The following are some of the steps involved in the process of underwriting in motor insurance.
Obtaining the necessary information
Understanding the risks involved
Let’s check both of them.
Obtaining the necessary information
It is one of the essential aspects of underwriting. The prospect can provide the required information directly, or the Agent or Broker can provide it. One of the easiest ways of getting the information is through the proposal form. The proposal form is a simple document and is used to extract the material information from the client. It, along with other documents, forms the complete insurance contract. Any misrepresentation in the proposal may lead to the insurer's denial of liability and will allow the insurer to treat the contract as null and void.
Understanding the risks involved
Once the underwriter gathers the necessary underwriting information, they will analyze the information obtained to insure the vehicle or fleet. The underwriter will evaluate the perils needed to be covered and the hazards which are coming with the risk or the motor vehicle of the area of operation or the type of business or other parameters.
Whether or not you get the auto insurance you want will depend on the evaluation of the risk involved, especially if it is a highly demanded $20 car insurance plan. After getting the necessary information, the underwriter can make three decisions. He may straightaway decline to insure the risk, or he may straightaway accept the risk as presented to him. The third option may be that the underwriter may ask for further information about the risk before taking a suitable decision.
After getting the additional information, the underwriter has a right to accept the risk or reject the risk. Once a decision is taken by the underwriter to accept the risk, his priority is to calculate the premium or the rate for insuring the risk and work out the suitable terms and conditions applicable to the policy.
The information required may be different for the different types of risk. We can categorize the risks into the following types.
Personal lines (covering Private vehicles)
Commercial Lines or Corporate business (Covering the cars belonging to the businesses such as private sector and public sector including the business from the Government)
Personal lines
Personal lines business is coming out of the individuals who are owning the vehicles. The information needed for personal lines motor insurance may come through the simple proposal form, copies of vehicle registration, and driving license. Usually, an inspection report is also insisted upon by most insurers depending upon the type of customer.
The in-house representative usually does the inspection. However, for the third-party insurance, the inspection of the vehicle is not mandatory. The insurance company can take their own precaution like insuring from the date and time of acceptance or providing coverage after a lapse of a certain period after the premium's receipt along with the other underwriting requirements.
2. Commercial lines
The risks under the commercial lines business are a bit complex, and it covers a whole array of vehicles. The insurance policies designed for and bought by businesses, individuals, or juristic persons are usually termed as commercial lines. Individuals using vehicles for commercial purposes are also treated as commercial lines. These risks are generally further classified, such as small, medium, and large accounts or markets, respectively. The vehicles may be from simple two-wheelers to a complex mobile crane and huge haulage trucks.
Usually, under commercial lines, there may be needed additional information. Some insurance companies do not require the proposal form, whereas others may ask for a simplified proposal form. The prospect should also provide details about the past claims experience and the vehicle schedules in a soft copy. The soft copy will make it easier to classify the vehicles for rating purposes, and in the case of usage of smart systems, it will be useful for generating the required data quickly.
In case the broker is involved, then the broker slip may provide the necessary information needed by the insurer to underwrite the risk. The insurance company may ask for a fleet or commercial risk control report. This report can be prepared by an in-house expert or can be outsourced. The report will provide details of the risk after the physical inspection by the insurer's representative or the third-party risk surveyor.
There is a considerable variation under commercial lines risks like passenger-carrying vehicles, goods carrying vehicles, and special types of cars. Some cars linked to the garages and showrooms can be covered under motor trade risk cover, which is an exceptional cover under the motor policy and covers road risks, road transit risk, and internal risks. Commercial vehicles are used as tools of the trade (tool or plant is attached to the car for performing the necessary function).
In general terms, the liability and damage to the motor vehicle are excluded under the policy. However, there is a provision to include the coverage by way of tools of trade endorsement. The underwriter will charge an additional premium for amending the policy or may suggest it be covered under public liability and plant and equipment cover separately.
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