Making Underwriting Decisions Can be a Risky Business Without All the Data

Sure, you know how old the house is, but did someone take note of those broken wooden steps in the backyard? The outside of the structure is in good condition, but those indoor pipes have seen better days. When evaluating a potential new policy or examining one that’s up for renewal, there’s myriad factors underwriters consider.

The only way to know what your insurance company could be taking on is by asking questions and executing inspections. We want to make sure you’re assessing with all the necessary data, so we’ve compiled a list of overarching questions that need to be considered, especially when reviewing a new policy.

The key to making sure you have all the data you need is by asking questions, researching, and looking at all the details.

1) Have you Talked to the Potential Insured or Researched the Property Records?

Conducting an interview with the policyholder and looking into the parcel history are some methods to obtain needed information about a residential or commercial property.

At a home, the interviewees can tell you if they have a dog and if they run an in-home business. They may also know dates of repairs or replacements.

For commercial inspections, it’s important to note how long the policyholder has been at the location, what type of business it is with a description of its operations, and, if the applicant will tell you, the number of employees and how much revenue the business generates. It’s also valuable to know if the company has an onboarding or safety training process for its employees. These may demonstrate what type of risks could be involved with the business and how invested the policyholder is in keeping the business, and the property, well-maintained.

2) Did You Fully Assess the Structure?

For homes or businesses, buildings are critical to assess.

For residences, it’s important to note when it was built, architecture style, structure shape, and type of construction. Also consider the number of stories, if it has a fireplace or wood burning stove – and what style, the foundation type, and if the windows are broken. The overall building condition, such as if the siding has mildew or mold, if the window frame is deteriorated, or, on the other hand, if it has been recently renovated or upgraded, should also be assessed. Research whether older properties are on the historic registry because that affects how they are preserved.

Commercial structures need similar assessments, with notes on the building age, number of stories, if there is a firewall, Insurance Services Office (ISO) building construction type, exterior wall construction, and overall building condition.

The roof can be a deciding factor on how a policy may be handled in residential or commercial cases. Damaged shingles or an aging roof may denote the need for further assessment.

These characteristics determine how the structure will withstand fire or a hazardous weather event – plus, are a snapshot of potential damages that could appear in future insurance claims.

Check the condition of the wires and pipes to see if there is evidence of a current problem, or a previous one.  

3) What Condition are the Utilities?

Utilities can also pose certain risks.

In-depth assessments should have information available that denotes what type of heating and air conditioning a property has, as well as the fuel source. They also can include overall condition of wiring and plumbing and note the most recent update.

It’s important to have information on if there are water stains from current or previous leaks, which could indicate an issue.

4) How Prepared is the Policyholder for an Emergency?

Fires and burglaries cannot always be prevented, but steps can be taken to ensure they are quickly discovered.

It’s important that during a full inspection there was a check for smoke detectors, heat detectors, fire extinguishers, sprinklers, or other features that will either promptly alert of a fire or extinguish it.

Home or business inspections should also provide data on offsite characteristics that could affect how an emergency is handled. These include the proximity and accessibility to the nearest fire hydrant and fire station.

Many homeowners and business owners have increased security. The burglary or vandalism risk may decrease with proactive or reactionary measures, such as having a central burglar alarm, security cameras, a local alarm, and camera monitors. For a business, it’s also important to note if there is a safe and if money is kept onsite overnight.

Fires and burglaries are two incidents that can lead to property loss claims, so it’s important to assess their risk of occurring.

Properties in areas known for hazardous weather, like hurricanes, may need additional assessment.

5) Are There Property-Specific Hazards?

Unique circumstances may pose special risks to a property.

Your data should include a check if any of these are onsite or nearby: commercial cooking, hot metal work, elevators, woodworking, or storage that includes explosive or flammable items.

Another characteristic not as closely studied are risks associated with adjacent properties. These could include a store that sells hazardous materials, a wooden frame structure too close to the policyholder’s property, or a business or venue likely to draw large numbers of people to the vicinity.

Weather and natural hazards are also important to consider. A property that is prone to hail, tornadoes, or flooding may require further review before a policy is issued.

These characteristics may not be a concern everywhere. Including them in your data gathering process will ensure they aren’t accidentally forgotten when making policy decisions.

A pool at a home or business may increase liabilities. Photo Credit: “Two Lounge Chairs Near Swimming Pool” by Adheesha Paranagama / CC BY 4.0

6) Are There Potential Liabilities?

Many of these topics deal with potential property loss. But noting possible liabilities are equally important when considering new business.

Among them are stairs without handrails, public parking areas, swimming pools, a dance floor, trampolines, playground equipment, firearms, or pets that may bite.

Acknowledging potential liabilities will ensure the insurance carrier is writing profitable business.

7) Do You Have Photographic Evidence?

Photographs and diagrams for properties are essential when inspecting a home. These offer definitive proof of the structure’s condition. Plus, you have something to compare for a later policy renewal. Photographs will also make it easier to differentiate properties when trying to assess several in a short time.

8) Did You Call JMI Reports to Ensure You Considered Everything?

JMI Reports offers a full range of underwriting inspections for properties nationwide. Our property and casualty inspections can be as in-depth as an underwriting partner wants to evaluate new or renewing policies. Let us help you make sure you have all the data you need to make consistent, accurate decisions within the underwriting timeframe.