While the insurance industry provides a valuable service of covering claims for individuals and organizations, it’s ultimately a business. Agencies don’t have an unlimited supply of funds to help. This is why they need to keep track of the number of claims made on behalf of the insured.
Tracking is critical when an insurance agency covers a business. The number of claims filed might determine changes in premiums. An overabundance of claims can also result in denial of coverage or dismissal from the insurer. The way the insured learns about these claims is through loss run reports.
What Is Reported?
The loss runs report is not only for the insurer to track claims; it’s also used for the insured to shop for new agencies. In that way, it’s similar to a credit report in the way it reveals a complete history of filings that show how risky a business is.
Among the items reported on a loss runs report are:
The number of claims filed
The types of claims
How frequently claims were filed
Who Utilizes Loss Runs Reports?
Insurance firms that specialize in the coverage of business are the ones who request loss runs reports from other firms. These are normally companies that handle policies for business owners (BOP), commercial property and vehicles, and workers’ compensation.
When Are Loss Runs Reports Used?
An insurer will use a loss runs report in order to provide proper quotes to a business. This is particularly true for companies that deal in risky jobs where their employees, customers, or property are at a high-risk for damage.
A business shopping around for a new policy is usually asked for a claims history that goes back between three and five years. This is when they would contact their current or previous insurer for a loss runs report.
If the report reveals few claims were reported for property damage or injury, the company might be entitled to industry discounts. However, if the business frequently filed claims with significant payouts, then the insurer could consider them a liability. At that point, they would either offer a policy with an extremely high premium to cover their losses or altogether deny insurance.
If the latter occurs, the best recourse for the business is to review its procedures and determine where significant improvements are required. Once it makes these corrections, it could attempt to acquire a new policy. Though the premium might still be high, the reduction of risks could result in a smaller loss runs report down the line.