The underwriting process assesses the amount of risk exposure, which has a direct correlation to the premium amount charged. It looks at the following elements:
Naturally, the more frequent the use of the vehicle, the higher there is a risk of an accident. Car usage is usually categorised, in ascending order, as follow:
- Private use
Vehicle bought by an individual for personal purposes.
- Company use
Vehicle bought by the company to be granted use by stakeholdersfor transportation during work.
- Commercial use
Vehicle used by a company for transportation of goods.
The make, model and engine capacity of the vehicle are telling of its risk exposure. An upscale, high-performance sports car, for instance, is capable of greater speeding and will incur more compensation (due to higher market value). This will cause the premium to increase or an implementation of an excess.
Also, insurers have been observed to favour vehicles equipped with safety features, such as the Autonomous Emergency Braking system, when it comes to premiums.
The impact of this varies across insurers. Older cars may mean less probability of theft, but it may also mean higher risk of accidents due to inadequate maintenance of vehicle parts. There are some insurers, which do not take this into consideration as well.
- Age & experience
Young, old, and new drivers may be prone to accidents due to immaturity, health deterioration and inexperience respectively. In such cases, insurers may impose an excess, an initial block of amount where the insurance will not undertake. Only the amount incurred after the excess can be claimed.
If the job function requires you to travel and entertain clients a lot, such as sales, there is a higher usage of the vehicle and risk of drink-driving. Whereas, a desk job in education, law or medicine will mean lower risk and premiums.
- Claim history
Drivers with claims in the past or bad driving records may not be eligible for certain policies.
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