While your company is shopping for insurance coverage, you’re told you need a loss run report. Now you’re wondering: What is a loss run in insurance and how do you obtain one? Let’s dive into what a loss run is, how you can obtain a loss run for your business and the role that loss runs play in commercial insurance coverage.
What is a loss run report?
An insurance loss run report or loss run statement covers a policyholder’s past claims. It typically covers a period of three to five years or the full period of coverage if the full period is less than three to five years. The loss run report can provide pertinent information about the policyholder, such as:
- Identifying information, including the policy number, effective date and insured name
- Claims history, including each claim the policyholder has filed, the date of the claim, the type of claim and a description of the claim
- Claims costs, including how much the insurer has paid or set aside
- Claim statuses, including whether each claim is open or closed
How can businesses obtain a loss run statement?
Since loss runs are common documents, obtaining one shouldn’t be difficult. Request a loss run report by contacting your insurance broker so they can get in touch with your insurance carrier or ask your insurance company directly. You may even be able to request a loss run online if your insurance broker or company has an online portal. Note that the insurance company may need a few days to complete the request, so make sure to allow sufficient time for processing.
What types of business insurance use loss runs?
Loss runs are common in many lines of commercial insurance, including workers’ compensation, commercial property and commercial auto, as well as various types of liability insurance, such as general liability and professional liability. If your business uses a business owner’s policy that combines multiple coverages, this policy may also use loss runs.
How should businesses use loss runs?
Loss runs can provide information that insurance companies may use to determine a company’s exposures and how much they should charge for coverage. But, loss runs aren’t only used by insurance companies – they can also be useful for the business itself. A few ways businesses can use these reports include:
- Anticipating insurance carrier decisions. A major factor when carriers are deciding rates is your past insurance claims. If your loss run report shows a high frequency or severity of claims, an insurer may charge you higher rates or even decide against offering you coverage at all. You can better prepare for these reactions by reviewing your loss run report and consulting with your insurance broker.
- Checking for mistakes. The information in your loss run report should be accurate, but mistakes are possible, and some mistakes may hurt your company. For example, if your report includes losses that your company didn’t have or if the claims amounts are incorrect, your claims severity or frequency may appear worse than it is, which could negatively impact your rates and coverage availability. You should review your loss run for mistakes and report any you find to the insurer.
- Refining risk management strategies. A company’s loss history can reveal a lot about its risk exposures. Your loss run can provide insights into the main loss drivers at your company. By looking for patterns and trends, you may identify new priorities for your risk management strategy and gain insights that can be used to implement changes to reduce future losses.
- Negotiating better rates and terms. If your loss run shows a positive claims history, you may be able to leverage it to negotiate lower rates and more robust coverage terms.
A Different Insurance Company Will Want to See Your Claims History
Imagine your company is hit with a lawsuit after a customer slips and falls on your property. The customer slipped on a puddle caused by a leak. Since your company has received multiple complaints about the leak and has not fixed it, there may be a case of negligence. Additionally, the customer is severely injured and may need multiple surgeries and long-term care. You file a claim with your insurance company, but since you’re worried the insurer will raise your rates, you’re thinking about switching to a different insurance company. Is this a good idea?
Not really. To avoid these types of scenarios, all insurance companies will generally require loss runs to assess your insurability. If you’ve filed a claim with one insurer, the information will be visible to future insurers. In fact, your new insurer will see all your open and closed claims for the period covered by the loss run report.
How to Appeal to Insurance Carriers
A history of insurance claims may count against your company when you apply for new insurance and when your current insurance renews, especially if the claims are more frequent or severe than what is typical for a company of your size and in your industry. This doesn’t mean you should never file claims, but it does show the importance of keeping your claims history as clean as possible. This is the best way to position your company as an attractive risk for insurance carriers and to secure the best rates and terms available.
Some ways you can appeal to carriers include:
- Prevent claims from occurring. Good risk management practices may reduce the frequency and severity of claims.
- Maintain documentation. If a claim occurs, documentation could show that your company fulfilled its duties, which may reduce your liability and strengthen your defense.
- Demonstrate improvement. If you’ve had claims in the past, take steps to address the underlying causes of these incidents. This can demonstrate that you’re less likely to have similar claims in the future.
- Wait it out. Your loss run will reflect high-frequency or high-severity claims you’ve had in the past, but they won’t remain on your record forever. The sooner you start implementing good risk control measures, the sooner your loss run report can improve.
Do you need help with your claims history?
Maintaining a good loss run report requires an ongoing dedication to risk management, safety and loss control. As one of the nation’s largest insurance, financial and HR services firms, Higginbotham can help you manage your risks and control your costs. We’re committed to adding value throughout the year, not just when you’re purchasing coverage. Get in touch with a member of our team to learn more.
