What risk management in auto insurance is, how it works pertaining to auto insurance, and basics of commercial auto insurance every risk manager should know.

The risk manager acts like an agent for the company rather than the insurance carrier.

Not all insurance jobs involve working as an agent or in a company home office. Larger companies may need insurance experts to help them navigate the ins and outs of insurance they face every day. Auto insurance being no exception.

These professionals are known as risk managers. One of their duties is to make sure the company is getting the most of its insurance premium as well as minimizing its exposure to adverse claim conditions.

Risk Management Defined

Risk management is a career path that can involve pretty much everything the financial sector has to offer; insurance is just a small part of it, and auto insurance just a small part of that.

Risk mangers can be generalists, working in a full range of financial fields such as financial law, accounting, compliance, contracts and other areas, or as specialists dealing strictly in areas such as insurance. It depends on the company and its needs.

Of course, risk management as it applies to auto insurance necessarily deals with commercial and fleet auto insurance. A risk manager dealing in auto insurance needs to be familiar with commercial auto insurance and how to best utilize it not only to prevent adverse insurance conditions such as claim denial, but also how to get the most out of the company’s insurance expenditures.

Knowing the Basics of Risk Management

A risk manager in essence can act as an insurance agent of sorts for his or her company rather than for an insurance carrier. Because of this, it is important for him or her to know the basics of commercial auto insurance and apply it to everyday company policy, even if the company’s “fleet” consists of only one vehicle.

Because commercial insurance requires a company to keep a current list of both vehicles and drivers on file with the insurance carrier at all times, it is of paramount importance for the risk manager to keep on top of both changing inventory and personnel and report it to the insurance company in a timely manner. This is inclusive of trailers and any equipment covered on inland marine policies. The risk manager should keep a file of VINs, serial numbers and drivers licenses as well.

The risk manager should know the insurance company rules regarding drivers, especially age restrictions. Most commercial policies require drivers to be between the ages of 25 and 74 with no exceptions. Drivers should also be properly licensed for the vehicles they drive.

Truck Insurance Considerations

If the company employs large trucks over 26,000 GVW, a different set of rules come into play, especially if their trucks travel out of state. The risk manager will want to ensure that all vehicles have valid and proper interstate trip permits and that all drivers have appropriate CDL licenses.

He or she will also want to make sure that these vehicles are covered appropriately with coverages such as bobtail coverage, or coverage for big rigs which are not pulling trailers, which is often excluded in standard truck policies.

The definition of insurable interest, examples of insurable interest in auto insurance, and how it’s applied by different insurance companies.

Nope. No insurable interest here.

Without something to insure, insurance is pointless. That should be a no-brainer. So what exactly does one insure? It’s not as dense a question as it seems.

You can’t insure just anything and expect to recover a claim from it. This is why no auto insurance company will cover the junker rusting away in your front yard which doesn’t even run.

The insured must also have a tangible interest in the entity insured. This is why you can insure your own car and place your spouse and children on the policy as drivers, but not the guy across the street just because you want to.

In order to properly indemnify the insured in a claim situation, an insurance company must make sure it is insuring something of value such as a car, a house or a life, the loss of which would cause financial hardship. This is the concept of insurable interest.

You must also own the item in question to have insurable interest. For example. If a storm knocks over a tree which damages both your car and your neighbor’s, you would have insurable interest in your vehicle but not your neighbor’s.

Examples of Insurable Interest

In auto insurance, the most obvious example of insurable interest is the auto itself on a full coverage policy. As your auto has intrinsic value, it can be insured for up to that value as determined by the insurance company. This is usually determined by its “blue book” value at the time of loss. Ask your insurance agent to see if specific losses are covered by “replacement cost” or “actual cash value” criteria.

Insurable interest can also be represented by liability. Say you’re in an automobile accident and found at fault. The insurable interest in this case is the damage to the other vehicle up to its value and the liability costs incurred for any bodily injury up to the pre-determined limit in your policy. Bodily injury coverages incurred in your vehicle such as medical payments and PIP work in a similar manner.

Insurable interest also applies to aftermarket auto accessories on inland marine policies. If your car stereo is stolen, the stereo has insurable interest and you can be indemnified for it per the terms of your policy.

