Let’s keep it real, “underwriting” sounds like one of those terms you nod along to in a meeting, hoping no one asks a follow-up question. We get it.
Our copywriter had to go through 2 full weeks of training to understand it well enough to write this blog.
But underwriting’s kind of important when it comes to insurance. So we’re here with a short, pineapple-flavoured version for you to sip on, with way less jargon and a bit more pizazz.
Because even though we bring you top-tier insurance with a free quote (click here, bestie, we promise it’s not a phishing scam), we’re also here to put you on to all things insurance ed.
TL;DR: How underwriting affects your insurance premiums, what underwriters look at, and how you can improve your risk profile
- Underwriting is where insurance providers determine the risk of insuring your items. Depending on this risk, your premium will either be higher or lower. (Higher risk = Higher premiums)
- There are a number of factors underwriters look at in determining your risk. These include your age, claim history, the value and use of your asset, and your location.
- Improve your risk profile by keeping your claim history clean, your credit score clean, taking extra security measures (depending on the item you want insured), and bundling your coverage.
What is Insurance Underwriting?
Underwriting is basically the Beyoncé of the insurance world, quietly carrying the whole industry on its back. (If you’re a Beyoncé hater, just ignore that line, okay?)
At its core, insurance underwriting is how insurance providers figure out how risky it is to cover you and your stuff. By establishing this risk, they are able to not only determine whether it is an acceptable risk or not, but also calculate a fair premium for you to pay for the coverage.
Basically, it’s like your bestie reviewing your latest Tinder match, checking for red flags, and letting you know if it’s worth going on a date with them.
This makes it an important part of the insurance industry because it’s all about balancing risk. (The higher the risk, the higher the premium.)
So long story short:
- It helps insurance providers establish the risk of insuring someone
- It helps them calculate an accurate premium according to the risk
- It helps balance the likelihood of risk with the cost of coverage
And the people who are responsible for this are just as important. Cue to stage, insurance underwriters.
Who Are Insurance Underwriters?
Insurance underwriters are the main characters of the underwriting process. These insurance pros cav (for the boomers, this simply means “understand”) insurance risks on a deeper level and know how to avoid them. They’re also there to make sure your insurance journey is a win-win situation for both you and your insurance provider, especially in regards to your premium (See, they’ve also got your back, bestie).
Fun fact: No two humans will ever get the same insurance premium price. You could live in the same complex, be the same age, and even have the same job, yet still pay different premiums. That’s what underwriters are here for.
Let’s unpack what they do a little bit.
What Do Insurance Underwriters Do?
While their process may vary based on the type of insurance they are underwriting, underwriters typically follow these steps:
- Review your insurance application
- Evaluate risk
- Determine whether the insurance provider should give you coverage
- Recommend the policy and conditions the insurance provider should agree to
- Set premiums
- Define T&Cs
- If there are any issues with your application, they will negotiate with the insurance provider to find ways to cover you (Remember the win-win? Yup, this is it in action)
But in order for them to do this, they need to first establish your risk profile.
Risk Profile 101
Think of your requirements when dating… good job (because love don’t pay the bills), dresses well, and smells good? That’s a risk profile right there. And that’s how insurance underwriters work too, looking at the different factors that could impact the risk of insuring you.
Simply put, a risk profile is a comprehensive assessment of the likelihood that you will file a claim. This is what helps insurance providers and underwriters assess the types and levels of risk that they are willing to take on, and how much they’ll be charging you for it.
Get your reading glasses on, because it’s time to unpack the factors that contribute to your risk profile.
- Personal history:
1.1 Claim history: If you’ve made a lot of claims in the past, insurance providers might see you as a higher risk to insure (Yes, we’re side-eyeing you, Mr. “I’m On My 6th Phone of The Year”).
1.2 Credit score: Some insurance providers consider your credit score when establishing your risk profile (Pssst, a good credit score might result in lower premiums, while a poor score could mean higher premiums).
- Types of assets:
Simply put, the nature and value of the goods you are trying to insure play a big role in your risk profile (Because insuring a luxury car will cost you more than insuring an “it gets me from A to B” car).
- Your location:
Where you live has a direct impact on the likelihood of theft, natural disasters or accidents, which means it would increase the chances of you making a claim sooner rather than later.
- Your behaviour and usage:
How you use what you want to insure affects your risk. For example, a car you drive on a daily basis will cost more to insure than one you only use occasionally for leisure.
- Safety and security measures:
If you’ve taken steps to reduce risk, insurers may reward you with lower premiums. For example, a car that is fitted with anti-theft devices and parked in a secure spot is less of a target, which means lower premiums.
- Age and personal profile:
Your age tends to have an impact on your risk levels. For example, younger drivers are often seen as higher-risk drivers, meaning their car insurance premiums will be higher. (Sorry chile, you still need to stand on business a bit longer for insurance providers to trust you.)
- Marital Status:
Married people are generally considered low-risk drivers, meaning their car insurance premiums will be lower. That’s more reason to put a ring on it, right? (No, your girlfriend didn’t put us up to this, we promise)
- Policy T&Cs:
The type and amount of cover you choose will affect your premium.
P.S. At Pineapple, we assess way more than these (we just can’t spill, because competitive advantage mos?)
With all this information, the insurance underwriter is able to build up a risk profile which helps them determine if you should be covered, and how much you’ll have to pay. But, how does this actually help an underwriter do their job? Let’s find out by looking at the entire underwriting process. We may or may not have taken this information from an underwriter’s LinkedIn page.
