Underwriting in the insurance world is one of those topics that for many is difficult to understand. Underwriting is used to determine risk. Essentially, Underwriters are number crunchers. Most people don’t realize that somewhere along the way their application crossed an underwriter’s desk.
Underwriting is one of the most important parts of the insurance process. Understanding what an underwriter does and why it’s important is helpful to those people shopping for insurance.
What Does an Underwriter Do?
Insurance is based on risk. Insurance is simply a company taking on your risk and more-or-less gambling on a return. So for example, driving your car is a risk. There is a risk that your car will be involved in an accident and either cause damage or may become damaged. Having auto insurance means that if the car does get damaged, the insurance company will pay for the repairs.
The insurance company offsets the risk by charging premiums and setting deductibles. An underwriter’s job is to make sure that the insurance company charges the right amount for coverage. Insuring they are charging enough to cover potential loss but maintaining a competitive rate as to not lose business. They determine how much risk you represent, how much coverage a company can offer you, and how much that coverage will cost.
Why is Insurance Underwriting so Important?
Insurance companies want to be competitive and stay in business, so underwriting is a key component in making sure this happens.
Now, that may not seem important to you but it really is. When you’re applying for insurance your application is going to be reviewed by an underwriter. That underwriter’s opinion is going to determine what your rates are. Based on your health, credit, driving record, or even mistakes on your application, your rates could be increased or your application could even be denied.
Unfortunately, it’s not as easy as just applying elsewhere. Insurance like almost everything these days leaves a paper trail. If you get denied for coverage, it will show up on your record. Once you’ve been denied coverage at one company, chances are other companies are likely to deny you too.
Working with an Agent
Insurance agents have a sense of what kinds of risk companies are willing to take on. When you work with an agent, they can direct you toward companies that are willing to accept you, with the most savings to you.
Insurance agents have professional relationships with underwriters. They can get an idea of whether your application would be approved or denied rather quickly.
If you need an insurance agent contact Madison Insurance Group today. They can help you get matched with the best rates and coverage for your auto, home and life needs.