Why does it take longer to get an insurance quote for a business policy than for an auto policy?
This has a lot to do with the nuances and complexities involved in underwriting these two types of insurance policies.
Auto Insurance Underwriting
Automobile insurance, for the most part, is pretty standard stuff. Everyone is required to buy it, and for most cars, it's pretty uniform – but it's a different story if you have a classic car or some other special risk (learn more about Insurance Options for Your Vintage Cars).
Underwriters rate drivers based on their claims history, usage requirements and years of driving experience. They rate the cars based on make, model, and year. They'll also have a look at your location. These are all categories that are easily quantifiable and then converted into a score or a rate class that is used to calculate the driver's premium. Nowadays, in fact, most of this process is completely automated due to the sheer volume of auto insurance transactions that are processed on a daily basis (see Experts Share Top Tips for Saving on Auto Insurance for advice on keeping your rate low).
However, as you can imagine, business insurance is a much lower volume and more complicated affair.
Depending on the type of coverage you want, underwriters will need to consider many factors, including:
- Claims history (see CLUE Yourself In to find out how your claims history affects your insurability)
- Subjective characteristics of the applicant (such as their business experience)
- Sales volumes
- Number of employees
The most time-consuming part is trying to understand the client's business. Businesses are rarely standard. Two metal working companies might be in the same line of work but have completely different risk exposures that have to be taken into account. For example, if one of the companies exports its products overseas to a country with a high litigation, or if their products are intended to be used in high-risk applications such as safety equipment, the insurer might need to charge more for product liability insurance.
As you can imagine, this takes a lot more time to calculate and, at least for now, it needs to be done by a human. But with computing power and algorithms improving on a daily basis, I would not be surprised if we see instant quoting for business insurance in the not-too-distant future (see 5 Ways New Technology Will Change the Way You Buy Insurance).
Written by Jacques Wong
Jacques grew up around the insurance industry and began actively participating in 2013. Since then, he has gotten a Level 2 license, won Insurance Council of BC awards in 2015 and 2020 for academic excellence in the insurance licensing courses. He educates insurance professionals through PNC Learning and as a Thought Leader at ReFrame Insurance.
In his day job as an insurance broker, he helps businesses with creative risk management solutions and strategic advice when it comes to insurance.
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