I Signed, Now What? Understanding Insurance Subjectivities

Carl Niedbala - Founder Shield
Carl Niedbala

COO & Co-Founder

Often referred to as the “pitfalls” of a quote, insurance subjectivities are certain conditions you must follow to ensure the coverage you need. It’s the insurance carrier’s way of guaranteeing your business upholds to a particular standard. Insurance subjectivities make covering you less of a risk.

Sometimes negotiable and always outlined in your initial quote, insurance subjectivities are not exactly the evil contingencies some make them out to be. Instead, they’re an innovative way to customize the safeguarding of your business.

It comes as no surprise that, like you, insurance companies have a lot at stake. They want to know if you’re worth it, essentially. As in any healthy relationship, establishing guidelines and boundaries are simply the pathway to success.

Yet, insurance subjectivities are more than a “good qualities” checklist on a first date. This post will help you make sense of the contract process and ultimately help you to understand your policy better, too.

What Are Subjectivities?

Reviewing insurance subjectivities might seem like a total drag. However, when it comes to landing a top-notch quote, it’s typically one of the first items on your to-do list.

In short, subjectivities are requirements you must comply with to ensure coverage as outlined in the insurance policy. If you don’t comply with the subjectivity, an insurance company may not cover claims related to that subjectivity.

For example, a subjectivity might involve changing a procedure to prevent a certain claim from reoccurring. So long as the company continues to follow the new procedure, the insurance carrier has no qualms about coverage.

Since no one likes to fall into the vortex of loopholes, insurance subjectivities are high priorities. After all, they exist for one main purpose—protection.

Not only do subjectivities protect you and your business from legal liability but they also protect the insurance company. Think of them as the terms of this professional coupling where you each get a little of what you want in exchange for security.

Commercial Insurance Application Process

Before we dive into specific types of insurance subjectivities, let’s review the actual application process. As a venture-backed company, it’s absolutely vital to understand this process. Mostly, because each step relates directly back to your insurance subjectivities.

1. Review Submission

In addition to an OFAC check, an insurance carrier will verify with all business units to see if the company has ever submitted an application in the past.

2. Consider Risk Appetite

To determine whether the professional union is beneficial, the company must fit both the unique guidelines of the insurance carrier as well as the underwriting group.

3. Evaluate Risk Characteristics

Verifying that nature of the risk actually fits within the criteria for writing business, an insurance carrier assesses a company from a big picture perspective—company size, claims history, quality metrics, and the location of the business.

4. Determine Pricing

Using a state-approved rating model or an adjusted rate price (depending on claim history), an insurance carrier will lay out what it will take financially to cover your company. Making educated guesses of the likelihood of a loss, the insurance carrier will transfer some risk to another party (impacting the cost).

5. Quote

Up until now, the application process has been slightly hued with the gray colors of number crunching. The quote, however, is where things get exciting. This is also where insurance subjectivities enter stage left.

As imagined, a quote offers high-level details about the coverage. This valuable information is what a broker uses to “shop around” for the best deal. The best part of a quote is that it’s not written in stone.

Based on terms and conditions, a broker can negotiate with the insurance carrier to some extent. Using the list of subjectivities, an insurance carrier can communicate exactly what the underwriter needs before binding coverage with a company.

6. Binder and Policy Issuance

Simply said, a binder is the engagement ring of insurance. It’s the agreement between an insurance carrier and the insured company describing coverage intent. Until the formal policy is issued, the terms of the binder dictate coverage.

7. Create Underwriting File

Every insured company has an underwriting file recording their unique business story. Outlined in this particular file are underwriting and negotiate records as well as legal documentation pertaining to the submission application.

8. Monitoring

An insurance carrier will keep a watch for claims activity to determine the profitability of the risk, implementing corrective action when needed.

Common Insurance Subjectivities

Subjectivities can seem threatening upon first glance. Yet, the requested information does have a vital purpose for all parties involved.


As suggested, qualifications are what deems you eligible for coverage. They work to convince the insurance carrier that you have what it takes to deliver on operations or services promised—especially those relating to the insurance policy.

Qualifications shine a positive light on your company, serving as an enormous bonus toward your eligibility. Basically, insurance carriers are thrilled to see that you are backed by knowledge and not just venture capital.

After all, it’s not solely the greenbacks they want to verify (but more on that below), it’s your professional suitability and sustainability. They want to know you can keep the ball rolling day after day, year after year.

With that said, insurance carriers peg plenty of items as a qualification. One of the most popular examples is a statement of the insured’s qualification (SOQ). Making up an SOQ are skills, knowledge, and abilities that you possess. Even a company brochure, certification, resume, or LinkedIn profile can count as a qualification.


Where qualifications test your industry knowledge financials test your stability.

Even your personal auto insurance carrier, for example, wants to know you can shell out $500 for a deductible should you need to file a claim. Commercial insurance works the same way, which is why an insurance subjectivities focus on your big picture financials.

If Q1 was filled with financial home runs but Q2 had far less wins, the ebb and flow often translate as a potential risk. Granted, no one can predict the future, but it’s beneficial to have a game plan to secure a larger sense of financial security.

Most of the time, policies are based on the estimated revenue for the upcoming year. As outlined in the application process, an insurance carrier will take a long, hard look at your exposures. Too much of a fluctuation in your revenue and the policy will require further review, or possibly, corrective action.

Loss Runs and Expiring Coverage

No healthy future exists without a thorough examination of the past. This truth pertains to commercial insurance as well.

Underwriters like to connect the dots by looking at previous losses. This helps them to analyze the company’s history. What they’re hoping to see, especially after a significant claim, is that procedural changes were made in attempts to prevent recurrent loss.

Additionally, an insurance carrier will often request the company’s expiring policy. Mainly, this is to safeguard proper coverage and to prevent coverage gaps. This subjectivity ensures any prior retroactive dates are honored as well.

How Subjectivities Differ by Policy

It’s important to know that not all insurance subjectivities are created equal. Some policies have very specific requirements compared to others. Unsurprisingly, these differences usually depend on the company and also the type of policy.

For example, Directors & Officers (D&O) insurance frequently requires more extensive financial subjectivities, and the strength of the company is a massive determining factor. Companies that are in financial trouble are much more likely to be named in a D&O suit.  However, it’s important to have a broker that understands your funding history (how convertible notes work, for example) to paint an accurate picture of your company’s financial strength.

Errors & Omissions (E&O) and Cyber insurance fall into this category, too. These policies are often combined, and yet, a major concern of both involve how you’re storing your records. Shielding against data breaches, carriers may develop insurance subjectivities surrounding this technological theme.

The list of policy-specific subjectivities goes on and on—each one customized to your company and insurance policy. Policy servicing demands are also extensive, which is why it’s vital to work with a knowledgeable broker with access to specialty products. A great broker should help to streamline your operations, keeping your company in forward momentum.

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