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What Are The Differences Between Underwriters and Insurance Agents?



According to IBISWorld, the market size for insurance agents and agencies in the US is $186 billion with there being 436,073 businesses in the country. This large market may be able to prove a bounty of opportunities for aspiring underwriters and insurance agents in the US. Underwriters and insurance agents are either employed by or represent insurance companies. The roles deal with similar content but are vastly different. This article will explore the difference between underwriters and insurance agents, as well as how to obtain an insurance license in the US.

What is an Insurance Agent?

Insurance agents are insurance professionals that sell an insurance company’s products, such as policies, to consumers to earn a commission. Insurance agents assist consumers in selecting the insurance policy best suited to them by representing the insurance company during the transaction. There are two different types of insurance agents, namely captive agents which represent one insurer, and independent insurance agents which usually represent more than one insurer. 

Insurance agents aim to gain new clients while simultaneously serving their existing policyholders. They do so by assisting these policyholders to file and settle claims if need be. Insurance brokers also assist potential clients in evaluating personalized insurance needs as well as to draft a policy to suit their needs and circumstances. Once this has been completed, an underwriter will review it. 

What is an Insurance Underwriter?

Insurance underwriters are employed by insurance companies. The role of an underwriter is to review applications for insurance while determining the amount of coverage the insurance company is able to offer the client, and at which cost. Computer software is used to calculate client risk by using the clients’ information from the application. Although underwriters use computer software for a large part of their job, they have the responsibility to evaluate the results and decide on the coverage recommended. They are also required to determine and find a balance between the potential risks and benefits for the insurance company. Other responsibilities include contacting insurance agents, medical professionals and financial institutions to investigate risk from the clients’ application, and communicating with insurance agents, brokers, and company personnel about the coverage decisions made.

Qualifications of Underwriters and Insurance Agents

Underwriters usually complete bachelor’s degrees involving mathematics, statistics and economics. Some insurance companies may require their underwriters to obtain certification for entry-level positions. Other insurance companies may consider only experience and education.

Insurance agents need to be licensed in the state in which they plan to sell insurance. Each state has different regulations regarding insurance. Insurance agents do not require a university or college degree to obtain a license, although completing a degree in business, finance or a similar course of study may prove to be beneficial. To obtain an insurance license, most states require that prospective insurance agents complete specialized courses and pass a state exam. The following steps should be followed:

1. Pre-license education 

Some states, but not all, require aspiring insurance agents to complete a pre-license education course before being able to register for the insurance exam. Some states only require a completion certificate on test day. Even if an aspiring insurance agent is based in a state which does not require this, they would still have to study thoroughly to successfully complete the exam. Pre-license education courses are available, and consist of practice exams, a study calendar, online instructor-led modules and access to study guides and materials. 

2. Complete the license application

The license applications are state specific and are available through the state’s Department of Financial Services, Department of Insurance, or State Corporation Commission. The license application requires applicants to provide their basic information. They will also have to indicate which license exam they are applying for. The options for the desired exam may include:

  • Life Insurance License
  • Health Insurance License
  • Life and Health Insurance License
  • Property Insurance License
  • Casualty Insurance License
  • Property and Casualty Insurance License
  • Personal Lines Insurance License

3. Fingerprinting And Background Check

Applicants are required to have their fingerprints taken and submitted. Each state has different requirements for this process, and some may direct applicants to a third-party agency or local law enforcement. The cost of fingerprinting ranges between $35 and $75. After this has been done, the state’s agency will run a background step. 

4. The exam

Once individuals feel prepared, they will write the insurance licence exam. Each license requires one exam. The exams take place in a controlled environment with an invigilator. Different states include different content into the exams. It may cover:

  • Purpose of insurance for financial security and emergencies
  • Contract law 
  • Underwriting and application
  • Traditional policies
  • Flexible feature policies
  • Policy provisions, options, and riders
  • Annuities and retirement plans
  • Business and group life insurance, commercial property and casualty insurance
  • Duties and responsibilities
  • State-specific insurance law and regulations

5. Application Review

Once the prior steps have been completed, the license application will be reviewed by the state, as well as the background check. If the application is accepted, the license would be issued. 

The bottom line

Underwriters and insurance agents are tasked with different responsibilities which affects insurance policyholders and potential customers. The roles are equally as important and may prove to be a viable job choice by prospective insurance professionals. For individuals interested in becoming an insurance agent, The Really Useful Information Company (TRUiC) is able to assist and offer more information on this matter.

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