Insurance Risk Determines Policy Price

Insurance Risk Determines Policy Price
Risk, simply speaking, is the danger that an unexpected event will occur and will cause a loss. Whatever you do in life carries with it a certain amount of risk, whether it’s crossing the street in traffic or buying a stock that could potentially lose value. Risk is the chance that an oncoming event may produce a financial or physical loss.
In the insurance game, risk can be neither certain nor predictable, but it can be managed. As an insurance underwriter, insurance risk must first be understood in order to write a policy with an accurate amount of coverage at a fair and accurate price for the policyholder. This is best done by studying the available data regarding the person or property being insured, preferably data relating to large numbers of examples, and then deciding if the insurance risk with which you’re faced is acceptable. If the risk appears too high, issuing insurance may end up being a losing proposition and you may not want to enter this transaction. If the risk appears within acceptable limits, the chance of the insurance contract being profitable to your company is good, prompting you to go through with a policy issuance.

Insurance Risk Management
Risk management is a means for prejudging the potential risk of a loss that may occur sometime in the future. While there are numerous types of risk that represent different types of loss, insurance risk always deals with financial loss. Since risk is neither predictable nor certain, prejudging risk as a part of risk management is not making a prediction. Rather, it’s a process where the perceived potential risks are reduced to a minimum.

For you, as an insurer, a major part of your client’s risk management program is to partner with you as a way of sharing their risk. For your company, risk management entails measures by which you can mitigate potential risks and, when the risks you perceive are too high, to decline from writing a policy.

Insurance Risk Assessment
Property insurance companies utilize a variety of tools in assessing insurance risk. These may include:

  • In-depth applicant screening from application information and from a slate of predetermined criteria
  • Accessing specialized underwriting computer software
  • Property inspection reports submitted by field inspectors

An important determining factor in making the underwriting decision of whether or not to provide coverage and, if so, how much protection to provide and how much to charge in premium lies with the results of the property inspection.

Property Inspections
A comprehensive property inspection conducted by a professional and experienced company like Insurance Risk Services can shed light on the condition of a property you’re considering insuring. A full-fledged, interior/exterior inspection from the roof down to the foundation will let you know what looks good and what, if anything, looks bad. Today’s inspections use the latest in high-tech inspection tools such as high-resolution cameras on high-flying drones, mobile inspection devices like smartphones, tablets and laptops, and big data analytics.

A comprehensive property inspection provides the information you require to make informed underwriting decisions. Insurance risks that might otherwise remain hidden can be uncovered and mediation efforts targeted to get a property where it needs to be to pass muster.

If risks exist that seem to disqualify a property from being a good candidate for your insurance offering, you want to know as soon as possible before you waste too much time on a lost cause. Since insurance is a risk sharing proposition between insured and insurer, every underwriting concern revolves around risk levels. Let us help you get a handle on the total risk picture.