Auto Insurance Underwriting: Simply Explained (2024)
The auto insurance underwriting process determines the risk of insuring a driver. The auto policy underwriting waiting period can take 30 to 120 days depending on the state and your driving history. Before you choose an auto insurance policy, check the company's financial strength and compare rates online to determine your auto insurer. Enter your ZIP code below to compare auto insurance quotes for free.
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Ty Stewart
Licensed Insurance Agent
Ty Stewart is the founder and CEO of SimpleLifeInsure.com. He started researching and studying about insurance when he got his first policy for his own family. He has been featured as an insurance expert speaker at agent conventions and in top publications. As an independent licensed insurance agent, he has helped clients nationwide to secure affordable coverage while making the process simpl...
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UPDATED: Aug 17, 2023
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Editorial Guidelines: We are a free online resource for anyone interested in learning more about auto insurance. Our goal is to be an objective, third-party resource for everything auto insurance related. We update our site regularly, and all content is reviewed by auto insurance experts.
UPDATED: Aug 17, 2023
It’s all about you. We want to help you make the right coverage choices.
Advertiser Disclosure: We strive to help you make confident auto insurance decisions. Comparison shopping should be easy. We are not affiliated with any one auto insurance provider and cannot guarantee quotes from any single provider.
Our insurance industry partnerships don’t influence our content. Our opinions are our own. To compare quotes from many different companies please enter your ZIP code on this page to use the free quote tool. The more quotes you compare, the more chances to save.
On This Page
Here’s what you need to know…
- Car underwriters determine how much of a risk you are to the insurance company
- They are the “behind-the-scenes” person who actually calculates how much your insurance premium rates should be and if the company will even offer to insure you
- Basic policies are sometimes written by an automated underwriting program
Your auto insurance employs a person called an auto insurance underwriter. What is underwriting? What does an underwriter do? This employee plays a crucial role in the claims process.
Today, we’re explaining exactly what an auto insurance underwriter does and asking: how does auto insurance underwriting work? Insurance underwriters are critical to understanding auto insurance and how your rates are determined.
If you’re trying to save money on your auto insurance, you can get free quotes from multiple insurers using our free tool above. Just enter your ZIP code to start comparing auto insurance rates now.
Table of Contents
What does an auto insurance underwriter do?
What is an auto insurance underwriter? Generally, an auto insurance underwriter calculates risk, but what do auto underwriters do?
What exactly do auto insurance underwriters look for? Some of the specific roles and functions of auto insurance underwriters include:
- Review information from the customer’s auto insurance application to determine the actual risk of insuring the customer
- Determine the type of policy coverage to offer the client, including what auto insurance does not cover and under which conditions
- Alter or restrict coverage using auto insurance endorsements (a special insurance policy provision that overrides other policy information)
- Negotiate with your insurance broker or agent to add or remove certain policy coverage add-on options
FindLaw notes that insurance underwriters heavily rely on computer programs and their algorithms to evaluate what the driver’s risk will be to the insurance company, which is what determines policy rates as high risk car insurance costs more.
An auto insurance underwriter is a trained professional. These professionals have years of experience assessing risk. They use this knowledge to determine whether or not to insure a driver.
What else do auto insurance underwriters look for, and what is the main function of an underwriter? Underwriters determine how much of a risk a person or group will be to the insurer. Insurance companies are in the business of making money, after all. This is part of how insurers calculate your car insurance rates.
Is it in the insurance company’s best interest to offer insurance to this person? How much should we charge this person for insurance based on the risk assessment? Auto insurance underwriters work to answer these questions every day.
The rates they determine are based on a wide variety of factors, so your rates may not be the same as your friend who lives outside of the city.
But you can get a general idea with this chart, which shows average rates across the country.
| Years | Average Annual Liability Auto Insurance Rates | Average Annual Collision Auto Insurance Rates | Average Annual Comprehensive Auto Insurance Rates | Average Annual Full Coverage Auto Insurance Rates |
|---|---|---|---|---|
| 2015 | $538.73 | $322.61 | $148.04 | $1,009.38 |
| 2014 | $530.01 | $308.32 | $143.45 | $981.77 |
| 2013 | $517.88 | $295.27 | $137.77 | $950.92 |
| 2012 | $503.28 | $287.87 | $133.30 | $924.45 |
| 2011 | $492.03 | $284.60 | $131.80 | $908.43 |
Things like your driving record, credit history, gender, and even your ZIP code affect how much you will pay. Your underwriter’s insurance rate determination will also change by company, as insurers determine their prices independently.
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How does insurance underwriting work?
Underwriting insurance is the process of evaluating the risk of insuring a driver and a vehicle. Before you get an auto insurance policy from an insurance company, the company needs to complete the underwriting process.
During the underwriting process, the company will analyze your vehicle, your driving history, and other information. Based on this information, the insurance company will be able to calculate your auto insurance risk. Then, the insurance company charges you a premium based on your risk factor.
In many cases, the “insurance underwriter” is just a software program. On standard auto insurance policies, most underwriting can be performed automatically with underwriting software. For other policies, however, the underwriter might be human.
After determining risk
The underwriter or senior underwriter sets a price and establishes the insurance premium. The driver pays the premium. In exchange, the insurance company takes on the risk of covering the driver.
All of this takes place behind the scenes at an auto insurance company. After receiving a Geico auto insurance estimate online, for example, you might proceed with buying your policy. Before the policy is finalized, however, an underwriter will verify the information you provided.
