Insurance is a way to protect ourselves from unexpected occurrences; this can include things from acts of god such as storm, hurricanes or floods, accidents or from unexpected malicious damage. An insurance policy is a protection from risks, an underwriter is the party that quantifies the risks and calculates a risk premium for the policy.
The risk premium is the premium to cover the risks, they will usually add on fees to cover their operating costs and for a small amount of profit, this will then be the insurance premium. This premium is paid annually by the policyholder but can also be paid monthly on a financial arrangement with the broker or underwriter. The underwriter will pool all insurance premiums into various funds, some are stored as cash to use to payout in the case of a claim and others are used to invest in various asset classes to cover any shortfall between the payout funds and claims.
A high risk insurance product such as impounded car insurance will require a specialist insurance broker to find the best policy to get your car released.
An underwriter that offers cheaper policies will usually invest in more aggressive funds as they will have a bigger shortfall to cover. In years where natural disasters are rare these companies can be more profitable however in years in which a large number of natural disasters occur, these companies can struggle and even be driven to bankruptcy.
An insurance broker is someone that knows the insurance industry well and all the insurance policies available, they are the ones that can look at your needs and advise you on which insurance policy will cover the risks you have. Once they have ascertained what policies are adequate for your risks they will look for the best deal for you. An insurance broker will also add on a small fee to the policy to cover their running costs and profits. There are also comparison sites that will compare policy prices from brokers and underwriters, but they won’t have the expertise that a broker will have in finding you the best deal.
In the event that a policy holder needs to make a claim, they will usually be required to call their broker who will normally have a claims assistance department that will help with making a claim. In the case of car insurance claim, they will ask for details of all parties involved in the incident, including all parties insurance details. They will ask for accounts of the incident to ascertain who is at fault and in extreme situations may also require a police report. If the insurance company find that the costs of repair to the vehicles are more than the car is worth, they will class that as a write-off and payout a lump sum to what the market value of what the car was worth at the time. This is usually negotiated by an appointed valuation officer and the policy holder before a final value is agreed upon.
The whole process of making a claim can take anywhere from a couple of weeks to a few months depending on the complexity of the claim; how many parties are involved in the incident and severity of injuries if any. In the case of people being injured, insurance companies may continue to do checkups on parties long term that can be ongoing for a number of years.