How does Auto Insurance Underwriting Work? [Complete Guide]

12th August 2022

Insurance underwriting is the procedure of evaluating the risk factor of a client to determine the insurance premium payment. Underwriters are professionals with years of expertise in the insurance industry. They access your auto insurance application to determine if the insurance company can offer you a policy and, if yes, what the premium amount should be. 

The rule is pretty simple here. If you pose a high risk to the insurer, your premium amount will be high and vice versa. But how does the underwriter know your risk category? 

The insurance underwriter uses the parameters or variables defined by the state laws and insurance companies. Most of them use predictive algorithms and advanced programs to get quick results. 

Getting affordable auto insurance means you should work with the insurance agent and impress the underwriter with your driving history and clean track record. Let’s find out more about auto insurance underwriting in this article. 

How Does Insurance Underwriting Work?

Every insurance company has a trusted team of underwriters. Insurance underwriting is an integral part of the system. The underwriters specialize in different areas such as life insurance, medical insurance, auto insurance, etc. 

The algorithm used by them is sometimes called an underwriting program. This computer program does the base work and establishes the fountain for base policies. These policies are then customized for individual clients based on the information provided. 

When you apply for vehicle insurance from an insurer, the company collects the necessary information through the application form. These applications are processed by the underwriters to create a coverage plan and finalize the premium amount. The underwriters also have the power to declare you an extremely high-risk client and reject your application for car insurance. 

The underwriter will also work with your insurance agent to make suggestions about which coverage you should opt for and whether or not you should include the add-ons. They also advise on how you can get low-cost auto insurance. Underwriters working with multiple domains also deal with insurance bundles. 

Insurance companies mostly use automated underwriting programs to create your insurance policy. Underwriters enter the picture when your insurance history/ data is complicated. Using human expertise at this stage is beneficial for the insurer. This also reduces the workload on the underwriters and allows them to focus on limited policies. 

When does an insurance underwriter take over? Here are a few scenarios: 

  • Multiple claims by a client 
  • Multiple incidents in the driving history 
  • A new driver applying for auto insurance for the first time 
  • Complications in verifying your records/ information 
  • Unexpected issues when paying the premium amount 

Factors Considered by the Insurance Underwriter 

For auto insurance, the underwriters use the following factors, though the importance given to each factor may vary from one insurer to another. 

  • Driving Record: How many accidents, traffic collisions, speeding tickets, etc., do you have? 
  • Vehicle Make and Model: The car’s overall condition and maintenance value. 
  • Age: Whether you are young, middle-aged, or senior citizen. 
  • Gender: The risk factor based on gender is also linked to the age factor. Six US states don’t consider gender as one of the parameters for auto insurance. 
  • Marital Status: Married people are considered fewer risk clients. 
  • Employment/ Occupation: Some occupations have additional benefits.
  • Claim Rate: How frequently do you file a claim? 
  • Credit Score: This is not used by all insurance companies. 

Insurance Underwriter Vs. Insurance Agent 

The insurance company has several professionals working together to provide you the services. The insurance agent is the person you directly interact with. They represent the insurer (or are associated with the company, but as independent agents). 

The underwriter is a part of the insurance company. They don’t talk to the clients in most instances. The communication between the underwriter and the client will happen through the auto insurance agent. The insurance agent is responsible for collecting the client’s data and verifying it. They will also offer suggestions to the underwriter based on your information. 

Furthermore, the underwriter has more authority and makes decisions, while the agent has limited decision-making power. The final approval or confirmation of the premium amount will come from the underwriter, not the insurance agent. The agent cannot give you a special discount or tweak the rules, but the underwriter can. 

To Sum Up 

The auto insurance underwriter has a key role in determining your premium amount. If you want to avail the Cheapest Car Insurance in Georgia, you should talk to the agent and reach out to the underwriter. Show that you are a low-risk client for the insurance company, and the underwriter will suggest ways to get a discount on the premium.