Insurance Underwriting Process, What Is It? How Does It Work? What information is required by the insurance company? How to lower premiums rate and get a better underwriting process result?
We’re going to discuss all these things in this article.
First, you should understand that not everyone, who applies for an insurance policy, is approved by the insurance company. Because they want to know all the risks associated with the applicant.
What is Underwriting?
If you’re applying for an insurance policy for the first time, it’s normal to be curious about understanding the whole process and what happens after you submit the application for the insurance policy.
Underwriting is the process of an insurance company to evaluate the risks associated with the applicant and to decide whether they’re going to accept the application or not. These risks are evaluated by reviewing your hobbies, lifestyle, financial and material status, age and gender, etc.
Based on this information, the underwriter determines whether the company is in profit or not if they accept your application. If they decide to accept your application, the underwriter will also determine the amount, also known as insurance premium, you’ll be paying for the policy. This premium can be monthly, quarterly or annually depending upon the type of insurance policy you’re going to buy.
Determining the Risk
Your application will be approved only when the underwriter is confident that the risks associated with your life are small. Because it’s the responsibility of underwriter to make sure that the company is not in loss.
To determine the risk, the underwriter uses the following information of the applicant:
- The habit of foreign traveling.
- Smoking Habit.
- Hobbies (the underwriter uses this because some hobbies are very dangerous and involve higher chances of death. For example, sky diving, rock climbing, etc.)
- Medical History (very important for Health Insurance)
- Material Status
- Children (if any)
- Purpose of insurance policy
- Occupation (because some occupation are also dangerous. For example, drivers, steelworkers, etc.)
- Financial condition (to make sure that you’ll be paying premiums on time)
This is the information that most of the companies ask for the underwriting process, but they can also ask for additional information.
Make sure you provide all the required information and don’t miss or hide anything. If the insurance company finds that information later that was required in the underwriting process, it may result in the permanent cancellation of your policy.
If you’re rejected for the reason of high risks, you can still apply for high-risk life insurance. But in this case, your premium amount will be much higher.
You should understand that underwriting doesn’t happen overnight, it takes a lot of time.
How Does the Underwriting Process Work?
The underwriting process can be either automatic or manual. In the case of the automatic underwriting process, insurance companies use some computer software to determine the risks.
In the case of the manual underwriting process, following steps are followed.
- You submit the application for the insurance policy.
- You’re required to submit the additional information(like medical history, etc.)
- The underwriter determines all the risks associated with your life.
- If they decide to accept your application, the underwriter also decides the amount of your premium.
How To Get Better Results From The Underwriting Process?
The final result of the underwriting process plays an important part in the selection or rejection of your application. If your application is approved, this result will also play its part in the premium amount calculation.
Here are a few tips to improve the results of the underwriting process.
1. Maintain a Healthy Diet and Exercise Regularly:
Make sure you follow a healthy diet plan and do some exercise on a regular bases. Both of these are going to help you lose weight and maintain a healthy lifestyle.
2. Stop Smoking and Alcohol
If you have a habit of smoking and alcohol, stop this immediately for better underwriting process results.
3. Stop Dangerous Hobbies
If you have dangerous hobbies like rock climbing, skydiving, and cliff diving, etc, stop them. Because the underwriter is going to look at your hobbies for the underwriting process risk calculation.
Loved this article? We love it when you share it!
Picture Credit: Pexels