Loss Runs – An Insightful Overview of Past Claims
Past Claims
We’ve all had those moments when a new business is seeking (or even your existing client is renewing) a commercial insurance policy, and they ask, “Why do we need loss runs?” It’s a term that might sound foreign to many but is undoubtedly significant in the insurance world.
TL;DR
- Loss runs are essentially report cards for your insurance claims history.
- They provide a detailed account of claim activity during a policy period, influencing both renewals and new insurance quotes.
- A lack of understanding about loss runs can result in underprepared clients and unnecessary confusion.
- A must-have practice is the regular review of loss runs to identify trends, take corrective action, and keep insurance costs in check.
What Is "Loss Runs" in Insurance?
In simple terms, loss runs are similar to a report card from your insurance company. They show claim activity for a policy over a certain period, typically five years. They’re significant documents when shopping for a new insurance policy or renewing an existing one.
From a technical perspective, loss runs are detailed records provided by current or previous insurance providers that outline the history of claims made on a policy. They include information on the date of loss, type of claim, claim status, and settlement costs. Generally, these reports are included in the underwriting process to assess the risk profile of the applicant.
Key Related Terms to Know
- Claim Status – indicates whether a claim is open, closed, or in process.
- Policy Period – the timeframe during which an insurance policy is effective.
- Claim Frequency – how often claims are made on a policy.
- Reserve Funds – the money set aside to pay future insurance claims.
- Underwriting – the process by which an insurer assesses risk and determines the premium to charge for insurance coverage.
Common Questions About Loss Runs
How Do I Get a Loss Run Report?
You can request loss runs from your current or previous insurance company. Most insurance providers will offer loss run reports upon request, although it may take a few days to generate the report because it is often manually prepared.
What Is an Insurance Loss Run?
An insurance loss run is a report from an insurer that provides a history of claims made on a specific policy over a particular period. It includes details such as the claim date, type, amount paid or reserved, and current status.
What Are Insurance Loss Runs Used for?
Insurance loss runs are used in underwriting commercial insurance to assess the risk profile of an applicant or renewer. They provide a view of your claims activity, shedding light on potential patterns or problems that could affect insurance costs and eligibility.
What Is Included in a Loss Run Report?
In a loss run report, you’ll find comprehensive details of all claims filed during a policy period. This includes the date of each loss, the type of claim, amounts paid for each claim, and status (open/closed) of each claim.
Loss Runs vs. Claims Activity Report
While both provide insights into an insured’s past claims, they serve different purposes. Loss runs are used mainly for underwriting and risk assessment, while a Claims Activity Report is often used for internal business analysis and trend spotting.
Comparison Area | Loss Runs | Claims Activity Report
|
Primary use case | Underwriting and risk assessment | Risk management and trend spotting |
Coverage / concept type | Claims history | Claims trends and patterns |
Typical exclusions | None | May exclude certain types of claims |
Who is most affected by errors | Insured parties and underwriters | Business owners, risk managers |
Common mistakes | Misinterpretation of claim details, errors in claim status | Failure to spot trends, missing key claims data |
Real Claim Examples Involving Loss Runs
Scenario 1: John, a small business owner, is seeking to renew his commercial insurance coverage. During the renewal process, the underwriting team requests loss runs. The report reveals several small claims that were settled swiftly, showing a positive claims management practice. However, one large open claim is still being resolved. This information impacts John’s insurance quotes, leading to higher premiums due to increased risk.
Scenario 2: Susan owns a convenience store and is shopping for a new business insurance policy. She requests loss runs from her previous insurer. The report shows a high claim frequency, although all claims closed with relatively low settlement costs. These findings affect Susan’s ability to secure favorable terms with new insurance providers because she appears to be a high-risk client.
Scenario 3: A manufacturing company experiences a year with an unusually high number of claims due to a process change in their operations. Upon reviewing their loss runs, they identified the trend and understood the bottlenecks, allowing them to enhance their risk management strategies.
Limitations and Common Mistakes in Understanding Loss Runs
- Misunderstanding the claim information or status displayed.
- Not knowing how to request loss runs and missing application deadlines.
- Overlooking the importance of loss runs in influencing policy details and premiums.
- Failing to review loss runs regularly to spot claim trends and take corrective actions.
How to Explain Loss Runs to Clients
Personal Lines Client: “Loss runs are just like your claim history or a credit report, but for your insurance. It tells your insurance company about any past claims you have made.”
Small Business owner: “Think of loss runs as a report card from your insurance company. It shows any claims made in the past five years and can affect your premium and eligibility for coverage when renewing or changing your insurance.”
CFO or Risk Manager: “Loss runs are critical in our insurance process. They show our claims history, patterns, and potential risks, helping us identify areas of improvement and strategize our risk management plan.”