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So insurance companies all have deep pockets? No. Not necessarily, anyway. Some are operating on very tight margins. The way it works is that the guys or girls you talk to on the phone when hunting for a new quote are usually just customer service staff or telesales drones working for a brokerage. These brokerage firms don’t directly take any risk. Instead, they collect your raw data, punch it into a computer and look to see which underwriter is prepared to take you on.


This dates back to Lloyds of London (founded 1688), an organisation that insured ships trading in the colonies and elsewhere. Lloyds isn't an insurance company, take note. It's a marketplace. And in that marketplace, no single individual or institution could afford to shoulder the entire risk of a policy. So a group of individuals, or firms, shared that risk. The individuals, generally called "names" would issue a certificate of insurance and write their names under the policy title or heading, or under the ship name.

Hence "underwriter".

The same practice applies today, and these underwriters generally have no public face. As a consumer, you’ll never hear their names except perhaps briefly when your chosen insurance broker reads the spiel on your new policy (which they're obliged to do), or possibly when you’re involved in an accident. That’s when you’ll receive correspondence highlighting the underwriter—which often sub-contracts the practical/bureaucratic clear-up work to another (unnamed) group.

From the consumer point of view, you always deal with the company/broker who sold you the policy. That’s who your legal contract is with. But if your case ever comes to litigation, your lawyer might well drag a few other firms into the fray.



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