Underwriting is part of the insurance process where an underwriter reviews an individual’s insurance application, assesses the applicant’s risk, and then categorizes them as eligible or ineligible for an insurance policy. Underwriting may help determine how much your premium will cost each month and the car insurance coverage terms you’re eligible for.
How underwriting works
Each insurance carrier has its own underwriting process. Depending on the insurance company, the process may be done by a human or completely automated with human review.
Underwriting may typically use these steps for their assessment:
- An underwriter receives an application.
- The application information is reviewed, which then may determine the applicant’s eligibility. Each provider has its own eligibility guidelines to follow.
- There are typically three outcomes after a decision is made:
- If the applicant doesn’t meet eligibility requirements, the underwriter will decline the applicant.
- If the applicant is close to eligibility, the underwriter may ask for more supportive information for a deeper analysis of the potential risk level. Supportive documents may include driver history, insurance history, motor vehicle reports (MVR), credit reports, and comprehensive loss underwriting exchange (CLUE) reports.
- If the applicant is eligible, the underwriter approves them, and the process moves forward.
- Once approved, the underwriter may suggest deductible options, limitation endorsements, premium payments, etc., that match that particular applicant’s eligibility. This is why you may have different insurance options depending on the carrier you choose.
- The underwriter may send their decision and the options to an insurance agent, who will then discuss the applicant’s options.
Why underwriting matters
For insurance carriers, underwriting matters because it may help assess potential insurance policyholders’ risk levels. Understanding risk levels can help insurance companies make better business decisions.
What it means for policyholders
For policyholders with low risk levels, underwriting may allow for a lower monthly premium. It could also get you potential discounts.
To provide an underwriter with a detailed picture of who you would be as a policyholder, you may want to offer as much documentation as you can. If you aren’t sure what information is needed, you may want to discuss this with your insurance agent.
Learn more about policy options
Searching and comparing insurance policy options can be challenging. That’s why Infinity Insurance Agency, Inc. (IIA) is here to help you navigate the insurance process. IIA works with numerous insurers and can present you with multiple options so you can select a carrier that suits your needs.
Get a free online quote today or call 1-855-478-3705 to speak with our Spanish-bilingual team.