Recently been denied commercial coverage from an insurance carrier?
Or perhaps the quote you received came back at a much higher cost than expected?
If you’re currently shopping around for commercial insurance for your business, you may have already experienced these roadblocks or are anxious you will encounter them when trying to secure coverage.
Knowing what information about your business insurance providers and underwriters will be inspecting most when determining rates or approval of an application can help you stay prepared for every possible outcome.
Even experienced business owners can find themselves denied insurance coverage for any number of risks identified in their operations. Risk assessment through underwriting plays an important role in the business insurance process, ultimately deciding whether a business is a right fit for the insurance provider.
At Berry Insurance, we’ve helped countless business owners get their coverage approved by commercial underwriters, ensuring they can run their business with peace of mind knowing they’re protected. In this article we’ll cover what commercial underwriters are looking for in insurance applications and the common reasons a business may be denied coverage.
What is the role of a commercial underwriter?
When looking to insure your business through any commercial policies, such as commercial flood, property, auto, workers compensation, and more, all of the information about you and your business operations collected by an insurance agency or company during the application process will be reviewed by an underwriter.
Underwriting is the process of reviewing potential policyholders for any risks that could come from insuring them and their business. The underwriter works with insurance providers to decide whether your business is a good fit for their company and to help determine the cost of your insurance.
While some businesses can receive insurance quotes online without having to speak with an underwriter, these generally include low hazard small businesses such as a local mom & pop shop or a florist. Most businesses, however, will require a more thorough examination from an underwriter, especially nowadays as more and more businesses are diversifying their operations in hopes of finding alternate sources of revenue.
When working with an insurance agency such as us, we would submit your insurance application, other information about your business, and history of claims (if applicable) to an insurance company’s underwriter. Depending on the type of industry you are in, the underwriter may require additional details about your operations, which we would provide.
Typically, underwriters will come back to us with more questions regarding your business, creating a back and forth until they eventually decide to accept or decline the insurance application.
What factors or risks are commercial underwriters primarily looking for?
While exactly what an underwriter reviews can vary from business to business, they typically are looking for the following details to determine the risk of a client's operations.
Hazardous business operations:
Underwriters will be looking for any parts of your business operations that would increase the chances of workers being injured while on the job. This in turn would increase the chances of the business being sued or having a workers’ compensation claim, a big risk in the eyes of the underwriter and the insurer.
Risk control:
As any business will come with a certain level of risk, underwriters are looking for what processes or equipment business owners implemented to mitigate potential risks or hazards. These can include an employee handbook, safety manual (if needed), and security systems or alarms installed.
Vehicles & drivers:
If you are looking for commercial auto insurance for drivers and vehicles as part of your business operations, underwriters will be reviewing the driving record of the business’ employees as well as their individual records and claims history.
Management control:
When reviewing a business underwriters will look at information regarding the owners themselves, determining whether they have the proper experience and know how to smoothly run a business.
Claims history:
If the business has been in operation for a while with other insurance coverage, the underwriters will be looking at the claims history for the frequency and severity to gauge the risk of insuring the business in the future.
List of services:
Underwriters will assess a businesses list of provided operations on their website to see if they are offering more than what they listed on their insurance application. This is a major red flag to any insurer, which is why we always stress that clients should be truthful when reflecting what their business offers online and on their insurance applications.
How long does commercial underwriting take?
How quickly the underwriting process occurs is entirely dependent upon how fast each of the parties respond to further inquiries after reviewing the initial application information. As we mentioned earlier, there will usually be a lot of back and forth between the underwriter, the agency, and the client about wanting more details about the business operations or alterations required to receive coverage.
The timeline of this process can take anywhere from a day to upwards of two weeks or more.
When will commercial underwriters deny coverage?
Well, that can depend upon a number of factors.
As it’s up to us, the agency, to “sell” your business to the carrier, the more information we have regarding the story of your business and how it is run - the better we can speak on the behalf of your business and the higher the chance you have of being accepted by the underwriters and insurer.
Our relationship as an agency with the underwriter and the insurer will also factor into the approval process of a businesses insurance application. If we have a good rapport with the underwriters and they know we consistently supply them with good clients for their company, they will be more likely to approve coverage.
This is one of the many benefits of working with a smaller insurance agency, like Berry Insurance. Even though we write coverage with a smaller pool of carriers when compared to other larger agencies, it allows us to maintain personal relationships with the carrier and the underwriter, guaranteeing a higher chance of approval of coverage for our clients and their business. If you’re interested in learning more about how an independent agency can support your business, check out this article: Can Berry Insurance (a Small, Independent Insurance Agency) Handle my Commercial Insurance Needs?
Insurance carriers are known to judge risks or details about a business differently. Some may require a full employee safety manual while others may just be fine with a routine team safety meeting.
If the underwriter identifies any of the risks we talked about earlier when reviewing a business application, they may ask for certain changes to be made to the business and its operations in order for coverage to be approved. It is up to the clients to address these given requested changes within the allocated time of the insurer and underwriter if they wish to receive coverage from the insurance provider.
Securing commercial coverage
As you can tell, underwriters play an important role in the commercial insurance application process. This makes it crucial for any business owner to ensure their operations are running smoothly when applying or can adequately address any identified risks/requested changes when looking to receive coverage.
Interested in learning what insurance carrier would be the right fit for your business? Learn more about what carriers we recommend, and how they can address your businesses needs, by reading this guide: 6 Best Small Business Insurance Carriers in Massachusetts.