How The Underwriting Process Works in South Africa
- Risk Assessment:’
This is where underwriters size you up (no, not in that creepy way). By looking at your risk profile, they will use company guidelines, data analytics, and their own expertise to determine your risk. Today, some underwriters use predictive analytics and AI to help them assess your risk more accurately. This means the process is faster and smarter, saving you time and coin.
- Policy Pricing:
Based on the assessed risk, underwriters then need to crunch the numbers and determine the premiums you’ll need to pay. This pricing needs to strike a sweet balance though: it must be enough to cover potential claims, but not so high that it makes your wallet cry.
- Policy Ts and Cs:
Underwriters will define the specific terms, conditions, limits, and exclusions of the policy. This ensures that your coverage is tailored to your unique risk level while still helping the insurer stay compliant with regulatory standards.
- Underwriting Decision:
This is where the underwriter makes a final call. They can:
- Approve the policy (yay)
- Modify the policy terms
- Request more information
- Decline the application (Eish, but with reasons, mtase. Trust, they won’t just ghost you)
- Policy Issuance:
If the underwriter decides everything is lekker and approves the policy, the insurance provider must then issue the official policy documents. These will outline your coverage details, premiums, start date, and specific obligations you need to meet.
Pineapple leverages external partners to enhance precision in underwriting decisions.
Now you’re probably wondering why we go external. Worry not, because we’re giving you all the tea as to why we (and some other insurance providers) do this.
Why Pineapple Uses External Underwriters
- Managing the risk:
Real talk, insurance underwriting is risky. By sharing this responsibility, companies are able to distribute any potential financial burden of claims across multiple parties.
- Makes handling large or specialised risks easier:
Sometimes, the risk is too much for a single insurer to manage. By using external underwriters, we are able to make sure we cover these sustainably.
- Access to specialist expertise:
Working with underwriting firms allows us to access advanced risk models and top-tier expertise, which means you’ll be getting smarter and accurate pricing.
- Support for smaller insurers:
We’ve made some major boss moves, but Pineapple is still a baby. While we are an accredited financial service provider, we’re not a licensed insurer just yet. By making use of external underwriters, we are able to offer you a wider range of products, without stretching ourselves thin. So everybody wins.
See, it’s not just about us. We’re committed to making sure you’re not spending too much on your insurance, in more ways than one.
That’s why we use Old Mutual Alternative Risk Transfer Insure Limited, part of the wider Old Mutual Group, as our insurance underwriter.
With a history that goes back as far as 179 years, Old Mutual is one of the oldest, leading companies in Southern Africa’s short-term insurance landscape. This partnership has given us access to innovative technologies such as AI and quality data analytics that not only introduce a new customer experience but also ensure we’re able to provide accurately priced insurance cover.
They bring the brains. We bring the platform. You get insurance that just makes sense.
Why Underwriting Is More Than Just a Checkmark
Underwriting isn’t just an extra step in getting insurance; it’s a crucial part of it. It helps ensure you’re getting the best premium that is based on your specific profile. This ensures that you’re not spending too much on your insurance, because let’s be honest, in Cyril’s economy, every cent counts.
Curious how your profile scores? Get a quote today and find out. We promise it’s worth it, aaaaand it’s free.
Frequently Asked Questions: Underwriting 101
1. What affects your underwriting score in South Africa?
Your underwriting score, also known as your risk profile, is impacted by a number of factors. These include:
- Your payment history: If you’ve missed any payments in the past, this is going to impact your score
- Age: Like we said earlier, the younger you are, the higher your risk is
- Driving history: Factors such as your past claims and accidents you’ve been involved in impact your score, too.
- Location: Some areas have high accident or theft rates, while others are just blessed with problematic weather, so this impacts your score
- The insured item: Factors such as a vehicle’s make, model, year, modifications, and whether it’s used for work or personal driving impact your score
- Claim history: A long history of claims impacts your score, making you a higher risk
2. Does Pineapple underwrite policies in-house?
No, Pineapple doesn’t underwrite policies in-house. Instead, we act as a digital insurance intermediary, with underwriting provided by Old Mutual Alternative Risk Transfer Insure Limited, a licensed non-life insurer.
3. How can I improve my insurance premium as a freelancer in South Africa?
Being a freelancer can put you in a position where you’re seen as a higher risk. However, there are a few steps you can take to improve your insurance premium. These include:
- Keeping your claims record clean: Fewer claims = Lower risk.
- Bundle your cover: Insuring all your belongings under one policy can earn you a better insurance premium.
- Improve your security measures: The safer your setup, the lower your risk and premium. It’s simple things like keeping your valuables safe, parking in a safe location, and even improving your home security that can improve your insurance premium.
- Keep your credit score clean: Some insurers use your credit behaviour to determine your risk, so manage your debt wisely so this doesn’t negatively impact your premium.
4. What do Pineapple underwriters check before approving life cover?
At the moment, Pineapple doesn’t offer life insurance. We focus on short-term cover like car, home contents, and portable possessions.
5. What risks do underwriters flag most often in South Africa?
Here are the top 3 risksthat underwriters in South Africa flag the most:
- Living in a high-crime area: If your home or car is in a crime hotspot, that’ll raise eyebrows, and possibly your premium.
- No security features: If your home has no extra security measures (such as alarm systems or burglar gates) or your car has no tracking device, underwriters will flag you as a higher risk.
- Your claims history: If you have a history of making a lot of claims (whether it be frequent fender benders or a cracked phone every month), this makes you a higher risk.
Pineapple (FSP 48650) is underwritten by Old Mutual Alternative Risk Transfer Insure Limited, a licensed Non-Life Insurer and authorised FSP. T&Cs apply.
Please Note: The information provided above is for informational purposes only; you should not construe any such information as legal or financial advice.
