Insurance Underwriting Is Crucial To Managing Risk

11th December 2009

Evaluating risks and possible exposures to dangerous conditions for potential clients is the definition of insurance underwriting.  A business usually utilizes an underwriter to decide the amount of coverage they should receive, what the price will be, and whether or not the business is actually insurable.

Guidelines are set by each individual insurance company.  The underwriter then determines whether or not their company can accept the risk of insuring your business.  A business has certain risk exposure that will determine what their premium will be.

A main focal point or function of this underwriting is to make the insurance company money.  To the public it would seem as simple as issuing policies with set coverage based on risk factors.  These risk factors are dependant on the type of coverage desired.  

For a business it would depend on what type of business it is and the factors should be in direct relation with what type of business it is so that the cost of providing coverage are consistent with the law.

When considering all of the risks insurance underwriting can deem that the business is uninsurable and may decline to insure it.  Even if the company is accepted and a policy is given it is not uncommon for the premiums to have been loaded or even for exclusions to have been stipulated so that any claims have restrictions on the payout.

Before the quote is provided on what the premium will be it is very common for the agent to ask several questions.  By answering a few questions the provider can set up coverage that is right for your business and their potential risks.

The type of policy or business the provider may use automated systems to encode their rules to reduce the amount of manual work for their agents.  Businesses with odd requests can certainly add up to a lot policy issuance work and preparation of a quotation for any agent.  However in the business world it is uncommon as there are so many different factors that represent the premiums.  Any individual requirements or odd requests that you may have need to be addressed.

In the EU there have been some changes recently.  The Council Directive 2004/113/EC on gender equality in access to services, insurance underwriting in the EU has been slightly modified.  Basically the directive states that policies may not be written on the basis of gender or without current and thorough research qualifying the difference in premiums available to men or women.  A thorough inspection of the place and a quote of the premium are available without limitation.

Businesses will need to speak with an agent on several occasions usually and it is common for several quotes to be made depending on the type of the coverage that is needed.  Often the agents use the aid of computers to analyze information for the underwriting within applications so that they may determine whether a risk is acceptable or will it result in a loss for the company.  If approved that is when an exhibition insurance quote is given and a policy is offered.