Loss Run Report – Claims History Summary
In plain language: A loss run report is like a credit report for your insurance. It lists claims made on your policy over a certain period, showing the cost of each claim and payouts made by your insurer.
Technical definition: An insurance loss run report is a document provided by an insurer detailing the claims history on an insurance policy within a specific period. This report includes information about dates of claims, description of incidents, the amount of settlements, and reserve funds set aside for open claims. It is frequently incorporated into the underwriting process and aids risk management and risk assessment.
A client makes a large claim, and their premium skyrockets unexpectedly at renewal. Upset, they turn to you for an explanation and you realize they did not understand their loss run report or the impact of the claim on premiums.
TL;DR
What Is a Loss Run Report in Insurance?
A loss run report, or sometimes more simply called a "loss run," or "loss report," provides a detailed record of claims made on an insurance policy across a certain time period—typically five years. It documents a policyholder's loss history, including date of loss, type of claim, the amount paid on a claim, and settlement costs if a claim is closed. If the claim is still open (unresolved), it shows the reserved amount - the money the insurance carrier sets aside anticipating the costs associated with the claim.
A loss run report is a critical tool for underwriting insurances, such as general liability insurance, professional liability insurance, and commercial property insurance. It allows underwriters to examine the claim history and risk exposure of a prospective insured, impacting decision-making around policy issuance, terms, and premium costs.
Key Related Terms to Know
Common Questions About Loss Run Reports
What are insurance loss runs used for?
Insurance loss runs help carriers evaluate an applicant's claim history and scale their exposure to risk. This information affects a carrier's willingness to ensure a risk and the premiums they charge. They are used in renewals, and when a client switches carriers. Sometimes, loss run reports are requested by lenders or stakeholders who need to assess a business's risk management practices.
Who can request a loss run report?
An insurer or insured can request a loss run report from the current insurance provider. The policyholder, an administration, or a business's risk manager might request it as part of regular business operations or when intending to switch providers or renew a policy.
How does a high frequency of claims affect the loss run report?
A high frequency or severity of claims indicates a higher risk, typically resulting in higher insurance premiums. High claim frequency might prompt underwriters to recommend additional safety programs or training programs to reduce the incident frequency and lower risk exposure.
What does 'currently valued' mean on a loss report?
This means the report was updated or issued very recently—often within the last 30-60 days—and reflects all claim activity up to the valuation date, including changes in open claims, new claims, or newly closed claims.
Loss Run Report vs. Claims History Report
A loss run report and a claims history report both contain information on past claims, but they serve different purposes. Here's how they compare:
Comparison Area | Loss Run Report | Claims History Report
|
Primary use case | Used by insurance carriers to assess risk and set premiums | Used by insured individuals or businesses to understand their claims |
Coverage / concept type | Primarily used in commercial insurance | Used in both personal and commercial insurance |
Typical exclusions | Does not typically include small claims below a certain threshold | Usually includes all claims, regardless of size |
Who is most affected by errors | Insured individuals/businesses who may see increased premiums | Primarily the insurance carrier who might misjudge risk |
Common mistakes | Not requesting updated reports annually, misunderstanding report terms | Not checking for accuracy, ignoring the influence of a high number of claims |
Real Claim Examples Involving Loss Run Reports
Scenario 1: A retail store owner filed a series of minor claims for shoplifting incidents. The accumulation of these small claims surfaced in their loss run report, leading to a hefty increase in their insurance costs at renewal. Lesson learned: frequent small claims can significantly impact insurance premiums.
Scenario 2: A small business received their loss run report but overlooked an open claim. The unsettled claim was due to delayed medical expenses resulting from a workplace accident. The reserve funds indicated for this claim led to an unexpected premium increase.
Scenario 3: A property management company sought to reduce their insurance costs by implementing a robust risk management plan. They regularly analysed their loss run reports and adjusted their safety protocols accordingly. This proactivity led to a decrease in incidents and, consequently, a lowering of their premiums.
Limitations and Common Mistakes
Loss run reports are very useful, but they have limitations. Be mindful of:
How to Explain Loss Run Reports to Clients
Personal Lines client "Think of a loss run report as a credit report for your insurance. It shows your history of claims, including how many there were, what happened, and how much was paid out by your insurance company."
Small Business owner "Your loss run report is a detailed list of claims made on your insurance policies. It helps your insurer assess the risk of insuring your business and affects your premium costs."
CFO or Risk Manager "The loss run report provides a granular view of your claims history, crucial for strategic risk management. Regularly reviewing and understanding your loss run reports can guide your risk mitigation plans and help manage insurance costs."