There are a number of jokes about underwriters; a favorite is that they cut out your heart when you become one. Another is that the only answer an agent ever receives is a resounding No. Conversely, many underwriting departments have Walls of Shame where underwriters post pictures from inspections of less than eligible properties. There are pictures of houses with six-inch maple trees growing in the gutters, houses with snow on the roof for an application that was submitted in June (we still need to see what the roof looks like) and the ever so popular picture of the large dog growling at the inspector through the windshield of the inspector's car. The truth, of course, is somewhere in between.

The function of an underwriter is to review the applications and ensure that the property, vehicles, or other risk submitted for coverage meets the company's guidelines and eligibility requirements. With auto policies, the underwriters look at driving records, CLUE reports, the ratio of drivers to vehicles, types of vehicles, etc. With property policies the year of construction, distance from the fire station, type of construction, use of the building, condition of the building and other variables are reviewed. There's a reason applications have so many questions, and why underwriters get annoyed when an application is not complete. Without complete information, they can't correctly assess the risk.

By carefully reviewing risks and ensuring eligibility, an underwriter helps maintain the company's loss ratio and profitability. Poor risks affect both the agent's book and the carrier's book negatively. While a few less than stellar risks are ok, if an agent is submitting a large number of less than desired risks it will eventually affect his and the company's profitability. This is why underwriters often say no.