By: Mary Thompson, Capstone Brokerage, Inc. President, May 22, 2017

When it comes to obtaining or renewing business insurance policies such as general liability, workers’ compensation, commercial automobile coverage, property etc., typically the business, policy coverage and risk associated with the policy will go through what is called underwriting. Each insurance company has it’s own set of underwriting guidelines when determining if they are willing to take the risk of the insured.

Insurance underwriting applies to almost every type of insurance. Underwriting is the process of classification, rating and selection of risks. The underwriter evaluates applications to determine the risk involved in deciding to accept or reject the application. If an application is accepted they then determine what is the appropriate premium.

Through the underwriting process, the insurance company determines which customers to insure. The insurance company will also determine what coverage they are willing to offer. The insurance company will accept the application, reject the application, or accept the application with modifications. These modifications can include higher deductibles, changes to the coverage limits or premium, or changes to the coverage using “endorsements” (specific policy revisions that provide greater or lesser coverage than allowed under the standard/base); evaluates property & casualty insurance applications to determine the risk involved in deciding to accept or reject the application; determines appropriate premiums.

The underwriting process of insuring a business is based on several factors. An underwriter is a qualified person that sole purpose is to evaluate an insurance proposal to access the degree of risk involved. During the underwriting process, premium is set forth as well as exclusions and limits. Often a business that is renewing any insurance policy will re -enter the underwriting process so to speak to determine if adjustments need to be made to the premium, coverage limits and to access the risks.