One of the things that makes the insurance industry so popular is that it offers any professional, whether you’ve got loads of experience or none at all, the opportunity to make a significant amount of income in just your first year. Of course, this comes with the caveat that you’ve not only got to work hard, but work smart.
If you’re looking to get into the insurance industry but want to know more about it first, that’s a great sign. People who’ve built successful insurance careers are usually the type who research and get to know something better before jumping into it. This article will give you a general overview of the insurance industry to help you decide whether it would make a suitable career choice.
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The Insurance Industry: A History
Insurance is like the fire extinguisher that puts out risk. Insurance companies takes on the risk of an individual or business’s loss and in return, these individuals make regular premiums. You’d be surprised at how far back the concept of managing risk this way actually goes. If you had to guess, it probably wouldn’t even cross your mind that insurance goes as far back as the 2nd millennia BC!
Back in the day, to distribute risk, the Chinese and Babylonians would arrange several ships to have their cargo spread out amongst them, reducing the risk of loss. One of the first written laws, the Babylonian “Hammurabi Code”, even offered some very basic insurance, wherein debts didn’t have to be paid if an unavoidable disaster made it impossible to do so. After the Great Fire of London broke out in the 1660s, thousands of houses were lost, and fire insurance developed from there.
Meanwhile, insurance careers and instruments have continued to develop as an effect of natural disasters and personal catastrophes. It’s taken time, but we’ve learned to gather our resources to protect ourselves and our loved ones from these events.
In fact, one of the greater motivations for people looking to build an insurance career is the thought that they are able to help console a grieving widow in some way, or at least ensure that the children can still go to school. Since its humble beginnings, insurance was seen as a noble profession, and you must build your insurance career with that in mind.
This blog post provides an even more in-depth look at the importance of insurance.
Insurance careers usually fall under three main functions — underwriting, operations, and investment. The first one deals with risk calculation; how much of a premium to charge according to different levels of risk, ensuring the insurance company is operating in such a way that it doesn’t assume more risk than it can take. Learn more about analyzing and managing risk with this excellent course.
Actuaries fall under this function. They go through the technical side, the mortality statistics, and model development to determine the appropriate insurance terms. If you love crunching numbers and are great at extracting useful information from the mind boggling language of statistics, this might just be the thing for you.
Operations is the function that administrative assistants and the insurance agents fall under. Agents are the ones who’ve got to sell the products that the underwriters come up with. They don’t just sell the policy, get their commission, and be done with it. To build a successful insurance career as an agent, they’ve got to educate their customers on the different types of insurance policies and help them understand which policy is best suited to them.
The last function, investment, helps invest the surplus of the income from premiums. This is critical because it gives the insurance company leverage at high volumes. Portfolio managers, securities researchers, and money managers are hired by insurance companies to earn good returns on their excess balances.
No one function is greater than the other, so when choosing which aspect of the insurance career to get into, doing your job well will be equally important to the insurance company because all functions are critical to it.
Pay Scale for Entry Level Jobs
Here we’ve listed a couple of entry level annual pay rates for the basic functions in insurance careers. Of course, these are simply averages and would vary according to region and company, as well as the level of education you’ve attained.
- Actuaries: $50,000-$55,000
Entry level Actuaries can make up to $55,000 a year on average, and when they hit senior they can make up to $200,000 annually. Actuaries require a bachelor’s degree and a couple of years experience in related fields, like mathematics or statistical analysis.
- Claims Adjuster: $30,000-40,000
Claims adjusters, when they hit senior level, can make up to as much as $80,000 a year. They have to deny or approve, and in some cases even defend, which claims are appropriate. This does require some educational background in law, as claims adjusters have to deal with contested claims in court. It’s one of the more detail oriented careers in insurance, since it requires you to know the ins and outs of the policies of your company.
- Sales Agent: $50,000
The salary structure varies for agents because they get commissions off of the premiums of their clients. The percentage will vary according to each company, and that’s why it’s important for agents to have a large client base. The higher volume of premiums and policies they sell, the higher their commissions. Sales agents can also make about $100,000 a year when they hit senior level. This requires a certain sales volume and several certification, which we’ll detail later.
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- Underwriter: $40,000
Senior underwriters make as much as $100,000 (or even more), but they’ve got to be highly skilled and have five or more years in related fields. As we mentioned earlier, risk assessment is a big part of the industry, and underwriters are critical to any insurance company.
In the past, the insurance industry has had its name tarnished after being hit with cases of malpractice. Because of this, they’ve developed designations and certifications so that people in insurance have to continue to study and be recognized as legitimate practitioners. Even at an entry-level job, your best bet is to go for a certification to help you learn more as you go through those insurance courses, and eventually get licensed.
The CISR or Certified Insurance Service Representative requires 5 single-day courses and exams on the different kinds of insurance, teaching you about operations as well as the different types of insurance you can issue.
Insurance agents and adjusters are eligible for the CIC or Certified Insurance Counselor certification. It’ll require you to attend several training programs and exams, and will allow you to move further in life, health, personal, casualty, and property insurance, and even agency management.
There’s also the Certified Risk Manager or CRM for risk managers, where the courses go through both theory and application of risk management principles. They are short but intensive courses, and end with an extensive exam. You’ve got to have around 2 years of experience in the field to go for this designation. For more info on becoming a professional risk manager, check out this course.
One of the higher designations is the CPCU, or the Chartered Property Casualty Underwriter. You’ve got to have 5 years under your belt and have been working full time insurance for 2 whole years. You still go through several courses on blanket topics in the industry—business law, operations, risk management, types of insurance, etc.
These designations will work great to help further your career, but remember, if you don’t apply what you’ve learned or are practicing unethically, these certifications will simply be letters after your surname. The most successful insurance careers are built on a foundation of solid knowledge and experience, both in principle and in practice!
Whatever role you take in the insurance industry, always remember that successful insurance careers are built by honest work, ethical practice, and the pursuit of excellence in everything you do. If you’re willing to work hard and choose the career path suited for you, it’ll be profitable and fulfilling to go to work everyday.
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