As a 21 year old soon-to-be college senior, I have always been told that insurance was essential and I would nod my head in agreement even though I had no idea how it worked.\u00a0 The extent of my knowledge of insurance was that you pay a predetermined amount of money to a company every month and in the event that you had some kind of accident, they would be able to cover it for you.\u00a0 In a nutshell, yes, this description is accurate but there is much more that goes on during that process.\u00a0 My objective is to explain how an insurance company works in the simplest way possible so that everyone understands.<\/p>\n
Underwriting<\/strong><\/p>\n The underwriters of an insurance company are the ones responsible for writing policies for clients.\u00a0 Their job is to determine which clients to take on and how much coverage they will offer them.\u00a0 They also determine the premium – the amount of money to charge \u2013 during the duration of the policy.\u00a0 The premium is determined by the amount of risk that the underwriter is deciding to insure.\u00a0 For example, a house that was built in the 1960s with old wiring and old shingles will cost much more to insure than a brand new house.\u00a0 This is because the potential for a major property loss is much greater with the older house.\u00a0 This example might seem obvious, but much more goes into the underwriting process.\u00a0 Factors such as the distance to the nearest fire station, the presence of a pool, or the age of the residents in the house all play a role in determining the premium.<\/p>\n To ensure that they have a good understanding of the asset that they\u2019re insuring, underwriters can order inspections.\u00a0 These inspections are conducted by professionals and the reports that they write are sent to the underwriter.\u00a0 If the underwriter sees any policy violations they can contact the insured individual to correct those issues, and if they decline to cooperate then the underwriter can issue a cancellation or they can non-renew the policy.<\/p>\n Overall, the underwriters are the ones who are responsible for writing the appropriate amount of coverage to the insured clients, while at the same time collecting enough premium so that the company has enough money to pay the claims that they receive.<\/p>\n Claims<\/strong><\/p>\n The claims department is responsible for processing and paying claims made by insured customers.\u00a0 Put simply, the claims adjusters are the ones that you speak to when you need compensation for an insured loss that you have experienced.<\/p>\n This process starts by reporting the claim.\u00a0 For example, if you are in a car accident, you would report this to your insurance company as quickly as you can.\u00a0 A \u201cfirst notice of loss\u201d form is created and assigned to an adjuster who then begins to process the claim.\u00a0 They typically start by reviewing the relevant policy to determine whether or not there is coverage for the reported loss.<\/p>\n After the coverage is verified, the adjuster will typically reach out to the insured to get their side of the story.\u00a0 This not only helps the adjuster get a clearer sense of what happened, but it also gives them a chance to root out the possibility of insurance fraud.\u00a0 If the story that the insured tells the adjuster doesn\u2019t make any sense, or the information doesn\u2019t match what is stated on the first notice of loss form, then the adjuster can investigate further for the possibility of fraud.<\/p>\n If the adjuster doesn\u2019t suspect any fraud, they will continue to process the claim by reviewing the police report of the accident.\u00a0 They will also examine photos of the scene and the damage to the vehicles to try to decipher who was responsible for the accident.\u00a0 Throughout this process the adjuster is constantly setting aside the amount of money they think would adequately settle a claim.\u00a0 This money is called the loss reserve and the amount changes when the adjuster discovers new information such as medical bills or more damage than they previously thought.<\/p>\n If the insured individual is found to be at fault then the adjuster must pay for the other party\u2019s vehicle damage\/medical bills as well their insured\u2019s damage\/medical bills up to the amount established in their policy.\u00a0 Conversely, if the insured individual is not found to be liable then the adjuster would pay for their vehicle damage\/medical bills and then they would attempt to recover that money from the other party\u2019s insurance company.\u00a0 This process is called subrogation.<\/p>\n Ultimately, once the liability has been established and the funds have been distributed, the claim has been processed and settled.\u00a0 However, this process can take months or years to be completed.\u00a0 In general, cooperation from all parties makes this process as quick as possible.<\/p>\n Accounting<\/strong><\/p>\n \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 <\/strong>The accounting department is responsible for processing payments as well as maintaining accurate financial statements for the company.\u00a0 They process checks from policyholders on a daily basis and they also make payments out to agents when they earn commissions.<\/p>\n Along with processing payments, the accounting department is also responsible for producing quarterly reports on the financial status of the company as well as yearly reports that are reviewed by state insurance bureaus.\u00a0 The quarterly reports are snapshots of the company\u2019s financial status throughout the year so that management can track whether they are progressing or regressing and make real-time adjustments.\u00a0\u00a0 The yearly reports are usually much more in-depth and some of them are sent to the state insurance bureau to be reviewed.\u00a0 These reviews are looked over by the bureau to determine whether or not the company is being financially responsible.\u00a0 If the company is found to be maintaining financial responsibility, their insurance rating can increase, which would help that company build more trust with their policyholders.\u00a0 If their reports show that they haven\u2019t been responsible, their insurance rating could drop which can potentially cause policyholders to switch carriers.<\/p>\n In a nutshell, the accounting department is responsible for managing the company\u2019s money so that they can responsibly grow and maintain trust with their customers.<\/p>\n","protected":false},"excerpt":{"rendered":" As a 21 year old soon-to-be college senior, I have always been told that insurance was essential and I would 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