Insurance underwriting is when an insurance company estimates the risk and profitability a potential policyholder will bring them.
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What is an Auto Insurance Underwriter?
What is an auto insurance underwriter?
In a weird way, offering insurance to drivers is like gambling on them for the insurance, and it is wise to have a general idea about what you are gambling on.
When the chances of things going wrong are high with you, the chances of your insurance company paying out a claim are also rising, and so will your auto insurance rate.
How long will underwriting an auto insurance policy take?
The auto insurance policy underwriting waiting period can take 30 to 120 days, depending on your driving history and which state you live in.
What happens after the underwriting is done?
After calculating the risk involved with providing insurance for a driver, the insurance underwriter will set the insurance premium that you will be paying for in exchange for taking on this risk.
Many companies won’t take on the risk they are recognized too high. But there are insurance companies that specialize in providing insurance for high-risk drivers.
How do companies decide what an acceptable level of risk is?
Underwriting is a complex process that involves data, statistics, and guidelines provided by actuaries to predict the likelihood of the risk and profitability a client brings to an auto insurance company.
An underwriter must review your information to find the risk and determine what kind of policy coverage or what perils the insurance company would offer you and under what conditions. Based on that, insurance companies charge premiums.
Why is it called underwriting?
The term ‘underwriting’ comes from insurer Lloyd’s of London, which accepts some of an event’s risk in exchange for a premium.
Back then, people paid some premiums to literally sign their names under the text describing the risk. This is where the term ‘underwriting’ comes from.
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What factors do underwriters consider?
When you apply for car insurance, the insurance provider requires you to give them a number of factors to determine the cost of your premiums. Just like when you’re taking a quote, underwriting will need:
- Age
- Gender
- Marital status
- Driving history
- Place of residence
- Credit card history
- Driver’s education courses
- Type and the year of your car
- Whether the car is leased or owned
- Where will you park the car (garage, street)
State laws prohibit underwriting based their decision on race, income, education, marital status, or ethnicity. Even in some states, it is not permitted for them to decline a client based solely on their credit scores or reports.
Automated underwriting
A number of car insurance companies are using automated underwriting systems, and this number is growing every day. Actually, it’s a software program.
Taking a quote and finalizing and purchasing an auto insurance policy can be done in less than 15 minutes, so quick and easy!!
You still have to shop around and get quotes from multiple companies to compare prices because each company uses different risk factors with a different formula for determining costs.
Brokers or agents?
An insurance broker or an independent insurance agent is a person that is licensed to search on your behalf and find the perfect policy for you. Brokers are insurance experts.
The only thing you have to do is tell them what your insurance needs are, and they search the market and give you a list of options. The best part is that insurance brokers do not work for a specific insurance company.
They have access to a wide range of different companies, and their only goal is to find you the best policy among them. Brokers also help you make a claim, guide you through the process, and even lead the negotiations with your insurer.
The underwriter gets to decide whether the insurance company should make the sale of that coverage, and most underwriters work for insurance companies.
The underwriter protects the company by enforcing the rules and assessing risks. Also, they can make exceptions or alter conditions to make the situation less risky for the insurance provider.
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What are the significant differences between an independent agent and a captive agent?
There are three main differences between agents and brokers:
- Brokers represent the customer, but agents represent the insurance company.
- Brokers have access to the policies of different companies, while the captive agents can only offer policies as the company they work for offers.
- Captive agents can complete insurance sales, but brokers cannot.
Some insurance companies like the traditional ways and only sell their policies through agents, some others like Intact, Economical, and Pembridge only sell their product through brokers, and some companies sell through both brokers and agents.