Insurance companies are for-profit organizations: the company is built to earn a profit. Underwriters help protect the bottom line of an auto insurance company by accepting the right insurance customers at the right price.
The main questions an auto insurance underwriter needs to answer are: what is the likelihood that this customer will make a claim that costs our auto insurance company money? How much should we charge this customer to ensure we make a profit while still offering competitive prices?
Read more: What happens if I disagree with Geico’s decision on my auto insurance claim?
Underwriters play a similar role in home insurance and health insurance: they work behind the scenes to calculate the risk of each policyholder.
As a customer, you should do your own research. These top insurers in the country have good ratings, as you can see below.
| COMPANIES | A.M. BEST RATING | DIRECT PREMIUMS WRITTEN | MARKET SHARE | LOSS RATIO |
|---|---|---|---|---|
| State Farm | A++ (Superior) | $41.9 billion | 17.01% | 63% |
| Geico | A++ (Superior) | $33.1 billion | 13.41% | 71% |
| Progressive | A+ (Superior) | $27.1 billion | 10.97% | 62% |
| Allstate | A+ (Superior) | $22.7 billion | 9.19% | 56% |
| USAA (Military Personnel & Family Members) | A++ (Superior) | $14.5 billion | 5.87% | 77% |
| Liberty Mutual | A (Excellent) | $11.8 billion | 4.77% | 62% |
| Farmers | A (Excellent) | $10.5 billion | 4.26% | 61% |
| Nationwide | A+ (Superior) | $6.7 billion | 2.73% | 58% |
| American Family | A (Excellent) | $4.7 billion | 1.90% | 69% |
| Travelers | A++ (Superior) | $4.7 billion | 1.90% | 60% |
A.M. Best Ratings show the financial strength of a company. If you see a loss ratio within the optimum range of 45 to 75 percent, that’s probably a good sign.
Also, if customer service is something you highly value, you might want to look at the J.D. Power rankings, as they measure customer satisfaction for major insurers.
What about automated underwriting?
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Some Auto Insurance Underwriting is Automated
If you have a standard auto insurance policy, then your underwriting process may have been automated. A computer program might verify your information against public records, for example, before offering you auto insurance coverage.
Most auto insurance providers rely on automated underwriting systems. These systems are similar to the online quote application forms you see on our website or on an auto insurance provider’s website.
If you have a more complicated auto insurance policy, then it’s possible an underwriter will get involved. A human underwriter might get involved in the following situations:
- You have multiple claims or incidents on your driving record
- You have never purchased auto insurance to insure a new driver
- There were issues processing your payment or verifying part of your record
If your policy gets flagged to be handled by an underwriter, it’s not a big deal. It just means it requires a little more effort than the computer can handle.
What is the difference between an underwriter and an agent or broker?
There are multiple groups involved with the auto insurance purchasing process for both monthly auto insurance and annual insurance, including auto insurance specialists like underwriters, agents, and brokers. These three parties might interact with one another regularly, but they all perform separate roles.
Think of the underwriter as the person behind-the-scenes. The underwriter receives an application and has to determine whether or not to offer car insurance to that person – and at what price.
The insurance agent and insurance broker, meanwhile, is the frontline salesperson: these are the people selling car insurance coverage to customers.
Agents do not typically have decision-making authority. Agents can offer auto insurance to clients who meet specific criteria. However, the agent is not typically able to alter the insurance policy outside of the boundaries of this agreement.
If a customer meets the basic criteria outlined in the underwriting manual, for example, then the customer might qualify for an auto insurance policy immediately. However, the agent is not typically able to “bend the rules” and change your policy without first consulting the insurance underwriter.
Read more: What is the difference between an auto insurance agent and an auto insurance broker?
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Conclusion on What Underwriters Do
Unless you’ve made a claim before, auto insurance can be a bit of a mystery. It’s easy to get confused about how everything fits together. The auto insurance underwriter, however, plays a crucial role in how auto insurance companies operate.
Plus, if you’re ever wondering which states offer affordable insurance rates, just check out our list of insurance specialists.
Enter your ZIP code below to get free auto insurance quotes from multiple insurers and save money on your auto insurance by comparing rates from multiple companies.
Frequently Asked Questions
What does an auto insurance underwriter do?
An auto insurance underwriter calculates risk and plays a crucial role in the claims process. They assess a driver’s risk to determine whether or not to insure them.
What do auto insurance underwriters look for?
Auto insurance underwriters evaluate various factors such as driving record, credit history, gender, and location to determine the risk and set insurance rates.
How does insurance underwriting work?
Insurance underwriting involves evaluating the risk associated with insuring a driver and a vehicle. The insurance company analyzes the vehicle, driving history, and other information to calculate the risk factor and set the premium.
How long does auto insurance underwriting take?
The duration of the auto insurance underwriting process varies by state, ranging from 30 to 120 days.
Do insurance underwriters make good money?
Experienced underwriters earn an average salary of $70,020 per year. However, job opportunities for underwriters are projected to decline by five percent from 2018 to 2028.
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Ty Stewart
Licensed Insurance Agent
Ty Stewart is the founder and CEO of SimpleLifeInsure.com. He started researching and studying about insurance when he got his first policy for his own family. He has been featured as an insurance expert speaker at agent conventions and in top publications. As an independent licensed insurance agent, he has helped clients nationwide to secure affordable coverage while making the process simpl...
Licensed Insurance Agent
Editorial Guidelines: We are a free online resource for anyone interested in learning more about auto insurance. Our goal is to be an objective, third-party resource for everything auto insurance related. We update our site regularly, and all content is reviewed by auto insurance experts.