Learning More About a Car Insurance Underwriter
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UPDATED: Oct 19, 2021
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An underwriter works for the insurance carriers to determine the risk, or likelihood that an applicant will file a claim.
The underwriter does not look in a crystal ball or flip a coin to determine risk. They evaluate and quantify based upon facts to establish likelihood you will make a claim, based upon certain figures.
For instance, they look at CLUE and A-Plus reports that provide actual claims histories for the applicants who are applying for an insurance policy.
If you have made two claims within one year, you may be sadly surprised to find that the carrier may issue a non-renewal letter rather than extending an offer at least one month before your policy is set to run out.
The other option is that based upon the cost of the claims, your insurer may issue rate increases typically from 20 to 40 percent. Despite that happening, other insurers may cover you but at a lower rate. The reason a new insurer would cover you for less is because they did not have to eat the cost of a claim for you.
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If you just filed a claim, you are less likely to need to file again for another 10 years or so, on average.
In addition to looking at the past cost of claims, the underwriter will look at the severity of the injuries and whether you were negligent, reckless, speeding, drunk, or distracted while driving.
All of those scenarios are risky behavior, or results of bad decisions that resulted in an accident that could kill other people, including your own passengers.
If the accident was beyond your control, your insurance carrier may decide not to punish you and may keep your rates the same. That is why you may want to look for reliable insurance carriers who provide policies that give accident forgiveness.
It ensures that you will not be treated unfairly if you are involved in any accident.
What factors do underwriters evaluate?
Past accidents is only one of many considerations that the underwriters take into account. The following list is not exhaustive, but covers many of the areas they look at:
- Driving history
- Workplace setting
- Neighborhood safety at home
- Make and model of your car(s)
- Driving history of all drivers on the policy
- Credit score
- Marriage status
- Female or male
There are many proven assumptions that the underwriters make based upon the above list. If you are under 25, you are inexperienced behind the wheel, and perhaps more distracted. That translates into a greater likelihood of more drastic accidents that cause injuries and death.
In addition, if you are over 65, you are more likely to lag in reaction time, and suffer from other faults of an aging body that can also cause accidents. For that reason, drivers between 26 and 64 pay the most reasonable rates.
Add to that if you are a female, you get a better rate automatically. It’s been argued both ways, that there is no proof, and that there is plenty of proof that women are safer drivers. However, right now, it is still standard that females pay lower insurance rates.
Anyone who is married has greater obligation to pay the bills for their spouse, if their spouse say loses their job. The reason is that their credit scores and prosperity are intertwined. Credit score is another way that underwriters evaluate risk.
Lower credit scores are found to lead to an increased likelihood of a claim.
It could be that the individual with a lower credit score is more likely to file a claim because they have less cash with which to cover even small damages. People who may have more money might be able to mitigate the claims by just paying out of pocket.
For instance, if the bumper gets knocked off the car in the parking lot, it is cheaper to pay out of pocket than to file a claim that increases insurance rates for five years for as much as the bumper costs to replace.
That would mean, if the bumper were $800, it could increase insurance by $800 every year for five years.
Compare that to buying a new bumper at $800 one time, and it is far less expensive. In addition, the underwriters for your homeowners insurance may be looking at how many claims you file over all, not just in the category of your house. Someone who is short on cash may be forced to file a claim for something that other people might just pay out of pocket.
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Making A Fair Shake
You may feel betrayed when you work so hard for your car. You jumped through lots of hoops and pay your premiums on time for decades without a claim. Bam!
That one claim you make sees a break in the long-standing relationship you had with your carrier. They are slow to pay the claim and then want to jack up your rates.
Many states have some degree of consumer protection and assistance in the form of an insurance commissioner.
The insurance commissioner is there to regulate and keep the playing field relatively fair for consumers too.
If an insurer is in the practice of denying valid claims, or taking too long to pay, filing a complaint — a simple form — with your insurance commissioner’s office, may get the ball moving much faster.
In addition, if the insurance commissioner receives more than a fair share of complaints about one insurance company’s practices, the carrier may face fines, sanctions, and be banned from your state.
Because of those consequences, if you file a fair and valid complaint, the carrier will respond quickly, and most likely in your favor, if it is actually a valid complaint according to the law and your insurance policy.
There is recourse for you when you feel your policy is not honored in the claims process. Even harder than that is taking on the due diligence and responsibility up front when you buy a policy.
You can only go on what you learn from consumer magazines, or online reviews, about whether a carrier pays out on valid claims in a timely manner. You can only go by past credit worthiness history to determine if it is likely a carrier will have the money to pay future claims.
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