What are underwriting rules?

These are rules used by insurance companies to assess the risk they are being asked to take by insuring you. In Nova Scotia, these rules are established by the insurance companies and are based on their own business needs.

Underwriting is essentially an exercise in assessing risk. The guidelines and rate structures established by insurance companies are based on the past experience of many years and literally hundreds of thousands, indeed millions, of cases.
Each applicant for insurance is assessed against the higher or lower risk categories. Some of these have to do with the individual record or circumstance. Others have to do with that person’s intended use of their automobile, how much they use their vehicle, or where they do most of their driving. Included in these considerations are such factors as where you live, how you use your vehicle, who else is regularly using your vehicle, your accident claim history and the claim histories of any regular users of your vehicle, and the value of your vehicle.

Once an underwriter has assessed your application, the company will decide whether to offer you a policy, and at what price (or premium). If you have made your inquiry through an independent broker, that person is expected to get quotes on your file from different companies to get you the best deal.

How do insurance companies determine rates?

Insurance companies keep very detailed statistics on the drivers they insure. These statistics help insurance companies predict the likelihood of your having an accident and determine the underwriting rules they should impose.
To assess your risk, the insurance company looks at your personal characteristics such as

• gender
• where you live
• how you use your vehicle
• how far you drive each day
• who else is driving the vehicle
• driving record and accident claim history of all drivers
• value of your vehicle
• type of vehicle, including theft rating for that vehicle type
• the type of coverage you chose
• deductible amount

Insurance companies may not use age or marital status in determining your risk classification after November 1, 2004. Premiums are also based on the specific coverages and deductibles you choose for your policy. If you buy optional coverages, you will pay more.