Delegating Underwriting Authority

An underwriting authority is the limit on decisions that an underwriter can make without receiving approval from someone at a higher level. The amount of authority given to each underwriter usually reflects the underwriter’s experience, the job title and responsibilities, and type of insurance handled. With some insurers underwriting authority is highly decentralized i.e., Underwriting Management delegates extensive underwriting authority to the personnel in the field offices. Other insurers are highly centralized with many or all final underwriting decisions are being made in the home office.

Many insurance companies also grant some underwriting authority to the agents who represent the company called frontline underwriters, these agents make the initial decisions regarding applications and then forward to the company underwriter those applications that meet underwriting guidelines.

Making and enforcing Underwriting Guidelines

Underwriting Management develops the guidelines that line underwriter’s views in underwriting process. Underwriting guidelines and bulletins explain how underwriter should approach each application. The guidelines list the factors that should be considered by the underwriter for each type of insurance, desirable and undesirable characteristics of applicants relative to those factors, the insurance company’s overall attitude towards the applicants that exhibit those characteristics.

Monitoring the results of underwriting guidelines

Monitoring the results of Underwriting Guidelines includes taking steps to ensure that the underwriters are following guidelines in that underwriting objectives are being met. If the guidelines are not followed there is no evidence as to whether they will work. An underwriting audit attempts to determine whether underwriters are following the guidelines. If the guidelines are being followed it is necessary to determine whether they are having the desired results.

The Underwriting Process

An underwriting decision must be made on every new insurance application as well as on the renewal policies. The Underwriting process comprises the following steps: -

· Gathering the necessary information

· Making the Underwriting Decision

· Implementing the Decision

· Monitoring the decision

CHAPTER 5 : UNDERWRITING