risk that borrowers will default on their loans, so it’s important for borrowers to understand what lenders look for when deciding whether or not to extend a loan.

Loans are often refused by lenders because they feel there is too much risk involved in extending the loan. This could be related to the reason for the loan (such as a business venture), the applicant’s credit history, or several other factors.

How often does an underwriter deny a loan?

An underwriter is the one who examines a loan application to determine if the applicant is eligible or not. The underwriter will review the credit score, income, employment history, and other factors of a potential borrower to make sure they meet certain criteria. This can include income, expenses, and debt obligations.

Underwriters may deny a loan because of many factors, but usually, it’s because the applicant has a bad credit score, didn’t provide enough information, or doesn’t have enough income to support the loan amount.

How to prevent loan rejection: Tips for getting approved

To avoid getting the official “no” from your lender, follow these tips:

Be prepared: Know why you want this loan and what you’re going to do with it. Have your paperwork in order before going in to speak with the loan officer.

Improve your credit score. You can do this by making on-time payments for 12 months straight and by paying off as much as possible of your debts (mainly revolving debt like credit cards).

Apply for loans at banks where you already have an account. These lenders are more likely to give you the loan because they already know you’re trustworthy.

What documents are needed for the underwriting process?

Underwriting is the process a lender uses to determine whether or not you’re a good candidate for a loan. To make this assessment, they’ll need to see proof that you can pay back the loan on time and in full, as well as proof of your current financial health.

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The documents required for the underwriting process include:

  • Your two most recent pay stubs
  • A record of your employment history (for example, an employment offer letter)
  • Proof of other income streams (if applicable)
  • Your two most recent W-2 forms
  • Copies of any 1099 forms you’ve received during the past year
  • Any tax records from previous years

What are the helpful tips for a smooth underwriting process?

Following are the helpful tips that you can follow to have a smooth underwriting process:

– Provide all the necessary details while you’re applying for a mortgage.

– Keep your credit history and financial information clean.

– Keep your current job and don’t make any major purchases before closing.


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How to Kickstart a Career in Underwriting?

To embark on an underwriting career, the path often begins with education. Acquiring a bachelor’s degree featuring coursework in subjects like mathematics, accounting, economics, and related fields provides a solid foundation. Cultivate essential skills like analysis and effective communication, and pursue relevant certifications. With these qualifications in your toolkit, seek entry-level positions that offer the necessary training to propel your career forward.

Are Underwriters Well-Compensated?

As of May 2021, the average earnings for an insurance underwriter rested at $76,390. Professionals in the upper echelons of the field, representing the top 10%, commanded salaries exceeding $126,000.

Is Underwriting a Profession in Decline?

Contrary to the notion of automation and advanced software eroding the underwriting landscape, the reality is quite different. Underwriting is far from becoming an obsolete profession. Its vitality persists because underwriters furnish indispensable analytical acumen and decision-making expertise for financial service enterprises.

Can You Pursue Mortgage Underwriting sans a Degree?

Indeed, becoming a mortgage underwriter sans a degree is feasible, although possessing one presents advantages. Holding a high school diploma or GED equates to approximately a 40% chance of employment, contingent upon accumulating substantial experience. A bachelor’s degree enhances your odds, raising the chance to 50%. While master’s degree holders have a mere 2% likelihood of employment, associate degree holders hold a 7% chance.

What’s the Work Schedule for Underwriters?

Typically, mortgage underwriters maintain a workload of around 40 hours per week. Completing an underwriting assignment usually spans 2-3 days. While the role is primarily desk-bound, occasional overtime might be necessary on certain days.


The insurance underwriter is the person who determines whether or not to accept an insurance risk and at what cost. The insurance company usually employs them, and they assess risk based on several factors. These factors include previous claims, credit history, and job history. If the underwriter rejects your application for coverage, you may be able to appeal their decision.

Charles Bains

Charles Bains

Charles Bains started his insurance career as a marketing intern before pounding the pavement as a commercial lines agent in Orlando, FL. As an industry journalist, his articles have appeared in a variety of trade publications. His insurance television career, short-lived but glorious, once saw him serve as the expert adviser on an insurance-themed infomercial (yes, you read that correctly). Having recently worked for various organizations, coupled with his broader insurance knowledge, Charles is able to understand our client’s needs and guide them accordingly. He is a gem for Insurance Noon as his wide area of expertise and experience have been beneficial in conducting further researches to come up with solutions and writing them in a manner which is easy for everyone including beginners to comprehend.

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