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How Underwriters Perceive Your Risk

For small and medium-sized enterprises (SMEs), navigating the world of insurance can sometimes feel like deciphering a foreign language.

One term that frequently pops up in insurance discussions is "underwriting." But what does it mean, and more importantly, how do underwriters perceive risk when it comes to SMEs? Let's dive in.

What is Underwriting?

At its core, underwriting is the process by which insurance companies evaluate the risk of insuring a person or business and decide the terms and cost of that coverage. Underwriters are the professionals who carry out this assessment.

Factors Underwriters Consider

When underwriters assess an SME, they look at a myriad of factors to determine the level of risk. Some of these include:

  • Nature of the Business: A construction company will inherently have different risks compared to a software development firm. The industry you're in plays a significant role in risk assessment.

  • Business History: A long-standing business with a track record of safety might be deemed less risky than a startup.

  • Location: A business located in an area prone to natural disasters might be seen as higher risk than one in a more stable environment.

  • Financial Health: Underwriters will often look at financial statements to gauge the financial stability of a business.

  • Claims History: Past claims can be indicative of future claims. A business with frequent past claims might be seen as a higher risk.

The Importance of Risk Management

Underwriters appreciate businesses that take proactive steps to manage and mitigate risks. This can include:

  • Implementing safety protocols and training.

  • Regularly maintaining and updating equipment.

  • Having a disaster recovery plan in place.

By showcasing your commitment to risk management, you can potentially sway underwriters to view your business in a more favorable light.

The Role of Data

In today's digital age, underwriters increasingly rely on data analytics to help assess risk. This can range from analysing industry trends to using sophisticated algorithms that predict potential future claims. For SMEs, being aware of this can help in understanding how certain data points might influence their perceived risk.

The Bottom Line

The underwriting process is all about understanding and pricing risk. For SMEs, it's essential to recognise the factors that underwriters consider and take proactive steps to present your business in the best possible light. By doing so, you not only increase your chances of securing coverage but also potentially reduce your premium costs.

While the world of insurance and underwriting might seem complex, with a bit of knowledge and preparation, SMEs can navigate it effectively. Remember, it's all about showcasing your business's strengths and commitment to managing risks. A competent insurance broker can help you prepare and secure the best terms for you.


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