Insurable Interest by Company

Unlike many other concepts in insurance, insurable interest is pretty much universal across companies. Differences in underwriting requirements, however, may make it look different as one company may take one vehicle while another won’t. Even so, the concept remains the same. Remember, insurable interest is a key concept in auto insurance. No claim can go forward without it.

What an insurance claim is, the process of an auto insurance claim, and what to do if there’s a problem with your auto insurance claim.

Insurance is nothing without claims.

Much can be said about the various nuances of insurance, but ultimately it all boils down to one thing: claims. Without claims, or at least the possibility of claims, there is no point to insurance. It is therefore an exceedingly important subject to consider when discussing any insurance topic.

Property and casualty insurance companies fully expect to spend two-thirds of their revenue on claims. They are required by law to keep large amounts of money on hand in reserves for the purpose of paying claims.

Claims are a big deal for any insurance company, auto insurance or otherwise; any company that doesn’t take claims seriously should be regarded with immediate suspicion.

Simply put, a claim is a notification of loss made by an insured to the insurance company. The insurance company then investigates the claim and assuming the claim is legitimate indemnifies the insured for the loss per the terms of the policy. It’s pretty straightforward, but there are certain steps that need to be taken to get to that all-important claim check.

The Auto Insurance Claims Process

Instructions to contact your insurance company are located on your auto insurance card you should carry in your vehicle at all times. Some companies will have you contact your agent, while others provided dedicated claims phone services. Contact your company as soon as possible after an accident.

Provide all the facts you can about the accident, including time, date, what vehicles were involved, extent of damage, if there were any injuries and if any law enforcement was called on the scene. Don’t worry if you can’t remember all that, the agent or claims representative will be able to help you.

Once the claim is reported it is assigned to a claims adjuster. The adjuster is either an insurance company employee or a contractor who specializes in investigating claims. A claims adjuster is never an agent. Indeed agents often have no direct contact with the claim itself after the initial report. Keep in contact with the adjuster for up to the minute reports. In addition, some companies now offer a special service that allows you to keep track of your vehicle while it’s being repaired.

After any deductibles the claim is paid in one of two ways, either directly to you as a cash payment or in services performed by the repair or auto body shop. Either way, the payment must be approved by the adjuster before the insurance company authorizes payment. Of course, if a cash payment is made the insurance company won’t pay to have the car fixed. You’re on you’re own with that.

Handling Disputes

If you are unable to resolve disputes with your adjuster, you can hire a third party adjuster for a second opinion of the damage. Lawyering up and going to arbitration or court should only be done in extreme cases after all other avenues are exhausted.

While a claims adjuster necessarily works for the insurance company, a good adjuster will work with you to give you the best claim settlement possible. Don’t be afraid to ask questions and check up on the work done throughout the process.

What underwriting is, why statistics drive it, how computerized underwriting streamlines the auto insurance buying process, and why underwriting fosters auto insurance competition.

Let computers do the underwriting. Life is less stressful. Really.

As with everything else, auto insurance has rules. One has to follow those rules in order to get the right policy issued to the right driver and the right vehicle to ensure both proper coverage and to keep the insurance company in the black at the same time.

But what are the rules?

This is a question that can confound even the sharpest of minds. Fortunately there is a method to know how the game is played: underwriting.

In a general sense, underwriting refers to the qualifying and pricing rules insurance goes by. Underwriters work in all forms of insurance: homeowners insurance, life insurance, renter’s insurance, commercial general liability insurance, you name it.

For auto insurance underwriting is dependent on literally thousands of variables regarding the auto, the driver and the conditions the auto is driven under, such as miles driven to work each day. All of these factors and more can not only determine if the auto and driver qualify for a policy to begin with, but also how much the premium will be.

Statistics Rule in Underwriting

Auto insurance underwriting is driven by statistics. The basic premise behind auto insurance pricing is that groups which cause the most accidents should pay the most in premium, while safer groups should pay less.

