Engineering Approach

What Does Engineering Approach Mean?

The engineering approach is a method of analyzing risk in insurance by utilizing the expertise of a professional engineer regarding an insurable item. The data provided by the engineer is then used for risk reduction and premium pricing. It is one of the inputs that goes into how business insurance premiums are calculated, since insurers price coverage based on the specific hazards an engineer identifies rather than industry averages alone.

Insuranceopedia Explains Engineering Approach

When the owner of a commercial building insures their property, the insurance company may hire an engineer to inspect the property and assess potential risks. The engineer submits their evaluation to the company, which serves as the basis for recommendations and premium pricing. For example, if the engineer determines that the alarm system is substandard or some materials are vulnerable to fire, the insurance company may require the applicant to make the necessary changes to the property before issuing a policy. The findings also shape the terms of commercial property insurance covering the building, contents, and stock, because the engineer’s report tells the insurer what the actual exposure looks like rather than what the application form claims.