What Is Insurance Underwriting?

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Custom illustration shows a woman writing on a long piece of paper at a desk with a stack of papers. Image shows what insurance underwriting is: It's the process of evaluating the risk of insuring a home, car, driver, or individual in the case of life insurance of health insurance, to determine if it's possible for the insurance company to take the chance of providing coverage.

The Balance / Nicole DeLeon 


Insurance underwriting is how an insurance company evaluates its risk. It helps an insurance company decide whether taking a chance on providing coverage to a person or business would be profitable.

Definition and Example of Insurance Underwriting

Insurance underwriting is the way an insurance company assesses the risk and profitability of offering a policy to someone. An insurance company must have a way to decide just how much of a gamble it's taking by providing coverage. It also needs to know the chances that something will go wrong, causing it to have to pay out a claim. This analysis applies to insuring a home, a car, a driver, a person's health, or even their life.

After looking at the risk involved, the insurance underwriter sets the insurance premium that will be charged in exchange for taking on this risk.


A company won't take on the risk of issuing a policy if the odds of a costly payout are too high.

How do companies decide what is an acceptable level of risk? That's where underwriting comes in. Underwriting is a complex process that involves data, statistics, and guidelines provided by actuaries. All of this work helps underwriters predict the likelihood of most risks. Then, insurance companies can charge premiums based on the level of risk.

For example, suppose someone is inquiring with a car insurance company about obtaining a policy. An insurance underwriter may evaluate their driving record as part of the process of determining whether to offer them a policy. A driver with a poor driving record could be seen as a high-risk customer, and the insurance company might decide to insure them but charge a higher premium to compensate.

How Insurance Underwriting Works

Underwriters are trained insurance professionals who understand risks and how to prevent them. They have special knowledge of risk assessment. They use skill and information to decide whether they'll insure something or someone—and at what cost.

The underwriter looks at all the information your agent provides. Then, they decide whether the company is willing to gamble on you. The job also includes:

  • Reviewing information to find the risk
  • Determining what kind of policy coverage or what perils the insurance company agrees to insure, and under what conditions
  • Possibly changing coverage by endorsement
  • Looking for solutions that might reduce the risk of future claims
  • Possibly negotiating with your agent or broker to find ways to insure you when there are issues

Assessing the Situation

An underwriter may become involved in cases when more assessment is needed, such as when an insured person has made many claims, when new policies are issued, or when there are payment issues.

For example, suppose a driver named Mary has made three glass claims on her car insurance policy in five years. Otherwise, she has a perfect driving record. The insurance company wants to continue to insure her, but it also wants to make the risk profitable again. It has paid $1,500 in glass claims in the past five years, but Mary pays only $300 per year for glass coverage. Her deductible is only $100.

The underwriter reviews the file and decides to offer new conditions to Mary upon her renewal. The company agrees to offer her full coverage, but it will increase her deductible to $500.

The underwriter also provides another option: They will renew the policy, but it will include limited glass coverage. That is the underwriter's way to minimize risk while still providing Mary with the other coverage she needs, such as liability and collision insurance.

Evaluating Changes When They Arise

Insurance underwriters will often review policies and risk information whenever a situation seems outside the norm. It doesn't mean that an underwriter will never look at your case again, just because you've already applied for or gotten a policy. An underwriter can become involved whenever there's a change in insurance conditions or a change in risk. 


State laws prohibit underwriting decisions based on race, income, education, marital status, or ethnicity. Some states also prohibit an insurer from declining to provide a policy based solely on credit scores or reports.

Working With Brokers or Agents

An agent or broker sells insurance policies. The underwriter decides whether the insurance company should and will make the sale of that coverage. Your agent or broker has to present a solid case that will convince the underwriter that the risk you present is a good one.


Most underwriters work for insurance carriers.

Agents aren't usually able to make decisions beyond the basic rules they're given in the underwriting manual, but some agents might decide that they're not able to insure you, based on the knowledge they have about their company's underwriting decisions. They can't make special arrangements to offer you insurance without the underwriter's approval.

The underwriter protects the company by enforcing the rules and assessing risks based on this understanding. They can decide, above and beyond the basic guidelines, how the company will respond to the risk opportunity. They can also make exceptions or alter conditions in order to make a situation less risky.

Key Takeaways

  • Insurance underwriting is how an insurer decides how risky it is to issue coverage to a certain person or business.
  • The process looks at how likely it is that the potential insured would make a costly claim and whether the insurer would lose money by issuing the policy.
  • An insurance underwriter will step in to review a policy if conditions change and your coverage needs to be re-evaluated.
  • Underwriters may work with agents or brokers to create a policy that works for you without being too risky for the company.
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The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. Bureau of Labor Statistics. "Insurance Underwriters." Accessed Dec. 8, 2021.

  2. Mass.gov. "Basics of Auto Insurance." Accessed Dec. 8, 2021.

  3. IN.gov. "The Use of Credit Information in Underwriting and Rating Insurance Policies," Page 1. Accessed Dec. 8, 2021.

  4. Bureau of Labor Statistics. "Occupational Employment and Wages, May 2019, 13-2053 Insurance Underwriters." Accessed Dec. 8, 2021.

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