Now for some reason, when I start to think about the life cycle of a policy, School House Rock’s I’m Just a Bill refuses to get out of my head! And while ‘I’m Just a Policy’ doesn’t have a fun refrain or animated storyline, it does have the advantage of moving faster through it’s cycle than the US Government allows bills to!
So what exactly happens when you go to purchase your insurance policy? Well, after you find an independent agent, they’ll ask you a few questions to determine what you’re looking for and what type of insurance you’ll need. Independent agents represent multiple insurance companies and will usually know where they can best place the coverage depending on the risk.
Your agent will start a quote either directly on an insurance company’s website, or they may use a comparative rater like EZLynx or PL Rating. Here they can input basic, general information about the customer (you!), and the comparative rater will give the agent quotes from the different companies they are licensed with. Your agent will then share all of this information with you, making sure you both know that this is just a baseline quote. Together you’ll review the quotes and decide whether to accept the preliminary quote or not.
If you decide to accept this quote, your agent will fill out the rest of the information needed, and run some reports to get a final quote. Usually, these reports include an MVR (Motor Vehicle Record), CLUE (a claims-information report that contains up to seven years of personal, auto, and property claims history), and Cred.t Once you get the final quote, you’ll accept and sign! These days you can sign either electronically, or by printing out the actual application, which is kept on file in your agent’s office. They’ll then submit the quote for issuance, and it will become an active policy on the date that you request. This is what will sometimes be referred to as straight-through processing (STP). This means that there’s no intervention needed by the insurance company or underwriter to issue the quote.
Not everything that an agent wants to write can be processed by them; some risks need approval before they can be issued. This is where underwriters come in! They review the risk and policy and approve or change the wording on the policy. There are also times when the insurance company doesn’t want the agent to be able to issue a policy with certain coverages without an underwriter reviewing them first. For example, on a home policy if an agent is adding or increasing the limit of Backup of Sewer and Water endorsement, the underwriter would need to review the quote/policy to see if there have been any claims of water backup. So the system will stop the agent from continuing with the quote and it would need to be sent to the underwriter for review and approval.
Each company will have its system programmed with what they want to review. Once the underwriter receives a quote to review, they may ask additional questions and can either approve or deny the risk if it’s not something the underwriter feels is a good fit and doesn’t meet the underwriting criteria.
At this point, whether your claim was STP or a bit more challenging, you (the insured) may need to make a down payment before the quote can be issued and then you’ll be billed for the remaining balance of the premium.
For each policy that is issued, you’ll receive a dec(larations) page and policy forms for the coverage that is on the policy, along with ID cards for each vehicle covered (if an auto policy was issued). And that’s it! You’ve got an active policy! But… is it set in stone? Of course not! Next time we’ll continue this life cycle and look at a policy’s life beyond its issuance.