Inspection Report

What Does Inspection Report Mean?

An inspection report is a document generated by an insurance company to assess the details of a specific risk. These reports examine the risk from moral, physical, and financial perspectives. For instance, in life insurance, the older a person is and the more health issues they have, the riskier they may be to insure.

When evaluating potential business, insurance companies conduct thorough due diligence to fully understand the risks they are assuming and to explore ways to manage or mitigate them. Tools used in this process include application forms, notes from brokers or advisors, and inspection reports.

In the context of life or health insurance, inspection reports typically involve a medical examination conducted by a doctor or healthcare professional. This may range from a basic physical exam to more comprehensive tests, including blood and urine tests. For applicants with pre-existing health conditions, this could involve reviewing medications and doctor’s notes.

For home or business insurance, an insurer may require an inspection report to be completed within a specified time frame (usually 30 to 60 days) after binding a policy. In these cases, the policy may depend on the inspection revealing no issues that would raise concern for the insurer.

Insuranceopedia Explains Inspection Report

Inspection reports are used across various types of insurance, from life and health insurance to property and liability insurance (such as home or business insurance). Despite the context, the core purpose of these reports remains the same: insurance companies request them to gain a deeper understanding of the risks they are assuming, identify potential risk factors, and sometimes make recommendations on how to manage those risks.

For life and health insurers, inspection reports typically involve medical examinations, testing of blood or urine, and a review of medications and medical records. These reports may also include information about the applicant’s financial status, occupation, moral character, participation in sports, driving history, other insurance, habits, and lifestyle. Often, an interview with the applicant is part of the process.

The importance of these reports lies in helping insurers assess the risk involved. If insurers take on too much risk for too low a premium, they may face substantial losses. As inspection reports often contain sensitive medical or personal information, they are kept confidential to respect the applicant’s privacy.

In property and liability insurance, inspection reports are used to manage risk by evaluating the conditions of the insured property. Many insurance companies require a satisfactory inspection report to issue or maintain a policy, usually within one to two months of binding. The insurer coordinates with the insured to schedule an inspection of the property.

During the inspection, the inspector will assess risk management measures in place, such as alarms, sprinklers, and general upkeep, and may offer recommendations to reduce potential risks. These recommendations are categorized into mandatory and recommended changes. Mandatory changes must be implemented or the insurer may rescind the policy, while recommended changes are suggestions to reduce the risk or severity of potential losses. For example, installing railings on long staircases or balconies may be a common recommendation.

In addition to insurance companies, specialized inspection report service providers also produce these reports.