What does it mean that the underwriter?

Question

What is a underwriter?

Answer 1

Usually, an underwriter works for an insurance company and evaluates the risk of an applicant verses the potential gain for the company.
This is also true for underwriters on home loans. The person screens the application of someone asking for a loan. If they are a safe risk for the lender, then the underwriter passes the application up the chain for the lender to consider, if not, the ball stops there. The lender is looking for the best, safest, and most clients he/she can get.... so the underwriter wants to find as many 'good clients' as possible. Usually, each company or underwriter has a set of guidelines which help them determine if the person will be capable and reliable to pay back a loan.

Answer 2

The underwriter works for the lender or insurance company. For a loan, he/she reviews the loan application, credit report, appraisal, and other supporting documents to make sure everything needed is there, the risk is appropriate for the loan, and there is no fraud taking place.

Every lender and loan product has its own guidelines. The underwriter will go through the guidelines and make sure the specific loan fits the program.

The underwriter is also responsible for evaluating risk, but in the past ten years, that function has mostly become computerized. The underwriter just validates the information that was entered into the automated underwriting system to be sure it is accurate.

In the lending industry, the underwriter ultimately approves or declines the loan. Usually, the underwriter works for the lender, but sometimes, the lender has delegated the underwriting function to another party, who will stand in the lender's shoes and underwrite the loan on the lender's behalf. But the loan is always underwritten for whomever is funding the loan.

The loans may be underwritten again by Wall Street as part of the evaluation of risk on mortgage backed securities.

It works similarly for an insurance application.

The term "underwriter" comes from merry old England. People would sit in coffeehouses where ships' captains would visit before leaving for the high seas. There were pirates and natural perils out there, so it wasn't a given that the ship would return. People would place bets on whether the ship would return. If it did, the ship owner paid the bettor. If it didn't, the ship owner kept the money. The bets were a hedge against financial loss if the boat didn't return. There would be signs on the coffeehouse walls with ships' names. If you were betting on a specific ship, you wrote your name under the sign; hence, the term "underwriting" was born. The most famous of these coffeehouses was Lloyds of London.

Answer 3

Insurance companies underwrite the risk they take when they insure you, your car, house, whatever. The people or firms they use to underwrite the risk are called the underwriters. They will decide if your claim is valid or not. It is the first step in getting your claim settled and there is no real time scale on it. It could be quick for a cut-and-dried case, or could last ages if they think there is something not quite right. They will have an input on just how much you get, yes.

Answer 4

An underwriter is the person who calculates the "risk" for the company (lender or insurance company) to lend the money or issue an insurance policy.