February is known as Black History Month, American Heart Month, Oral Hygiene Awareness Month, and many others. For those of us in the insurance industry, we know it as Insurance Careers Month. We’ve been hearing for a while about how the industry is aging, and more insurance professionals are or will be retiring, which means that the industry needs to attract people to it. Unfortunately, insurance is widely considered boring. If you mention it at a party, unless someone has an open claim, people’s eyes tend to glaze over. Many, however, are not aware of the variety of jobs within the insurance industry and their duties. We’re here to remedy that.
Start with marketing and sales
Let’s start at the beginning: insurance is a product that must be marketed and purchased. Therefore, there must be people to market and sell it. Insurance companies typically market their products through employed sales representatives, but these representatives don’t sell the product directly to the insured. Rather, they offer the product to people known as agents or producers. These agents or producers may be direct employees of the carrier, but more often, they are independent operators that represent more than one insurance company.
Agents tend to be outgoing, extroverted types who find it easy to talk to people and like to help them out.
You need a license
Insurance is a complicated business; it’s not like many jobs where you’re hired, you receive a few weeks of on-the-job training, and you’re good to go. Agents must be licensed, and to be licensed they must take a required number of hours of classes and pass a licensing exam.
There are multiple lines of business that an agent needs a license for; one license doesn’t cover all aspects of the industry. A property & casualty license allows an agent to sell personal or commercial property and liability coverages, which include homeowners, personal auto, personal umbrella, commercial general liability, commercial property, commercial auto, truckers, garage, and many others.
Life and health insurance requires a separate license, and annuities and financial planning require yet another license. When agents are licensed they’re allowed to write policies in the state in which they received the license; to write coverage in a different state, they must pass that state’s required exams.
Getting a license to write insurance isn’t the end of the story. Licenses must be renewed on an annual or semi-annual basis, depending on the state requirements. Each state has different licensing and renewal requirements. Likewise, a certain amount of continuing education credits must be accumulated before a license can be renewed.
What do underwriters do?
An agent works with a person or business and when that person or business decides to buy coverage, the agent fills out an application. Agents writing personal lines generally use quoting systems that provide the rates from multiple carriers at one time. Agents writing commercial coverage complete an application and send it to one or more insurance companies for underwriting and to obtain a quoted premium.
Insurance company underwriters review the applications and determine whether the risk presented fits the company’s pre-established eligibility guidelines. The underwriter also reviews reports submitted with the application, such as driving records, and Comprehensive Loss Underwriting Experience reports (CLUE) that show the applicant’s past accident history.
Not everyone is totally honest on an application, although if they’re not that’s considered fraud. If the underwriter discovers losses or other characteristics of the risk that make the applicant ineligible for coverage, the underwriter advises the agent. Underwriters do have the power to make exceptions based on the quality of the agent’s book of business and the risk in general. An underwriter may allow a marginal risk for an agent with an overall profitable book of business, but there are some risks that will never be eligible.
Individual underwriters don’t write all lines of business. They’re broken out by specialty: personal lines underwriters, commercial lines underwriters, and life and health underwriters. Each underwriter reviews applications for specific types of risks and determines whether to accept the risk for the company. They also review risks at renewal, looking at an insured’s losses to determine whether the policy still fits the guidelines or whether there have been so many losses that the carrier is no longer able to provide coverage.
Underwriters also match the information on the application to the guidelines and determine whether the risk is eligible. Property applications are often required to have a picture of the property, or an underwriter may require an inspection of the property. This is where a picture truly is worth a thousand words; pictures that show debris in the yard, loose dogs that won’t let an inspector out of the car, or trees growing in the gutters are all factors that an underwriter uses to decline a risk.
Insureds have the right to file a complaint with the insurance department if they dispute a cancellation or nonrenewal. The insurance department will send a request to underwriting to explain their reasons for the cancellation or nonrenewal. Underwriters tend to be analytical and must be able to explain why a risk has been declined, nonrenewed or canceled.
Actuaries set rates
The underwriters approve or decline the risk, but the actuary sets the rates. Actuaries are very mathematical and numbers oriented, and they’re incredibly analytical.
An individual must pass a series of difficult exams to become an actuary. Actuaries look at loss data as well as other variables to determine how to establish adequate rates for every type of risk and what variables should be considered in the development of the rates. For example, the actuary may decide based on the data that males between ages 16–25 have poor driving skills and their rates need to be higher. Actuaries must be sure that the rates are adequate so that the company is able to pay claims when they arise and cover expenses.
