In layman’s terms, underwriting is the process of determining if a customer is eligible for life insurance (or other types of insurance). However, the term underwriting is used in a broad sense and includes several aspects of how a case is processed. It’s important to understand the difference between underwriting and processing.
Once a life insurance application is submitted to a Brokerage General Agency (BGA), the BGA typically processes the application and prepares it for delivery to the insurance company. The BGA has the goal of making sure the application is in order so that it reduces any chances of delays in the overall underwriting process.
For example, once a BGA receives a life insurance application from an agent or broker, their process may include an initial review of the application by case managers to determine what they received on the application and what information may be missing, outstanding or required. Case managers have dedicated skills to process a life insurance application but they are not considered underwriters. Some of the steps involved in processing a case include setting up the case in the BGA’s system, ordering client medical records through third-party vendors, client interviews on behalf of the insurance company and overall agent or broker support throughout the life of the case.
As part of the life insurance application process, some BGA’s employ in-house underwriters to assist in determining the viability of a new application. The in-house underwriter usually has underwriting experience gained from previous employment at a life insurance company. The in-house underwriter can also be useful as an additional resource or advocate as the life insurance carrier considers the application. The in-house underwriter also reviews medical and financial information on a client and may identify alternatives based on the specific profile of the client. Having the additional resource of an in-house underwriter could be viewed as part of the underwriting process but the ultimate underwriting decision will always come from the insurance carrier.
After the application is considered in good order, the BGA will submit it to the insurance carrier. Once it is submitted, the BGA will routinely follow up with the insurance carrier to track the progress of the case. Once the application is received by the insurance carrier, they conduct a similar setup process and begin the actual underwriting of the application (which is an assessment of the risk). When the underwriting is complete, the insurance carrier will either:
- Make an offer for insurance coverage
- Decline to offer insurance coverage due to specific circumstances such as problematic medical or financial histories
In conclusion, underwriting includes the processing of an application in conjunction with the underwriting of the risk associated with that case. Although there are different stages associated with underwriting and processing, it’s acceptable to refer to the entire process as underwriting.