The insurance sector is divided up into four main job functions – underwriting, actuarial, claims and broking. These are the main tasks you’ll do in each role.
The fact that it’s often called actuarial ‘science’ tells you how complicated this job function is. Actuaries, the maths whizzes of the insurance world, produce ‘ratemaking’ (price-setting) policies based on the statistical analysis of risk, which are then used by underwriters (see below) to help decide whether to reject or accept an applicant for an insurance policy.
Actuaries constantly crunch data about the frequency and severity of insured perils and the expected average payout resulting from them. They construct probability tables to forecast risk for events such as accidents, natural disasters and unemployment. An actuary working in life insurance, for example, will look at factors including age, sex and smoker/non-smoker status to set premiums. If the statistics suggests that someone will live a shorter life, the cost of their insurance will be higher
While the job calls for extreme analytical and mathematical prowess, you don’t get to sit in an ivory tower. Actuaries need to work closely with underwriters, programmers, claims experts and senior management to develop plans for new products and to improve existing ones.
Insurance underwriters may work behind the scenes, but they are also crucial decision makers who contribute to the company’s bottom line. Underwriters determine whether insurance policy applications by individuals or companies should be accepted or not. If the risk is accepted, they then decide how much the customer’s premiums will be, so the insurance firm can provide a quote.
Your job as an underwriter is to help maximise profits and reduce losses for an insurance firm by assessing risk based on the likelihood of an applicant making a claim in the future. Your risk analysis is typically built on sifting through demographic and other complex statistics produced by actuaries affecting the prospective policyholder. Underwriting is a delicate balance – if your accept a large number of customers you grow premium income for your firm, but you also need to ensure that this growth doesn’t trigger a rise in the number of high-risk policy holders who could end up making costly insurance claims.
Given the complexities of assessing risk, underwriters tend to work in one area of insurance, such as life insurance, reinsurance, or one of the many sub-sectors of general insurance (property, motor, travel etc). The day-to-day tasks of an underwriting job are similar across sectors, however. They include: gathering background information from applicants; calculating potential risk and premiums; deciding whether risk should be shared with a reinsurer; liaising with third-party experts such as surveyors or doctors; and negotiating terms with policyholders or brokers.
Claims teams at insurance companies employ a vast number of people. Claims handlers help to manage the services – from document collecting and processing to final settlement – which policyholders need following an accident, theft or any other insured event. For a motor insurance claim, they might arrange for a temporary replacement car to be provided, for example. And if the policyholder is a large company, they might find themselves dealing with large scale incidents such as a fire at a manufacturing plant or the capsizing of a cargo ship.
Most senior claims experts aren’t involved in routine administration, however. They decide on the extent and validity of a claim, investigating potentially fraudulent activity and communicating with experts such as lawyers, forensic accountants and loss adjusters if necessary. Experienced claims people may also end up in legal discussions about recovering money from the party responsible for the loss.
Insurance companies often rely on brokers to feed them customers. Brokers are the salespeople of insurance – intermediaries tasked with finding the right products for clients. They are either fully independent and can recommend policies from a range of insurers, or they are part of a large network representing a single firm. Retail insurance brokers deal with individuals or small companies, arranging motor, property, travel and other vanilla insurance products. By contrast, if you work as a commercial insurance broker, you will be handling more complicated insurance needs and will typically be a sector specialist – in oil and gas or shipping, for example.
As a broker it’s vital to build relationships with clients and insurance firms alike. You need to gather information from clients to determine their insurance needs and risk profile in order to recommend the best insurance options. You also advise them on how to make claims or even how to mitigate risks – improving security on a commercial property, for example. And you must stay on top of insurance companies' policies, negotiating with underwriters to find the most suitable insurance for clients at the best price.
Insurance accounting is a specialist and sought-after profession and – like banks – insurance firms employ legions of compliance professionals to ensure they adhere to complex regulatory regimes such as the EU’s Solvency II Directive. There’s also a rising demand for data analytics skills throughout the industry, says Sabine Goesch, chief human resources officer at Allianz Asia Pacific. “New roles will emerge as the insurance sector is at the threshold of a massive transformation as we enter the digital era. Digitalization heralds not only a whole new distribution model but also multiple new career avenues,” says Goesch.
She adds: “The sector will now open up avenues for data analytic experts and data scientists to analyse various data including big data. Customer interactions are also changing drastically as we have more tech-savvy customers who prefer not only to research and purchase online but also to manage their insurance policies online. This will give rise to new digital roles these customers expect insurers to be there for them, anywhere and anytime.”