Underwriting Modified Car Insurance

by amaus on April 23, 2013

Modified FalconOne of Australia’s leading providers of car insurance has recently relaxed their underwriting standards on modified cars.

For many years it has been difficult to obtain insurance for vehicles with more than a few modifications.

There have been specialist underwriters such as Just Car Insurance, but when it comes to the mainstream insurers there were few options.

NRMA’s Changes

As with most insurers, NRMA were another who seemed to frown upon modified cars when underwriting them, but this has now changed.

In a dramatic underwriting shift, NRMA no longer asks policyholders for details about their car modifications, and instead provides cover on the basis that the car is ‘street legal’, so to speak.

This means that many people who previously could not obtain insurance through any of the mainstream insurers can now use NRMA instead.

Whilst people not the modified car scene may not see this as a huge change, it is in fact massive.

In the past NRMA may have only insured a car with limited modifications such as upgraded wheels and exhaust system, where as now someone could potentially insure a highly modified vehicle with a turbocharged engine conversion and major body modifications.

An exclusion that NRMA does place on the policy is that the vehicle will not be insured for racing, track work other timed events.

Rationale

It’s difficult to understand the rationale behind this change without speaking with NRMA’s underwriters directly, but there are a few theories.

For starters, one would assume that the company has done its homework and research to discover that modified cars perhaps aren’t the risk that everyone once thought.

Another important factor that many in the car scene have argued for years is that they are far more likely to look after their car and park it in safer areas than someone who has little car for their car and treats it as nothing more than a form of transport.

It certainly makes sense that someone who takes a huge amount of pride in their vehicle is going to take much more care for it, and therefore potentially be less likely to make a claim.

Impact

The obvious impact this change will have is on the specialist insurers such as Just Car.

Companies such as this previously had their point of difference being that they did offer insurance for highly modified cars, but now this competitive advantage is gone.

How long until the other insurers change their underwriting policies in regards to modified cars?  Only time will tell.

The other factor to keep an eye on from an underwriter’s perspective is the impact this will have on claims.  Obviously if claims from modified cars start increasing, NRMA will have to rethink their approach.

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Underwriting TPD Insurance

by amaus on July 2, 2012

TPD InsuranceWe already know that different forms of insurance require a different approach to underwriting, and TPD insurance is no different.

TPD insurance claims have the potential to involve vast sums of money, with many policies well into the millions of dollars in terms of the sum insured.  For this reason prudent underwriting is essential.

What is TPD Insurance?

TPD insurance will pay a lump sum to the insured person if they suffer an injury or illness that leaves them unable to work again.  More specifically, a medical specialist must give their opinion that the insured person is unlikely to ever return to work.

In the context of TPD insurance, TPD stands for total and permanent disability.  This is because essentially an insured person would need to be in that state to trigger a claim.  This is no always the case however, as we will see below.

There are two different definitions when it comes to TPD insurance, and the chosen definition can have a major impact on the underwriting process.

The two definitions are known as any occupation and own occupation.

An own occupation policy will have a claim triggered if the insured person is unlikely to ever return to their own occupation any time in the future.  Their own occupation generally refers to their normal occupation at the time of the claim.

An any occupation policy will have a claim triggered if the insured person is unlikely to ever return to any occupation for which they are suited to by qualifications or experience, any time in the future.

This difference may seem minor at first, but it can have a huge impact on the policy holders ability to make a claim, as well as how the policy should be underwritten.

TPD Insurance Underwriting

The underwriting process for TPD insurance is generally very similar to life insurance and income protection, as the events and situations covered are quite similar.

Underwriting staff dealing with TPD cover need to be aware of the rules around when an own occupation definition can be offered, as not all occupations are eligible for this definition.

For example any professional worker or skilled and qualified tradesman will generally be able to obtain this definition, but an unskilled or unqualified tradesman may not be able to.

The underwriting is important when it comes to the definition offered to the policy applicant, as the different between an own occupation and any occupation definition can be the difference between a successful claim and a declined claim.

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