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Parameters Used by the Underwriter in Auto Insurance Underwriting

Parameters Used by the Underwriter in Auto Insurance Underwriting

Undoubtedly, there are many parameters that the insurer uses when it is going to underwrite the risk represented by insuring a certain driver. We address some of these parameters below.



1.   Deductible or excess 

Deductible or excess are the same, the dictionary meaning may be slightly different, but the overall purpose in insurance is one and the same. Most of the insurers use it synonymously. The underwriter will impose a minimum compulsory deductible under the policy known as mandatory excess. However, the insured does not have the choice to reduce the compulsory excess but does have an option to increase the excess and get a discount in the rates from the insured. If the insured is a good driver and feels that he may not be able to have accidents, then he will increase the excess in the hope of getting the discount in the premium rate. This kind of driver is commonly well-received by Direct Auto Insurance providers.

The deductible opted by the insured is known as the voluntary deductible. The underwriter will have a twin benefit if the insured is opting for the voluntary deductible. He will save the claims cost and the claims administration costs. This will allow him to make the discount to the insured. Thus, this will help both the insured and the insurance company in reducing the costs. 

How does de deductible work?

For example, in the above case if Mr. X wants to insure his car then the insurer will offer him a deductible of $ 500 each and every claim. This deductible is compulsory and the insured cannot get a deductible less than $ 500. However, if Mr. X is a safe driver and he would like to avail of some benefits then he can go in for a reduction in premium by increasing the deductible. Suppose he would like to volunteer for a higher deductible of $1,500. Then he may get a discount in rating, usually, the underwriter is willing to reduce the premium by half a percent. The rating for the risk will be revised from 4% to 3.5%. Mr. X will be paying a premium of $ 3,500 for going for a higher voluntary deductible of $ 1,500. 

2.           Safety measures 

Technological advances have helped in building features in the vehicles that will protect the passengers and also the vehicle from accidental damages and thefts. Vehicle technology has helped the insurers track the running of the vehicle, it has also given the insured the navigational tools and other features like sensors to avoid the accident to the vehicle. The features like air-bags, seat belts, and the strong body of the vehicle help in protecting the driver and the passengers. Other features like designing of the vehicle so as to make it more stable on the road and in case of an accident.

The built-in cameras and sensors help in avoiding minor as well as major accidents. A theft alarm and steering wheel lock will help in preventing losses due to theft. The insurance industry is hopeful of many new features being brought into the vehicle to avoid accidents and to reduce losses. The underwriter needs to consider these features while underwriting a vehicle risk. Under fleet insurance, the underwriter should take into consideration the fleet safety program. By installing proper safety features, it will be easier for you to find affordable coverage plans. You get insurance now pay later, in addition to getting supplemental insurance with companies like Aflac car insurance.

A fleet safety program should have the right processes and procedures to help improve safety and reduce costs. All the stakeholders should be involved in the process. The Insurance company representative can also become a part of the fleet safety program. The underwriter will discount the standard rates in case the insured has safety features in his risk. 

3.           Pre-Risk surveys 

Pre-risk surveys one of the important elements of underwriting. In most of the individual or personal lines risks or small commercial risks, the pre-risk surveys are recommended to avoid fraud and make sure that the risk is acceptable. It is almost essential in the case of high-risk groups like hazardous tankers, haulage trucks or chemical carrying vehicles, etc. The pre-risk survey can be done by the in-house representative or can be outsourced to a third-party loss adjuster or surveyor.

The in-house surveys are done by the salesman of the insurance company or the underwriter or one of their claims staff. However, in the case of the commercial fleet, the outside surveyor is used. The outside surveyor is a professional who will be able to provide the full-scale details of the risk being insured. The main purpose of the pre-risk surveys is to obtain the full description of the risk being insured and assess the physical and other hazards of the risk.

It will also help in understanding the correctness of the proposal form. A professional pre-risk survey especially related to a commercial risk will also suggest risk improvement and loss prevention measures. The outside agency will provide the photographs of the risk along with the pre-risk survey report.