What Underwriters Really Look for When Insuring High-Risk Businesses

If you run a business in a high-risk industry, you know the frustration of finding affordable, comprehensive insurance. You’ve likely faced high premiums, strict terms, or even a flat-out refusal from a standard carrier. It can feel like an arbitrary and unfair judgment, but the truth is, the underwriting process is a highly logical, data-driven science.

Underwriters are risk analysts. Their job is to predict the likelihood and potential cost of future claims for your business. By understanding their perspective and knowing what they look for, you can not only secure the coverage you need but also position your business to earn a more favorable rate.

At GrayStone Insurance Group, we serve as a bridge between high-risk businesses and the specialized insurers who understand them. We know exactly what underwriters are looking for and how to present your business in the most compelling light across our key markets, from the hurricane-prone coasts of Houston and Tampa to the construction sites of Austin and the dense urban centers of New York.

The Underwriter’s Checklist: 6 Key Factors They Evaluate

Underwriters don’t see a “high-risk” label; they see a collection of data points. By meticulously evaluating your business across six key areas, they build a comprehensive risk profile.

1. Your Claims History (The Loss Run)

This is the most critical piece of the puzzle. Underwriters will request loss runs, which are reports detailing all your insurance claims over the past three to five years. They are not just looking at the total cost of claims but also the frequency and severity. A single, large, one-time claim might be viewed more favorably than a series of small, frequent claims. The latter suggests a systemic issue with safety or operations.

For workers’ compensation, this is quantified by your Experience Modification Rate (EMR), or E-Mod. This number compares your business’s claims history to the average for your industry. A 1.0 EMR is average. An EMR above 1.0 means your claims are worse than average, resulting in a premium surcharge. An EMR below 1.0 means you have a better safety record, leading to a discount. For example, a 1.25 EMR could increase your premium by 25%, while a 0.85 EMR could lower it by 15%.

2. Your Industry and Operations

Underwriters start with your industry’s national risk profile. Industries with a high rate of injury or property damage are automatically placed in a higher-risk category. For instance, according to the Bureau of Labor Statistics, industries like transportation and warehousing (4.3 injuries per 100 full-time workers) and construction (2.2 injuries per 100) have significantly higher injury rates than finance and insurance (0.3 per 100). [Source: BLS]

Underwriters dig deeper, analyzing the specific details of your operations. They want to know:

• Do you handle hazardous materials?
• Do employees work at heights or with heavy machinery?
• Do you sell products that could cause injury or illness (e.g., cannabis or food products)?
• Do your clients have access to sensitive data?

These details help them understand the unique risks you face beyond the general industry classification.

3. Your Risk Management and Safety Protocols

This is your greatest opportunity to prove you are a better-than-average risk. A proactive approach to safety can offset an underwriter’s concerns about your industry or location. Underwriters want to see tangible evidence of a commitment to safety, including:

• Written Safety Plan: A formal, documented plan that outlines safety procedures and protocols.
• Employee Training: Evidence of regular safety training, including certifications and a record of attendance.
• Maintenance Logs: Documentation of regular maintenance on equipment and vehicles.
• Security Measures: For property risk, underwriters will evaluate your security systems, fire suppression systems, and alarm systems.

An underwriter views these measures not just as a cost but as a direct indicator of a company’s financial discipline and management expertise.

4. Financial Stability and Business Maturity

Underwriters prefer to insure businesses that are financially stable and have a proven track record. A history of consistent revenue and profitable operations suggests that the business is well-managed and has the financial resilience to withstand a minor setback. They may ask for financial statements or a detailed business plan to assess your stability. A new business, or one with a history of financial struggles, may be seen as a higher risk due to a greater likelihood of cutting corners on safety or maintenance.

5. Location, Location, Location

Your business’s physical location is a significant factor in a property underwriter’s risk assessment. Insurers meticulously evaluate a location’s exposure to natural disasters and other regional perils.

• Texas & Florida: Businesses in cities like Houston, Tampa, Austin, and San Antonio face a heightened risk from hurricanes, tornadoes, and severe storms. For example, from 1980 to 2024, Texas was hit by 190 “billion-dollar” weather and climate disasters, while Florida was hit by 94. These events account for a staggering amount of insured loss. [Source: NOAA]
• New York: Urban properties in New York face a unique set of risks, including higher property crime rates, higher potential for civil unrest, and a greater risk of catastrophic damage from a major event like a hurricane, as seen with Hurricane Sandy.
• Colorado: In Denver, underwriters are highly focused on the risk of wildfires and severe hail. The Marshall Fire alone in 2021 caused an estimated $2 billion in insured losses. [Source: Rocky Mountain Insurance Information Association]

6. Management’s Experience and Reputation

Finally, underwriters are insuring the people behind the business. They will look at the management team’s experience, professional background, and industry reputation. A seasoned management team with a proven track record of successful operations and sound business decisions is seen as a better risk than a new, unproven team. A history of past bankruptcies or legal issues can be a red flag.

FAQs About Underwriting

Q1: What exactly is an underwriter? A: An underwriter is a professional at an insurance company who evaluates insurance applications. They use data, algorithms, and their own expertise to assess the risk of a business and determine if the company should insure it, what the premium will be, and what the policy terms will include.

Q2: Can a business with a bad claims history still get a policy? A: Yes. While a poor claims history is a significant hurdle, it’s not a deal-breaker. A business can often still get coverage by providing a detailed plan for how it will prevent future claims, such as implementing a new safety program or updating equipment. A broker is essential in presenting this case to an underwriter.

Q3: How can I improve my business’s “underwriting profile”? A: The best thing you can do is to be proactive about risk management. This includes creating and documenting a comprehensive safety program, training employees, maintaining equipment, and investing in security. Also, maintain clear and transparent records of all your operations.

Q4: What are “loss runs,” and why do underwriters care about them? A: Loss runs are reports that detail your business’s insurance claims history. Underwriters care about them because past claims are the single best predictor of future claims. A loss run helps them understand the frequency, severity, and type of risks your business has experienced.

Q5: What is the “Excess and Surplus Lines” market in this context? A: When a traditional, or “admitted,” insurance company denies coverage to a high-risk business, an underwriter at a specialty or E&S carrier may be willing to take on the risk. The E&S market is less regulated and offers more flexible policies for unique or complex risks. Independent brokers are crucial because they have the exclusive access and relationships with these E&S carriers.

Your Partner in Proving Your Worth

Underwriters are not your enemy. They are a crucial partner in a successful insurance program. By understanding their process, you can move from feeling judged to taking control of the narrative.

At GrayStone Insurance Group, our deep knowledge of the underwriting process allows us to serve as your advocate. We don’t just submit an application; we prepare a compelling case that highlights your business’s strengths, showcases your commitment to safety, and demonstrates why you are a smart risk. Our relationships with specialty carriers in the E&S market ensure that even the most challenging risks can find the coverage they need.

Don’t let a “high-risk” label define your business.

Contact GrayStone Insurance Group today for a comprehensive consultation and a quote that reflects your business’s true value.