These experiences vary from company to company, but for the most part insurance companies agree that teenage drivers cost more than their older counterparts. Also,  Women are slightly less expensive to insure than men and people with tickets and claims cost more to insure than those with clean records. Insurance companies employ actuaries to crunch the numbers and back these claims up with hard facts.

Underwriting Goes Digital

Despite often complex variables, many auto insurance carriers are moving away from human underwriters and relying more and more on automated underwriting to allow for quicker policy issuance. In the past agents temporarily bound coverage when an application was written with final approval, or policy issuance, coming only when the policy was approved by an underwriter at the home office.

Today many auto insurance companies will issue a policy on the spot thanks to computerized underwriting systems, sending an application to an underwriter at home office only if a particularly unusual circumstance is encountered.

Computerized auto insurance underwriting takes the guesswork out of auto insurance applications, which saves both insurance agents and customers a lot of grief. Customers know that their policy is issued and in force before they walk out the agent’s office, and agents don’t have to go back days or even weeks later to tell a customer their policy was turned down by underwriting, something agents dread more than just about anything in the business. If there are problems, it’s known right away.

Different Companies Use Different Underwriting

Not all insurance companies are created equal, and some companies look at the business with very different mindsets. For example, a standard insurance company will underwrite very differently than a high-risk insurance company, and a specialty car insurance company will underwrite even more differently than their mainstream counterparts.

This is why price can vary widely for the same driver and the same car from company to company; different companies consider different things in their underwriting. Because underwriting is by no means uniform across the industry, it pays to shop around.

What property and casualty insurance is, the history of property and casualty insurance in general and auto insurance in particular, and how it all ties in to save you money.

Benjamin Franklin. Your Founding Father ... of insurance!

Your local auto insurance agent is probably what’s referred to in the insurance industry as a “property and casualty,” “P&C,” or “multi-line” agent. What does that mean, anyway?

Well, it means that he or she sells and services more than just auto insurance. While there’s plenty to write about auto insurance (and believe us, we’ve proven it), it’s just the tip of the iceberg when it comes to the larger insurance realm.

Auto insurance is part of a larger group of insurance types, or “lines” as they’re known in the industry, known as property and casualty or P&C. Other forms of property and casualty insurance include homeowners, renters and most commercial and general liability insurances.

Most states require a special type of insurance license to sell and service property and casualty insurance. Because most large auto insurance carriers are multi-line companies, they require their agents to be property and casualty generalists as opposed to auto insurance specialists.

A Short History of Property and Casualty

Crude forms of property and casualty insurance can be traced all the way back to Hammurabi’s Code in ancient Babylonia. Actuary tables developed by Blaise Pascal were in use in Europe in the 1600s. Property and casualty insurance in America can be traced back to 1752 Philadelphia, when a group of property owners banded together to form the Philadelphia Contributionship for the Insurance of Houses from Loss by Fire. The prime mover in this organization? None other than Benjamin Franklin, who later had a hand in forming the first life insurance company in America as well.

In addition to forming the precursor to homeowners insurance and therefore the beginnings of property and casualty insurance in America, the Philadelphia Contributionship also pioneered underwriting techniques by refusing to insure houses that were considered unacceptable fire risks (and in 18^th Century Philadelphia, there were a lot of those) as well as ushered in some of the country’s first zoning ordinances and building codes.

The History of Auto Insurance

Auto insurance, of course, came a bit later in our history with the advent of the automobile itself. The first recorded auto insurance policy was written by Travelers in 1897 for Dayton, Ohio, resident Gilbert J. Loomis. Loomis paid a cool $1,000 – a fortune in 1897 – for a policy that covered only property damage, bodily injury or accidental death. In other words, a liability only policy.

Auto insurance began to assume its modern form in the 1920s with the formation of companies like State Farm in Illinois and Farmers in California, both founded on the premise that farmers were safer drivers than the general population. Although harder statistical data is used today, the same basic concept that some groups are cheaper to insure than others remains a central tenet of auto insurance marketing and pricing.

How It’s Related

Underwriting in all property and casualty lines is driven by statistics. What’s more, auto insurance discounts are often available by purchasing other property and casualty products from the same company. These “package discounts” are often a great way to get cheaper car insurance. Ask your agent for more details.