Understanding Loss Run Reports: What Are They and Why Are They Important?

Eman Wilder, CPIA, CISR, Account Executive – ASCE Member Insurance

When requesting a professional liability insurance quote for an upcoming renewal, you will most likely be asked for five years of “loss run reports.” If you are wondering what these documents are and why they matter, you are not alone. Many firms are surprised to learn just how important this information can be in determining their coverage options and rates.

What is a Loss Run Report?

A loss run report is defined as a detailed claims history document that shows all the insurance claims filed under your current or previous professional liability policies over a specific period of time. The loss run report could also confirm that you have no claims during that time.

You can think of a loss run report as your professional liability “risk report card” that insurance carriers use to assess your firm. The report includes information such as claim dates, amounts paid, reserves set aside for pending claims, and the current status of each claim, such as whether it’s closed, open, or still being investigated.

Why Insurance Carriers Request Loss Run Reports

The request for a loss run report is an extra step in the process of requesting a quote. The information is used by underwriters to make coverage assessments and, in some cases, pricing. Like in personal auto insurance, your “clue” report is the equivalent of your loss run report; if those reports show incidents, it could affect coverage options and/or rates negatively.

Underwriting use of loss run reports is simple because insurance companies are businesses trying to make a profit. Firms with a claims-free history are commonly viewed as lower risk, while those with frequent or high-dollar claims may be seen as higher risk. This assessment affects not only whether a carrier will offer you coverage, but also what rate you’ll pay and what terms and conditions may apply to your policy.

How Loss Run Reports Impact Your Professional Liability Insurance

• Claims Frequency—Carriers pay close attention to how often claims have been filed against you. Even if the claims were ultimately closed with no pay out, frequent claims can signal potential risk factors that insurance companies want to evaluate carefully. This can also be considered a good thing, however, as it can be a sign that the firm asks for help before a problem spins out of control by enlisting the insurance company’s pre-claims assistance features.
• Claim Severity—The dollar amounts involved in previous claims matter significantly. A single high-dollar claim might raise fewer red flags than multiple smaller claims, depending on your profession and the circumstances involved.
• Trends and Patterns—Insurance underwriters look for patterns in your claims history. Are the claims related to similar types of work or clients? Do they indicate a process or procedure that may need to be reviewed? These patterns help carriers assess your risk profile more accurately.
• Current Coverage Limits—Similar to auto insurance, your current professional liability limits can influence how new carriers view your application. Lower limits versus higher limits may indicate that you take risk management seriously and are committed to adequate protection.

Getting Your Loss Run Report

There are two main methods of obtaining your loss run report:

1. Contact your current insurance carrier or agent and request a copy. Most carriers can provide this document within a few business days.
2. Some firms are not comfortable requesting the loss run report from their current agent. In this case, a loss run release form can be completed and provided to the agent you are working with to get a quote on the professional liability insurance; the agent will then try to request the report directly from the carrier on your behalf. However, this method isn’t always successful, and it may require a call from the firm personally to request the loss run report.

Either way, you are legally entitled to receive reports within a certain period of time following the request. This time period varies by state, and it is regulated by the state’s department of insurance.

If you have been insured with multiple carriers over a five-year period, you will most likely need to request reports from each one to provide a complete picture of your claims history.

Be Proactive

If you know your renewal is approaching and you want a quote elsewhere, take the initiative and request the report before the renewal. Delays in providing the loss run reports will delay your quote and, sometimes, you may not even receive a quote without it. Be aware that the loss run reports must be “currently valued” or “currently dated,” which may mean requesting them twice—once to submit with your application and again to bind coverage.

Having an understanding of your loss run report puts you in a better position when seeking new coverage. Review the report carefully for accuracy and be prepared to complete a form called the claim supplemental form. This form will have you explain in detail about the claim and the processes that have been put into place to prevent a recurrence in future claims that are similar.

Remember, a clean loss run report can be your ticket to better rates and broader coverage options.