You may have heard the term “loss run” or “loss run report” when applying for business insurance or renewing your policy.
Insurers use a loss run report to figure out the risk level of a certain client. However, loss run reports can also help you, the small business owner, lower your insurance premiums and gauge how safe you’re being.
So, what exactly is an insurance loss run report, and how do you go about getting one?
Keep reading to learn exactly how to get a loss run report and understand what it includes.
The Basics of a Loss Run Report
A loss run report shows the history of claim activity on a commercial insurance policy. Insurance providers use loss run reports for a variety of purposes, such as assessing your risk level and underwriting or determining your premiums.
Your current insurer may use a loss run report to analyze your claim history when deciding whether or not to renew your policy.
In the insurance industry, providers use a loss run report similarly to how banks use your credit score when you apply for a credit card or loan.
Let’s say you had a hard year and, unfortunately, your loss run report shows a lot of claims. Your insurance provider may decide not to renew your policy or they may assign you higher premiums as a riskier policyholder.
If you don’t have a lot of claims, your insurance broker can use a loss run report as leverage when shopping for insurance. Why? Because now you can prove you’re a low-risk and responsible policyholder, which can help you find lower premium rates.
How to Request a Loss Run Report
Loss run reports are created by your insurance carrier. If you want to request a report, all you need to do is contact your insurance agent or broker with a loss run request, and they'll contact your carrier.
You can ask for a loss run report for pretty much any type of business insurance, such as workers’ comp, commercial property, general liability, and professional liability insurance.
You’ll need to provide the business name listed on the policy and the policy number of the report you’re requesting (though your agent will most likely know this information).
Additionally, you should let them know how many years of claim history you want to see and how soon you need the report delivered.
Many insurance providers can produce a loss run within one day to one week of your request. In fact, most state regulations require loss run reports to be fulfilled within 10 business days of the request.
How to Interpret a Loss Run Report
Loss run reports follow a fairly standard format. Your agent or broker can help you interpret it, but generally when reading a loss run report, you can expect to see a detailed list of your claims history and the associated costs.
For each claim, you’ll see the following information:
- Policyholder name
- Policy number and policy term
- Date of incident
- Date of claim
- Description of claim
- Settlement costs (or amounts on reserve)
- Claim status (open or closed)
If an insurance company requests a loss run report from your broker (because they're trying to decide if they should insure you), the company will typically ask for five years of history or however long you held that policy.
If you’re the type of business with several different policies or you happened to switch providers, your broker will need to request a loss run report from each insurer to get an entire claim or loss history. If your business has not filed any claims on the policy, the report will state “no losses reported.”
The insurance provider will then review the loss run report to see how often you’re making claims and their price tag. They may also review how long it took you to make a claim after an incident happened.
Again, the information in a loss run report not only helps insurers decide whether to insure you but also how much your premiums should be—and can help your broker bargain for more affordable policies (if you don’t have a lot of claims).
Using Loss Run Reports to Improve Business Practices
Of course, in an ideal world, your broker would use your loss run report to negotiate lower premiums. But you’re a business owner and you know, more than anything, things happen. So what if you have a lot of claims on your report? Is a loss run report still valuable?
The answer is yes.
A loss run report is an excellent way to gauge how safe your workplace is and improve your bottom line.
Let’s look at a few examples using a loss run report for a workers’ compensation policy.
Analyzing Workplace Safety
Let’s say you’ve had a pretty good year, in terms of accidents, but you know there were a few incidents. So you decide to ask for a workers’ comp loss run report. You see there were five accidents throughout the year, and four of them were slips and falls at your warehouse.
Not only are these incidents leading to more insurance claims, but when an employee incurs lost time due to an injury, it affects your overall operations and productivity levels.
By analyzing all of your claims in one report, you can see the larger patterns. Understanding the type of claims in your history lets you discover opportunities to improve workplace safety and reduce the financial impact of workers’ comp incidents.
In this situation, you might decide to implement some safety measures at your warehouse to prevent your workers specifically from slipping or falling.
With better risk management practices, you could see fewer claims, lower insurance premiums, and a less time lost.
Identifying High-Risk Individuals
Let’s say instead of finding four slip and fall accidents, you realize you have several workplace injury claims for a single employee.
Now that you know who your high-risk team member is, you can make sure they understand the safety protocols. And you can revisit safety procedures. You might find that employee training needs to be improved or that you need additional safety equipment.
In other words, you can look for what’s causing a high number of claims and adjust your day-to-day to stop more incidents in the future.
Managing Open Claims and Reserve Amounts
Your report also details claims reserves, which is the amount of money set aside for a claim that has been reported but not yet settled. The claims reserve is sometimes known as reserve funds.
Claims reserves are ultimately estimates made by your insurance company. You may want to keep an eye on these if you think an assessment may be significantly miscalculated.
Get a Loss Run Report to Save Money
A loss run report can help your insurance broker get you lower premiums when shopping for (and negotiating) an insurance policy on your behalf. Not in the business for a new policy right now? Or think you had too many accidents? Well then the report can help you identify common risks and improve the safety of your workplace. And now that you know all about how this helpful tool can save you money (and stress)—all that's left to do? Get out there and request that report!