Underwriters perform an essential task in the financial sector. Usually, as part of a large institution, underwriters evaluate and assume risk in exchange for profit. This risk results from numerous financial services, including mortgages, loans, insurance and investments.
With underwriters operating across several areas of finance, ranging from insurance to mortgage lending, their primary function is to determine the level of risk of a specific transaction or business decision. This helps the business make profitable decisions that achieve its goals.
What are the responsibilities of underwriters?
Underwriters have a storied history that first emerged in the early maritime industry, as merchants looked to insure their ships and contents when embarking on a long journey. Underwriters would assume the financial risk of the voyage after agreeing on a premium. While the job has undoubtedly changed, many responsibilities remain the same.
1. Review applications
Underwriters review applications regarding mortgages, insurance policies and bank loans. Although the nature of this assessment will change depending on the sector, the primary goal is to ascertain the level of risk involved with approving the application.
For example, loan underwriters will consider an applicant’s employment history, salary and financial statements to determine the likelihood of the loan being repaid. Making this evaluation requires sharp analytical and statistical skills.
2. Assess the degree of risk
Across numerous objective and subjective criteria, underwriters decide an applicant’s risk. For example, an underwriter working in car insurance will consider the driver’s age, where the vehicle is parked, and their accident history to understand the level of risk.
In this scenario, older applicants that live in a safe neighbourhood and have never had an accident will pay lower insurance premiums than less experienced drivers. Making the right judgements about risk is central to everything an underwriter does.
3. Define the terms and conditions
Underwriters must also devise precise terms and conditions before agreeing to take on the risk of an applicant’s house mortgage or bank loan. Typically, these protect the business from a myriad of harmful circumstances while outlining the responsibilities of each party.
Depending on the sector, there may be some room for the applicant to negotiate the terms of the agreement. The underwriter must decide whether accepting additional risk by removing specific terms and conditions is within the company’s best interests.
What are the different underwriter roles?
With the role of an underwriter so crucial to the financial services industry, there are numerous positions to explore your interests.
1. Loan underwriting
Loan underwriting is where a lender verifies an applicant’s income, debt and assets. After thoroughly reviewing an applicant’s documentation and other publicly accessible data, the underwriter will determine the risk of approving a loan and decide whether to approve the application.
2. Insurance underwriting
Insurance underwriters can work across numerous sectors, including car, home, life, and many more. After measuring the institution’s exposure regarding someone’s application, underwriters decide the level of coverage and the premium involved.
3. Securities underwriting
Underwriters can also work as part of investment banks looking to purchase securities, like stocks. When a company holds an Initial Public Offering (IPO), an investment bank might choose to buy the securities before selling them on the market. Underwriters assess the risk of doing so.
4. Forensic underwriting
Forensic underwriters have a slightly different role from others in the industry. Their job is to determine how the financial institution approved a loan or mortgage that eventually failed. Underwriters work to identify failed risk assessments and fraud while safeguarding the business against future problems.
How to become a successful underwriter
Ready to find an underwriter job in Singapore? First, you’ll have to earn your qualifications and specialise in a niche.
1. Choose your niche
If you’ve got an excellent mind for mathematics and business analytics, choosing to become an underwriter is a wise decision. However, focus on a niche that helps you stand out from the competition, such as property or healthcare.
2. Get qualified
While you don’t have to get a bachelor’s degree to work as an underwriter, it’ll undoubtedly help you find your place in the industry. Complete a relevant degree in business administration, finance or economics to give yourself a helping hand.
3. Enhance your skills
Maths and analytical skills are essential to your success as an underwriter. Developing outstanding interpersonal skills ensures you work well with colleagues and clients, while computer skills in the latest industry software will increase your employability.
If you’re all set, take some time to customise your resume so that your job application is relevant and stands out.