Property and Business  Insurance Underwriting

By: Mary Thompson, Capstone Brokerage President, January 20, 2015

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 the appropriate premium. It is in a businesses best interest to complete the applications with fact, be aware of false advertising effects, and the repercussions of offering services that are not accurate.

A company may provide inaccurate information when applying for coverage causing an underwriter to reject the application. An example of this situation would be the radius of operation. A local shipping company states that the company does local and long haul shipments, when in fact they only do local. Many insurance companies will not offer a quote for a long haul trucking, which would limit the carrier selection. It is important to be accurate in your application and only list services that the business actually provides during the normal scope of operations.

We are now in the digital age, which means many underwriters will research a business by visiting the company’s website. It is important to know what information a website can provide an underwriter. A website can also say a lot about a company and the exposed risks. An underwriter will take many factors into consideration, but remember, a simple google search and the click of a mouse say a lot about a company. Often time’s companies will boost themselves up on the website, or brag a bit about things that are not always 100% fact, which will hurt them in the long run.

One of the most common issues that I see during the underwriting process is a company will put on their website things that are not true. An example is that the business is operating internationally or operating in states other then the ones they mention on the insurance application. This can make an underwriter question the risk in insuring the business.

Another common issue with boasting on a website is scope of services. Listing services that a company is offering or able to provide that is not precise, can cause underwriting problems. Any service information must be accurate on a company’s website and in advertising, or it puts the business at risk. For example; if a commercial contractor puts on their website that they can do residential work when they typically only do commercial projects, it changes the scope of insurance and also would leave a risk for denial of coverage. It is important to have precise and true information on the internet.

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. Sometimes the carrier will request modifications to the requested policy which can include higher deductibles and changes to the coverage limits, or premium. Underwriters may even request changes to existing coverage using endorsements. Providing accurate information makes the underwriting process run smoother and allows insurance companies to provide rates based on true need.

Having an agent involved helps the process for a number of reasons: They can help guide the business as to what amount of coverage to request, should know the policyholder’s loss and insurance history, as well as risks that the company has in the scope of business. More importantly, an agent can help guide a business to making the right insurance choice that provides the best coverage available.