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Two common types of insurance industry professionals are brokers and underwriters. Due to the nature of their jobs, you may have fairly regular contact with brokers, while you might not ever speak directly with an underwriter. While brokers and underwriters often work closely together, each fulfills a different role for the companies they represent.
Insurance brokers sell insurance policies to individuals or business owners. Unlike insurance agents who generally represent one company, brokers work independently and may represent a number of companies, allowing them to supply a broad range of coverage options and price quotes to their prospects. Brokers also work in a service capacity by periodically reviewing their clients' coverage and making changes as necessary. Brokers must be licensed to sell insurance by the states in which they do business.
Insurance underwriters assess the risk potential of prospective policyholders. They review the application for coverage to determine whether the prospect meets the company's eligibility requirements and if the premium needs to be adjusted to meet the risk level. Underwriters also review the claims history of existing policyholders to determine if they have become an unprofitable risk and need to have their coverage terminated. Unlike brokers who work with the public, underwriters typically work "behind the scenes" in an insurer's home or regional office.
Although a broker's primary focus is to generate sales while an underwriter's focus is to ensure profitability, they often work closely together. Brokers perform "field underwriting" when they initially obtain information from prospects to gauge whether they may be eligible for coverage. Once underwriters receive the application, they sometimes must contact the broker to obtain additional documentation. Underwriters also serve as a valuable resource for brokers by answering questions or clarifying gray areas concerning the company's eligibility guidelines.
While underwriters typically are compensated on a salary basis, the bulk of a broker's compensation consists of commissions from policy sales. Underwriters also receive company-supplied fringe benefits while brokers must locate their own benefits package. According to the Bureau of Labor Statistics, the median annual income for underwriters as of May 2008 was $56,790. For brokers and agents, the median income was $45,430. However, a broker's income may vary widely due to the fluctuating nature of working on commission as opposed to a guaranteed salary.