Leslie Kasperowicz holds a BA in Social Sciences from the University of Winnipeg. She spent several years as a Farmers Insurance CSR, gaining a solid understanding of insurance products, including home, life, auto, and commercial, and working directly with insurance customers to understand their needs. She has since used that knowledge in her more than ten years as a writer, mainly in the insuranc...

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UPDATED: Oct 15, 2021

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Here's what you need to know...

  • When you apply for auto insurance, the carrier assigns your file to an auto insurance underwriter
  • During the underwriting period, the insurer can run reports to verify the information that you provided is honest and accurate
  • All insurance companies will spend money during the 60-day binding period to run your Motor Vehicle Report. If there are citations that you didn’t list on the report, they can have an impact on your rates or your ability to keep your insurance coverage
  • Many insurance companies will run a Comprehensive Loss Underwriting Exchange report. This CLUE report will tell the insurer if you’ve filed an accident claim or damage claim in the past, whether or not you were at fault, and how much was paid out by the insurer
  • If insurers in your state are allowed to use your credit rating to calculate your rates, the company will check your credit-based insurance score

Auto insurance companies spend a lot of time and money designing marketing campaigns to entice consumers to buy their personal insurance policies.

While a great deal of time is spent promoting a carrier, just as much time is spent reviewing clients before an insurer officially extends an offer for coverage to an applicant.

Not just anyone will qualify for insurance through a preferred or standard auto insurance carrier. To truly understand how carriers set their pricing and calculate their rates, you need to realize how the marketplace works.

Here’s what you need to know about rate making and insurance underwriting before you start to apply for insurance.

Start comparison shopping today by entering your zip code into our FREE comparison tool!

What’s the process of applying for auto insurance?

When you want to comparison shop in the insurance marketplace, you start by requesting personalized quotes from multiple carriers.

By comparison shopping and soliciting quotes, you’re able to see how much each carrier charges someone in your rate class for the same amount of coverage. After you select a quote, you will then start the application process.

When you apply for a policy, the agent will ask you for detailed information on your vehicle, your driving habits, and your driving history. This information is used by the auto insurance company to calculate your rates and determine your premiums for the term. After you submit your application, the information that you provided is reviewed by an underwriter.

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What is the role of the auto insurance underwriter?

Auto insurance companies employ several underwriters. An underwriter is in charge of reviewing an application or an auto insurance renewal to determine if the information provided for a rating is accurate.

The purpose of doing this is to ensure that the auto insurance company is charging a client the right rates and that the client is eligible for coverage.

How does an insurance underwriter assess an application?

Insurance underwriters are professionally trained and licensed. They attend schooling to look at risk and then assess an application to determine whether or not the client is forthcoming when they are buying insurance.

Without an underwriter, it would be easy for clients to lie on their applications just to save money on their coverage.

Underwriters use a variety of different tools to check and see if you are being quoted the right rates. With more advanced electronic databases, it’s far easier for an underwriter to spot discrepancies.

If information can’t be verified, the client may be asked to provide proof to support what they claimed on their application.

How are Motor Vehicle Reports used?

Motor Vehicle Reports (MVR) are records that show how long you’ve been licensed if your license is active, and whether or not you have citations on your record. When you apply for insurance, the company may ask for conviction dates that go back three, five, or seven years. If you don’t put the appropriate date, it could affect your initial quote.

Insurance companies spend money to request your MVR directly through the state. Since record requests are electronic, they can be processed instantly. Even so, it costs your insurer an average of $5 for each MVR that’s requested. This investment shows how important it is for underwriters to catch convictions that weren’t disclosed. Licensing dates are also verified.

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What is a CLUE report?

Motor Vehicle Reports are tools used to help the underwriter verify licensing status and tickets, but these reports don’t typically include information on accidents and insurance history.

A CLUE report is a summary of your auto and homeowners insurance claim history that major insurance companies use when deciding to accept a new customer. The CLUE database which is operated by LexisNexis Risk Solutions allows insurers to check any claims that a new customer has filed within the last seven years.

Every claim that you file is registered in your CLUE report, even if you haven’t received a ticket or found at-fault for the accident.

Since all companies use your insurance claim history to determine your rates, it’s important to verify your claims history. The Comprehensive Loss Underwriting Exchange report includes:

  • Your name
  • Date of birth
  • Policy number
  • Date of loss
  • Type of loss
  • Amount the carrier paid
  • Description of the property
  • Vehicle information
  • Status of the auto insurance claim
  • Fault determination

How is a CLUE report used?

CLUE reports are used to verify whether or not you had unreported losses in the last three to five years. If you have a loss on the report that you didn’t disclose, the premiums you were quoted may change. You could lose discounts and be assessed a surcharge on the policy if the driver who had the loss is still in your household.

How is your credit score used?

Not all states permit companies to review an applicant’s credit information. If you live in a state where insurance scores are used to set rates, the underwriter will more than likely run your credit-based score to either give you a discount or charge you for a low score.

Insurance companies don’t pull up the standard credit report to give you an insurance score. Instead, the underwriter runs a report through an agency that does the work for them. Your score is dependent on several different factors, many of them related to your credit history. Some of the items on your credit report that can be used include:

  • Payment history
  • Outstanding debt
  • Credit mix
  • Pursuit of new credit accounts
  • Credit history length

If you fail to disclose blemishes that show up on your credit or driving record, the quote you received can change. Consumers who aren’t happy with their insurance rate should apply for coverage elsewhere before their policies lapse.

Now that you know what an underwriter checks, compare quotes only today. By entering your personal information in our FREE tool, you can get instant rate quotes and choose a policy.

References:

  1. http://www.insurancejournal.com/news/national/2014/11/21/347749.htm
  2. https://personalreports.lexisnexis.com/
  3. http://personalinsure.about.com/od/insurancetermsglossary/g/underwriting.htm
  4. http://www.investopedia.com/ask/answers/091815/can-your-car-insurance-company-check-your-driving-record.asp
  5. http://www.dds.ga.gov/drivers/DLdata.aspx?con=1740840381&ty=dl
  6. https://www.insurance.wa.gov/your-insurance/tips/clue.html
  7. https://www.privacyrights.org/clue-and-you-how-insurers-size-you
  8. http://www.naic.org/cipr_topics/topic_credit_based_insurance_score.htm
  9. http://www.consumerreports.org/cro/car-insurance/credit-scores-affect-auto-insurance-rates/index.htm
  10. http://www.naic.org/documents/consumer_alert_credit_based_insurance_scores.htm