Statistics are a large part of the data actuaries review in order to set rates. Actuaries also determine when discounts may be applied to certain coverages. All rates must be filed with the state insurance department for approval, and actuaries create and submit those filings. They field any questions the department has concerning the proposed rates.
After the policy has been underwritten, rated, sold and issued, it may sit there for years without a loss. But when a loss occurs, a number of different professionals will be involved. An insured may call his agent or the company call center. The call center is staffed with customer service representatives (CSRs) who take all the information about the loss: what kind of damage happened to what property, whether there were injuries, when the loss occurred, the cause of loss, and other details. The CSR then assigns a claim number to the loss and assigns an adjuster who works that area or that type of loss.
Depending on the type of loss, it may be assigned to an inside or outside adjuster. Inside adjusters are company employees who handle injury claims, liability claims, glass and towing claims, auto claims when the vehicle is a total loss — basically any claim in which the adjuster doesn’t need to see the damage. For auto claims, the inside adjuster also sets up the insured with a rental car if it’s needed and that coverage is available on the policy. A carrier may at times use non-employee adjusters for areas where they don’t have an office or for catastrophic losses.
Outside, or field, adjusters visit the site and inspect the damage; for vehicle losses, there may be a drive-in center, although carriers more commonly work with repair shops to review the damages for them.
Outside adjusters review the cause of loss and the resultant damage, and they’re generally assigned a particular area to work so they can efficiently handle claims without being spread too far out. They also review the policy coverages and exclusions to determine whether there is coverage for the loss and process the claim from there. Following company guidelines, adjusters handle salvage property, set up contractors for repairs, set up the insured in substitute housing or offices if the damaged building is uninhabitable, and settle the claim.
At times the claim is handed off to an inside adjuster for completion. After coverage has been determined, an inside adjuster may work with a repair shop or contractor to complete the repairs while the field adjuster goes on to look at other losses.
Like agents, claims adjusters are often personable and enjoy working with people. They must also have specific training so they know what type of damage has occurred and whether the property is repairable. Injury adjusters need to have some degree of medical knowledge to know whether the injuries being claimed are likely to have been caused by the type of accident reported.
Not all claims are legitimate, however, and there may be indications that everything is not as it seems. A field or inside adjuster who suspects fraud then assigns the claim to a special investigator. Special investigators are trained to spot inconsistencies in the details of a claim and interview the claimant to determine what actually happened. They may look at the salvage and talk to fire or police personnel.
Often, special investigators are former police officers trained to interview people. They may surveille the claimant or verify addresses to confirm that the claimant lives where he says he does. Fraud is an enormous issue for the insurance industry, and special investigators are important in detecting fraud.
Insureds and claimants may sue the company when they feel they have been treated unfairly in a claim. When a company is sued, they may have an employed in-house attorney who handles the case. The in-house attorney reviews the suit and the claims files to determine whether the declination or the amount of settlement was reasonable. The in-house counsel also deals with the claimant’s attorney and represents the company in the case if and when it goes to court. In other cases, the in-house attorney works with a law firm to manage the case.
Legal staff also reviews new coverage forms before they are filed.
Like many organizations, insurance companies use computer systems to store data including who and what is covered, what coverages are on the policy, whether payments been made and other information. Although the accounting department tracks premium and claim payments, information technology (IT) systems ensure that the policies are correctly rated according to the actuarially defined specifications. A reduction may need to be added to the premium calculation at a particular point in the rating process, and IT ensures that the system properly rates the policy and tracks premium and claim payments.
Auditors and compliance professionals
Many insurance companies employ staff auditors who are responsible for periodically reviewing underwriting and claims files for compliance with state regulatory requirements. This enables a company to monitor its own employees and make sure that the decisions made and the forms and rates applied are in accordance with the company filings made with the state. In addition, some commercial policies with fluctuating exposures are written on an auditable basis. At the end of the policy term, the exposures used in pricing and writing the policy are matched against the insured’s actual exposures for that year. Depending on the result the insured may be required to pay an additional premium or may receive a return premium if the exposures were less than expected.
Finally, some carriers maintain staff to ensure the company policies and procedures comply with current state regulations and track new requirements. Agents must be properly licensed and appointed, and carriers need to know that agents’ licenses have been renewed.
Insurance careers are many and varied, but they all help policyholders in some way. To learn more about insurance careers and participate in the conversation, check out InsuranceCareersTrifecta.org.