What is insurance underwriting?

Underwriting is the process insurance companies follow to determine coverage eligibility, the risk of insuring you, and, ultimately, how much you pay for coverage. When you apply for any insurance policy, the insurer analyzes the information you provided in your quote or application, and information from other sources as part of their underwriting process. Many insurance companies use technology to automate parts of or the entire underwriting process, allowing customers to get coverage fast.

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What factors affect the insurance underwriting process?

The factors analyzed during the underwriting process vary based on the type of insurance.

Car insurance underwriting factors

For example, when you apply for a car insurance policy or any vehicle insurance, your insurer may look at:

  • Your age: Younger drivers are more prone to accidents and tend to have higher rates as a result.
  • Vehicle usage: Insurers generally want to know how often you use your car, and if you use it for ridesharing or on-demand delivery services. Frequent trips increase the risk of an accident or having a claim.
  • Your driving record: Drivers who've been in several accidents or have had multiple speeding tickets within a short period are riskier to insure.
  • The make and model of your vehicle: Some makes and models may be more expensive to repair or replace than others, so insurers scrutinize these costs during the underwriting process to accurately price your comprehensive or collision coverage.

Learn more about the factors that impact car insurance costs.

Life insurance underwriting factors

As for other types of policies, such as life insurance, the underwriting process may factor in more personal information, including:

  • Your health: Your health conditions will affect your rate and eligibility, especially chronic or severe conditions.
  • Occupation: The underwriting process may also consider your occupation, especially if it puts you in dangerous situations, such as a police officer or firefighter.
  • Hobbies: If you partake in risky hobbies, such as skydiving or rock climbing, your insurer may consider you a higher insurance risk, either charging you more or denying coverage altogether.
  • Age and sex: For life insurance, the underwriting process heavily emphasizes your age and sex, because younger policyholders generally have fewer health problems, and men are more likely to have dangerous jobs or lifestyles.

Learn more about the factors that impact the cost of life insurance.

WHAT IS AUTOMATED INSURANCE UNDERWRITING?

Automated insurance underwriting is a technology-driven approach that leverages data analytics, artificial intelligence, and other technologies to generate an insurance quote as fast as possible, i.e., with as little human involvement as possible. Many insurance companies use some form of automation in their underwriting process, while others may offer policies using entirely automated underwriting.

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