What are loss runs, and why do insurers ask for them?

A loss runLoss runA loss run is a report from your insurer listing the claims filed under your policies over a set period, with dates, amounts paid and whether each is still open.Read the definition is a report from your insurer listing the claims on your policy over a stretch of years: when each loss happened, what kind it was, what’s been paid and, usually, what’s still set aside for claims that are open. When you shop for a new policy or a renewal quote, the new insurer asks for it so it can see your claims history in the old insurer’s own numbers, instead of taking your word for it.

You get one by asking each insurer you’ve had, in writing. Ask while nothing is riding on it. A loss run that takes three weeks to arrive is a nuisance in March and a real problem the week before your renewal.

What’s on a loss run

Formats differ from one insurer to the next, but the core details are much the same, and Florida’s statute on loss run statements, for one, says a statement there must show the policy number, the period of coverage, the number of claims, the paid losses on all claims and the date of each loss.

Most reports show:

• Policy details: the named insuredNamed insuredThe named insured is the person or business listed on the declarations page as the policyholder, with the main rights and duties under the policy.Read the definition, policy number, kind of coverage (such as general liability or workers’ comp) and policy periodPolicy periodThe policy period is the span of time between a policy’s start and end dates, usually 12 months, during which its coverage is in force.Read the definition
• Valuation date: the date the figures were pulled, often labeled “valued as of”
• Each claim: the date of loss, the date it was reported, a short description and a claim number
• Status: open or closed
• Paid: what the insurer has paid so far, sometimes split between the loss itself and expenses like legal defense
• Reserved: what the insurer has set aside for what it expects to pay on an open claim
• Incurred: paid plus reserved, the insurer’s current estimate of the claim’s total cost

A policy period with no claims usually gets a line saying so, or a short “no losses reported” letter, and it looks like nothing, but it’s proof of a clean record, so keep it.

How to read one

The numbers that matter most are the incurred amounts and the patterns, and here’s what that looks like on a simple report.

Look at the open claims first. A new insurer prices the reserve as written, however cheaply you expect the claim to settle, so a large reserve on a claim you think is nearly done is worth a call to your current insurer to ask whether the figure is still right. Then look for claims with nothing paid. An incident you reported that never turned into a payment may still show up with zero paid. One of those is normal. Several of the same kind start to look like the pattern described in the next section, so have a line ready on each. Finally, check for mistakes, like a claim that isn’t yours, a claim on the wrong policy or a wrong date, and ask the insurer to correct them in writing.

Why five small claims can look worse than one big one

You’d think an underwriter would care most about the biggest number on the page. Often, though, it’s the count.

The clearest statement of this comes from the National Council on Compensation Insurance (NCCI), which designs the experience rating plan that adjusts workers’ comp premiums in many states. Its guide to experience rating compares two similar employers with the same $50,000 in total losses, one from a single claim and one from ten small ones, and says the employer with ten claims would generally be expected to have the higher future costs. The reasoning is that the cost of any single accident is partly chance, while the fact that ten accidents happened says something about the workplace, and any one of those ten could have been the expensive one under slightly different circumstances.

NCCI’s plan builds that view into the formula, giving greater weight to how often losses happen than to how large they are. A single very large loss is capped for rating purposes at an amount each state sets, because, as NCCI explains it, one very large loss doesn’t imply a pattern. Ten small ones might.

That’s the workers’ comp formula, and NCCI publishes it. Underwriters pricing general liability or property don’t run that exact math, and how each one weighs a loss run is its own business, so treat what follows as reasoning, not a published rule. Still, the logic carries over. Four slip-and-fall claims at the same café over three years tell an underwriter the floor, the mats or the cleaning routine has a problem that will probably produce a fifth, while one large fire claim at a store with a clean record before and after may read as bad luck.

So the pattern is where you have room to help yourself. If your loss run shows repeat claims of one kind, the explanation that matters is what you changed, and the most persuasive version is specific: new non-slip mats behind the counter, a revised lifting rule at the auto shop, a backflow valve on the store’s drain.

How to request a loss run

1. List every insurer you’ve had for the years the new insurer asks about, and every policy with each one: general liability, property, workers’ comp and so on.
2. Contact each insurer, or the agent or broker who sold you the policy. Many insurers take requests by email or through your online account.
3. Ask in writing. Give your business’s legal name, the policy numbers, the years you need and where to send the report. A written request also gives you a date to point to if the reply is slow.
4. Ask for current figures. Underwriters usually want a loss run valued within the last few months, and one valued last year won’t show what’s happened since.
5. Start early. Ask several weeks before your renewal or before you need the quote, so a slow reply doesn’t hold up a policy start date.
6. Keep copies. Save each report with your insurance records, since you’ll likely need them again.

How fast you get one depends on the insurer and your state. Under Florida’s statute, an insurer must provide a loss run statement within 15 calendar days of receiving the insured’s written request, covering the preceding five years of claims history with that insurer for most lines. The same statute says the insurer doesn’t have to include loss reserve figures, which is a good reminder that a loss run from one insurer may not look like another’s. Other states have different rules or none, so check with your state’s insurance department.

When will someone ask for them?

Mostly when you shop. A new insurer quoting your business will want them, so have them in hand before you start comparing quotes, and what to do when your renewal goes up covers that situation. Adding a new kind of coverage can trigger a request too, as can a large contract, since some clients and general contractors ask about a contractor’s claims record before awarding work. A buyer looking at your business may want them as well.

A business that has never been insured has nothing to request, so say so on the application, and the insurer will price you on your industry, location and the other details it asks for.

What to do about claims on your record

You can usually still get coverage with claims on your record. Your job is to explain them before anyone has to ask.

Write a short note for each claim that needs context: what happened, what it cost and what you changed afterward. A store that fitted a new back-room drain after a flood is a different risk from one that didn’t, but an underwriter can only give you credit for the fix if you tell them about it. Follow up on any claim that has settled but still shows a reserve, and ask the insurer to close the file and update the figures. And answer an application’s claims questions fully, because the loss run will show the claims anyway, and an incomplete answer looks worse than the claim itself.

Claims history is one factor among several. Your industry, location, revenue or payroll and the limits you choose all affect price, as how much business insurance costs explains, and for workers’ comp, past claims feed into an experience modification rateExperience modification rateAn experience modification rate (EMR) is a workers’ comp factor that raises or lowers your premium by comparing your past claims with those of similar businesses.Read the definition, covered in how workers’ comp premiums are calculated. For the habits that tend to keep loss runs short, see ways to lower your business insurance costs.