How Does the Insurance Underwriting Process Work?

Collecting the Necessary Information

To begin the underwriting process, an underwriter needs to have several pieces of information in order to provide the most accurate evaluation of a potential policyholder. This information includes the insurance application (previously completed by the customer or their insurance agent), VIN numbers (Vehicle Identification Number) for any vehicles to be insured, MVRs (Motor Vehicle Reports) for any drivers to be insured, loss histories from previous insurers, photographs of properties to be insured, and any other information related to the type of insurance being underwritten (commercial, small business, homeowner's, health, etc.).


Once the required information has been collected, the underwriter can begin to analyze each piece of information. Underwriters are governed by underwriting guidelines set forth by their company; therefore, all information is evaluated against these guidelines. Underwriters have different levels of authority, as well. If the information and analysis reveals that a decision needs to be made by someone with a higher level of authority it will then be passed on to that particular underwriter.

The main purpose of analysis is to determine how much risk a particular customer will bring to the company. A client with no losses, clean driving records, and good to perfect credit is preferable to one who has had several losses, driving violations or issues of imperfect credit.

Identifying options

Once the analysis of the provided information is complete, the underwriter basically has three options:

  1. Accept the application and approve a policy
  2. Reject the application and deny coverage/refuse to write a policy
  3. Approve an application with conditions attached (lower coverage limits, modification of loss control practices, higher premiums)

After the underwriter chooses how to proceed, the application will either be forwarded to the policy processing department, back to the agent for modifications and review with the customer, or a rejection letter will be sent to the agent and the customer.

The importance of underwriting

Without underwriting, an insurance company would be placed on shaky ground with regards to its financial stability. Underwriting ensures that a company will not be confronted with a consistent barrage of losses. Just as a customer is evaluated to determine their risk, an insurance company has to evaluate its own tolerance for risk, and has to determine the ratio of favorable policyholders to those with a less favorable profile.

Each insurance company has its own underwriting guidelines and standards for who they will and will not insure. The underwriting process is the method of determining that the company continues to function within workable boundaries.