You may be forgiven for asking what is underwriting and why does it matter to me, after all, most of us have no idea what happens to our application when it goes to the motorcycle insurer for assessment.
Insurance underwriters decide whether your application for motorcycle insurance should be accepted and on what terms. They assess a risk according to the likelihood of a claim being made by weighing up a number of factors and asking for detailed information.
Motorcycle Insurers protect the rider from financial loss by taking on millions of pounds in risk each year. Underwriters are needed to identify and calculate the risk of loss from policyholders, establish appropriate motorcycle insurance premium rates, and write policies that cover the risk.
The primary function of motorcycle insurance is to act as a risk transfer mechanism between the policyholder and the insurer. The principle of insurance is that the losses of the few are subsidised by the contributions of the many.
The aim of a motorcycle insurance underwriter is to minimise losses for their company and help to make a profit.
So what are the factors that decide your motorcycle insurance premium and why.
The motorcycle itself and the several factors that are linked to it, a mature rider deciding on whether to buy a small moped or a larger sports machine will undoubtedly pay a higher motorcycle insurance premium for the vehicle that has a higher performance.
The value of a motorcycle will affect the premium but only to a certain extent. Generally insurers will have value brackets, so a motorcycle worth between one hundred pounds or three thousand pounds will not see a difference in the premium charged, however, once the value brackets increase so will the motorcycle insurance premium.
Security on a motorcycle whether it is fitted as standard by the manufacturer or a device that the rider has purchased himself will have an affect on the insurance premium, generally however, only if it is an electronic device such as an alarm or immobiliser. Chains, disc locks and ground anchors are all preventative measures but do not usually merit a discount on the premium.
Where the motorbike is kept when not in use at the home address is an important factor for underwriters. In areas where the risk of theft is high due to an inner city postcode or a high value or prized motorcycle, being able to garage the machine will have a significant affect on any motorcycle insurance premium. Keeping your vehicle on a driveway or private property would be seen more beneficial by an underwriter than perhaps keeping it on a public highway.
The age and experience of the rider has a huge impact on the motorcycle insurance premium. An underwriter will deem a younger rider a higher risk, as he would a rider who has only just obtained his full licence. A rider who has a tarnished driving record whether it be motoring endorsements on a driving licence or involvement in road traffic accidents will influence an underwriter's decision on the motorcycle insurance premium he will quote.
On the surface, underwriting seems quite a simple process. Insurers ask you the questions that are designed to capture the information they need to build a clearer picture of you, and the factors which might increase the likelihood of you making a claim. Upon completion of a quotation and gathering all the necessary information, underwriters may
* Offer cover on standard terms
* Impose additional conditions, such as insisting on a certain type of security is fitted to the motorcycle.
* Exclude part of the risk, such as theft cover if the policyholder has already experienced more than one theft claim.
An underwriter may lose business to competitors if he appraises risks too conservatively, or he may have to pay excessive claims if the underwriting actions are too liberal.
Either way, you the motorcyclist pays your motorcycle insurance premium in good faith on the understanding your insurer will indemnify you in the event of a claim.
