Like unraveling the threads of a mystery, analyzing insurance loss run reports provides critical clues into the backstory behind business insurance policies. These documents decode the truth about past coverage and claims activity, unlocking insights needed to make smart decisions for the future.
Though often overlooked by some, wise insurance brokers know that properly interpreting loss runs separates the elite risk managers from the mediocre.
Read on to gain the knowledge needed to leverage loss runs to their full advantage.
What is an Insurance Loss Run Report?
A loss report, sometimes called an insurance claims history report, is a detailed record of all claims filed on an insurance policy over a specified period of time for commercial insurance. It is generated by the insurance carrier and provided to the policyholder or their broker upon request.
These reports contain highly valuable data points that help insurance companies evaluate risk and determine renewal pricing. For policyholders and brokers, loss runs allow a transparent view of past claim trends and loss history details.
Key Fields on a Loss Run Report
While loss run report formats vary slightly between carriers, most insurance providers include the same key data fields:
- Policy Number – Identifies the specific policy the claims data is associated with.
- Valuation Date – The effective date the carrier generated the loss run report.
- Total Number of Claims – Provides an at-a-glance overview of claims frequency.
- Total Paid – The total dollar amount paid out on each claim.
- Total Reserved – The amount set aside or estimated to ultimately pay or resolve outstanding claims.
- Total Incurred – The sum of the total paid and total reserved amounts.
- Date of Loss – When the incident leading to the claim occurred.
- Claim Status – Typically shows if a claim is open or closed.
- Claim Description – Brief narrative summary of the claim details and cause of loss.
Why Review Loss Runs?
Carefully examining loss run reports provides myriad benefits for brokers and policyholders, including:
- Identifying positive or negative trends in losses to guide risk management efforts. Recurring claims suggest systemic issues to resolve.
- Pinpointing new loss exposures that may require additional insurance coverage.
- Providing insurers with detailed data to more accurately underwrite and price policies. Clean claims histories often lead to lower premiums.
- Allowing brokers to shop policies more effectively to find the best fit carrier based on historical losses.
- Supplying proof of loss history if transferring to a new insurer.
- Determining the impact of policy changes or new risk control initiatives over time.
Timing for Obtaining Loss Runs
Typically, loss run reports are reviewed at least 90 days prior to a policy renewal to allow time for analysis. However, business owners or policyholders can request loss runs from insurers at any time with proper notice.
Brokers will gather multi-year loss run histories with past insurance claims when marketing an account to get quotes from prospective carriers. What’s typically included in a loss run report is 3-5 years of loss data that provides an overview of trends.
Year-to-date loss runs are also requested periodically to evaluate the current policy term. Risk improvements or new problem areas often first appear on YTD reports.
Pitfalls of Relying on Loss Runs
While indispensable, some nuances to keep in mind when evaluating loss runs include:
- Time lags – Reports may not reflect very recent claims activity if they are still being processed.
- Fluctuating reserves – Amounts initially reserved can change up or down as claims are adjusted.
- Subrogation potential – Reimbursements from liable third parties may offset incurred costs.
- Claim closure delays – Complex claims may stay open beyond the typical policy period.
- Loss analysis skills – Properly interpreting loss run data takes training and experience.
How Insurers Use Loss Run Data
Insurance carriers use loss run reports to make informed underwriting decisions at policy renewals. Key factors they analyze include:
- Loss ratio – Total incurred losses divided by total premiums. A high and rising loss ratio signals unprofitable risk.
- Claim frequency – How often claims occur. Frequent small claims suggest poor risk controls.
- Claim severity – The average size of losses. Large or unusual claims will raise concerns.
- Claim types – Losses by category reveal problem areas to address.
- Trends – Steadily increasing claims activity or costs may prompt stricter underwriting.
Getting Loss Run Reports from Insurers
Policyholders shouldn’t assume loss run reports will be automatically provided at renewal. The onus is on the insured to submit requests in writing per the carrier’s guidelines. Most insurers will readily provide loss runs to current clients upon a formal request.
If switching insurers, you may need to request letters of reference with aggregate loss data to share with prospective carriers. Disclosing full, accurate loss histories is crucial for proper underwriting.
Brokers can expedite obtaining loss runs on behalf of clients with proper authorization. However, direct policyholder requests tend to receive swifter responses from carriers.
Thoroughly analyzing loss run reports takes time and diligence. But, the payoff for policyholders and brokers can be significant in the form of optimal coverage options and cost savings. The insights within loss runs are well worth understanding for effective insurance placements.
In the end, loss run reports resemble a choose-your-own-adventure book, with myriad pathways forward depending on how the data is read. The studious reader who pays attention to the details will reach the optimal ending, where insurance mysteries are solved and savings are uncovered.
But those who ignore the clues within loss runs risk taking a substandard path. Insurance professionals who want to gain the most favorable outcomes need to approach loss run analysis as detectives, peering into the numbers to reveal what truly transpired in the past to dictate the best direction ahead.
But the best thing about all of this is that you don’t need to go it alone in deciphering the codes within your loss runs. At IWFirstCall BPO services, our experts know the quickest way to request a loss run report and have the finest loss run investigation skills to uncover every detail and opportunity.
We make it fast and easy to order comprehensive, up-to-date loss runs on your accounts. Our insightful insurance specialists can create loss run summaries that perfectly interpret the data to identify savings and craft strategic plans.
IWFirstCall has all the brain power to help you choose the wisest insurance path forward based on ironclad loss run insights. Contact us today to get started.