What is Underwriting and how does it apply to Car Insurance?

5/15/2012 4:27:18 PM

Smashed carWhen applying for a car insurance policy, before the insurance company can issue the policy they must try to anticipate how much risk you will bring to the table if the policy is issued. This helps them to control the claims experience they have, determine whether or not to issue your policy and, if they do issue your policy, decide how much to charge you for it. The process during which they assess your risk is called underwriting.

While underwriting your car insurance policy for coverage, underwriters will consider many different criteria including your age, gender and marital status. It may seem like these have no bearing on whether or not you are a gooddriver, and in reality, they don’t. No arbitrary fact about you determines whether or not you drive well, but based on many studies and anecdotal evidence, underwriters can create assumptions about likelihood of whether you drive safely and responsibly or not based on these factors. For instance, a married man who is in his thirties will be considered less risky a driver than a single girl who is 16. Why? Well, a 30-year-old of any gender will generally have more experience driving than a 16-year-old, and a married person is usual viewed as being settled down and more responsible because he (or she) has people who depend on him (or her). And while none of these assumptions are guarantees about the quality of the driver in question, the process of underwriting relies on both collecting evidence of actual driving history and making assumptions based on this data.

Other traits underwriters consider include your past driving record. They will get a motor vehicle report (MVR) to see how many tickets, accidents and other driving incidents you’ve had, what the tickets have been for, and determine how much bearing that behavior has on your current driving habits. Some of your past behavior—like speeding—will make you a riskier candidate to insure than others. This is because your past behavior and choices indicate something about your personality and habits. Someone who has been cited with several speeding tickets in the past is more likely to have an accident and has also shown a tendency to ignore the legal speeding limit.  This indicates that the driver might be likely to ignore other driving laws and safe driving practices, thus making him or her more likely to have an accident resulting in an insurance claim.

It is through this careful balance of assumption, statistical data and historical driving information that underwriters decide whether or not to issue your policy and how much to charge you for it. The only data you truly have control over in this situation is your driving record, so be sure to keep the record clean and free of tickets that are preventable if you just follow the posted laws.  

Call us today to discuss your Dallas auto insurance options at 888.751.75111.

Tags : insurance, car, auto, underwriting, Dallas, Texas
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