What Is an Underwriter? How to Become an Underwriter

An underwriter is a professional that assesses the level of financial risk associated with a particular undertaking for a client, investor, or lending institution. Underwriters assess candidates for mortgage loans, business loans, Initial Public Offerings, investments, or insurance policies to determine their risk level for a lending institution.

Underwriters evaluate the financials and circumstances of the project to determine whether or not the project is worth the investment. Industries like investment banking, mortgage lending, and insurance require the expertise of underwriters.

In general, an underwriter gathers information about a borrower to evaluate the level of risk that they may present to the lending party. The underwriting process depends on the specific field that the lender is in. For example, a mortgage underwriter assesses an applicant’s personal finances (like debt-to-income ratio and credit score) and a property appraisal to ensure that a loan to a particular candidate for a particular piece of real property is wise. An insurance underwriter may look at a person’s medical history and pre-existing conditions to assess the level of financial obligation they may present to the insurance company. An underwriter can approve or deny a loan application based on their findings and risk assessment.

Underwriters assess the risk levels of all sorts of undertakings in different fields, depending on the type of loan or investment. Here are some of the most common types of underwriters you may see in various industries.

1. 1. Auto loan underwriters: Auto loan underwriters examine a potential borrower’s credit score and other financial data on behalf of a lender in order to determine the client’s eligibility for an auto loan. If their financials and credit history meet the lender’s requirements, the applicant is granted a loan amount for their vehicle. Auto loan underwriters negotiate the right down payment and interest rates for loan applicants, based on their financial records.
2. 2. Insurance underwriters: These underwriters assess peoples’ insurance applications on behalf of the insurer. These insurance industry professionals look at an applicant’s history and circumstances to evaluate them for insurance coverage. They also determine monthly premium costs for life insurance or health insurance policies. Commercial insurance underwriters assess a commercial property’s location, security, and environmental risk to establish coverage rates.
3. 3. Mortgage loan underwriters: A mortgage underwriter assesses an applicant’s financial documents like income, savings, and credit reports on behalf of a lender to determine whether they qualify for loan approval. Mortgage application underwriting is a key component of many real estate transactions, specifically the property or home buying process, and certain mortgage lenders may have strict criteria to approve a home loan (for instance, many lenders will not approve loans for flipping properties).
4. 4. Equity underwriter: Equity underwriters, sometimes known as securities underwriters, are financial specialists are the anchor of initial public offerings (IPOs). Equity underwriters are similar to investment banks, helping to determine the prices of the securities, and assuming the risk individually for forecasts that don’t pan out as they estimated.

Here is a brief overview of the career path to becoming an underwriter.

1. 1. Obtain a relevant degree. Most insurance underwriters have at least a bachelor’s degree in a related field of study to their specialty such as business administration or finance. Some positions or organizations may also require you to get additional training, like certification.
2. 2. Hone your skills. Underwriting involves a lot of mathematics, analytical skills, and decision-making skills. You should also be as detail-oriented as possible because the job involves examining copious amounts of granular information. Take any opportunity to hone and evolve those skills in the process.
3. 3. Apply for entry-level positions. Many entry-level underwriter jobs will offer an on-the-job training program. OTJ training is any experiential way of training employees for a job. OJT is done in-person in the work environment and is meant to simulate the work the employee will be doing once training is complete. Search for part-time or full-time job opportunities that give you the training and work experience you need on this career path.
4. 4. Gain additional certifications. Advancing in your career as an underwriter may require further licensing or certifications. For example, if you’d like to become a senior underwriter, you will need to complete the coursework and training for additional certifications. Certain companies that perform estate planning may require you to gain an advanced designation like Chartered Life Underwriter (CLU), or companies who perform risk management for residential and commercial properties may require a designation like Chartered Property Casualty Underwriter (CPCU) or Associate in Commercial Underwriting (ACU).

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