The Importance of Underwriting to the Claims Person
Barry Zalma
Sep 20, 2023
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The insurance adjuster and claims investigator are major sources of information available to the underwriter to avoid moral hazards. The adjuster provides the underwriter with information gained at the scene of a loss that will alert the underwriter of the existence or potential for a moral hazard. Every person involved in claims must understand that he or she has an important underwriting function as probably the only person from the insurer who actually communicates directly with the insured and actually views the property that is the subject of the insurance.
The sources of information available to the underwriter are limited. At best he has the answers of the insured, and the insured agents to questions posed in an application and the information provided by a pre-risk inspection. These are seldom sufficient. The investigation and adjustment of a claim is a source of detailed information about a risk that should cause an underwriter to reevaluate the risk and if a moral hazard is revealed the underwriter can take steps to protect against the moral hazard.
The adjuster must be able to recognize and report any information that might affect the underwriter’s decision to continue to insure the insured. When evidence of a moral hazard is discovered, the underwriter should be immediately alerted. Occasionally the information contained in the application is enough to make a decision. Usually, the underwriter will request more information in order to get further details to substantiate or negate suspicions. Every source of information is important to the underwriter as he or she attempts to decide whether to insure or not insure an applicant for insurance.
The Application
Clues to moral hazard can be found with statements about previous losses, previous business experience, the person in whose name title is held, and the number of mortgagees. If an inspection by the producer or loss control engineer is required, the underwriter will also learn about poor housekeeping or poor business practices.
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This is a change from my normal blog postings. It is my attempt. in more than one post, to explain the need for professional claims representatives who comply with the basic custom and practice of the insurance industry. This statement of my philosophy on claims handling starts with my history as a claims adjuster, insurance defense and coverage lawyer and insurance claims handling expert.
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When I was discharged from the US Army in 1967 I was hired as an insurance adjuster trainee by a professional and well respected insurance company. The insurer took a chance on me because I had been an Army Intelligence Investigator for my three years in the military and could use that training and experience to be a basis to become a professional insurance adjuster.
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