Insurance companies employ underwriters to evaluate a potential customer's risk to cover and the cost of that coverage in relation to the insurer's requirements. Whether it's for a home or auto insurance policy, the underwriter will get specific information from you, calculate your risk as a customer and figure out what you should be charged for coverage based on that information.
This article covers:
What does an insurance underwriter do?
Regardless of whether they are working on your home or auto insurance policy, an insurance underwriter's prime tasks are the same. They are:
- Determining if the insurance company they work for should cover you.
- Calculating how much the insurer should charge you as a premium.
The underwriter evaluates your status as an insurance risk by analyzing the information you filled out on your insurance application. They do this by running it through a program designed to facilitate the underwriting process. If necessary, they consult field underwriters and other experts to clear up any gray areas in your application that pop up.
If your risk status is acceptable to the insurance company's standards, your premium cost is then calculated to reflect your risk factors. This is not just a one-time process when you first apply for insurance. Underwriters do it again when the time for you to renew the policy approaches.
There are some differences in the process depending on whether you're applying for auto or home insurance.
What does an auto insurance underwriter do?
An underwriter for a car insurance policy looks at your personal information and your car's details when calculating your risk status and premium. The personal information they look at includes:
- Your age
- Your gender
- Your driving record
- Where you live
- Your insurance history
When assessing your car, the underwriter takes into consideration:
- Make and model
- Current replacement value
What does a home insurance underwriter do?
An underwriter for a home insurance policy usually works with field agents to calculate your coverage risk. A field agent inspects your property to see if there are any conditions and hazards that are likely to result in you filing a claim. These conditions may include:
- The condition of your roof
- Foundation issues
- Dead or dying trees on the property
- Distance from a fire station
- Local crime rate
Home insurance underwriters also look into your history of filing insurance claims. Having multiple claims on your insurance history may result in higher premiums.
Difference between an insurance underwriter and an agent
The key difference between an insurance underwriter and an agent is the level of interaction with customers. Underwriters have a lot less communication with the customer. They review your application, either approve or deny it, and set your coverage limits and premium. You probably won't deal with them again until your annual premium review.
Insurance agents are more public facing. They manage your insurance account, including when you have any questions or problems regarding your policy, as well as when you file a claim.
Another difference between the two is their relationship with your insurer. Agents are more likely to work for both you and their employer. Underwriters only work for your insurer. Their job is to protect the provider's interest and profit margin. If an insurer is too loose in writing policies, they may have to pay out too much in claims, costing them money.
If the insurer is too conservative in policy writing, they could lose customers to competing insurers who offer better rates and coverage. The underwriter is there to maintain the balance between the two.
What can I do to get better results from an underwriter?
The biggest tip for getting approval for insurance coverage and a cheap premium is to eliminate as many risk factors as you can. Factors such as age can't be helped, but you can change many others. For example:
- Fix your credit: While some states — such as California, Hawaii, Massachusetts and Michigan — don't allow insurers to use credit scores for auto insurance quotes, insurers in other states may see a correlation between your credit score and the likelihood of you filing a claim. Keeping your credit clean is a good way to reduce your risk in the eyes of an underwriter.
- Keep your house in top shape: If you keep up on home repairs and security upgrades, the field agent working with your underwriter will have less to check off as a potential risk.
Shop around: All insurers are different and very competitive. Compare quotes from multiple providers. If one insurance company's underwriter doesn't approve you, that doesn't mean another will do the same.
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