What Is Your Underwriter Looking For?
To long-term risk managers, your insurance underwriter is almost a member of the team, but many small business owners remain confused about the role of an underwriter. And long-term managers please note: Even you may need a refresher course in today’s underwriter and how he or she impacts your organization.
Here’s a primer on the important role this valuable person plays.
Underwriters hold the key to insuring your business or organization. The underwriter is the person at the insurance company who makes the decision to accept a certain risk and at what price, as all insurance companies are in the business of transferring risk for a fee. All the questions they ask about you or your company help them make that decision.
Here are some questions they may ask:
- How long has your business been in operation? Underwriters like to see three full years of operation. If your business is new, it will be harder for the carrier to insure your business at the best rate.
- Is your business financially sound? For example, if you own investment properties and you are “upside down” on several of them, underwriters may decline your account. Prior cancellations for nonpayment of premiums will hurt your risk profile as well.
- If you have a vehicle fleet or commercial buildings, are they in good condition, clean and outfitted with adequate safety measures? Are your vehicles in a secure location when not in use?
- Where is your business located? The safety of neighborhoods is a prime concern, not just for you but for your insurance carrier.
- What is your loss history in the past three to five years? Most underwriters anticipate a better-than-average loss history. You can explain some outliers, but standard insurance carriers will hesitate if your business has an unfavorable loss history.
- Do you, as owner of the business, actively manage the operation on a daily basis? If so, you are demonstrating that you have control of the operations of the company.
- What loss prevention programs are in place? Do you have a safety manual, and do you conduct frequent safety meetings? For workers’ compensation insurance, many underwriters require a return-to-work program that brings injured workers back to work temporarily after an injury.
- Does your organization have a drug and alcohol policy? Is it enforced? Do you prescreen employees for criminal and driving records?
- Are vehicles available for personal use? How many drivers do you have under the age of 25?
- Is your insurance application filled out completely and neatly? A sloppy application may indicate a lack of attention to detail. Especially when purchasing professional liability coverage, this can immediately sour the underwriter.
Prior to binding coverage, underwriters will review your loss runs, request inspections and check insurance claims databases. Most insurers validate and cross-check information on your application. Your honesty and how you interact with the carrier in the initial stages of the underwriting process can mean the difference between that carrier accepting or rejecting your business.