Loss Runs or a Loss Run Report
If you have a commercial policy, whether it be commercial trucking, commercial auto, or general liability, chances are that most insurance companies are going to ask you for a copy of your loss runs or your loss run report when you go to shop your insurance policy. What is this report, why do they want it, and how can you get a copy of your loss run report? We will cover all of these questions in this short article.
What is a Loss Run Report?
A loss run report is a report that can be generated from your insurance carrier each year, and it will typically include some or all of the following items: the named insured, policy number, effective and expiration dates of your current or previous policies (or the term the report covers), premiums paid for last year, the lines of coverage (liability, physical damage, cargo, general liability, property, etc.), and most importantly, pertinent details of each loss you had during the report period. If there were no losses, your loss run report will state that there were no reported losses for the policy period. If there were losses, you will typically see details of each loss, including: date of loss, claim number, vehicle and driver involved in the loss, amount paid to either you or to another party as a result in the loss, and status of loss (open or closed).
If a claim is closed, you will know how much was paid out for each line of coverage. But if a claim is still open, you will see a reserve amount, which is the amount your insurance carrier estimates it will take to close the claim and pay all expenses associated with that loss. Reserves can be a bit tricky, and they can help you or hurt you, depending on the timing of the loss, as the reserve amount can jump significantly or can settle for much less than anticipated. If there is an open reserve on your loss run report and you are trying to renew your policy, it can make it difficult for you to find a competitive quote, as your carrier and other insurance carriers quoting your policy might count that reserve against you, even if it might settle for less.
Why Do Insurance Companies Want My Loss Runs?
The insurance companies use your loss run report to generate a loss ratio, which is a percentage calculation based on the amount of insurance premium you paid during the policy term versus how much money was paid out in damages to your property, auto, truck, or damage you might have done to someone else’s property or body. In general, for a commercial truck policy or commercial insurance policy, your loss ratio needs to be below 50% to be considered for any preferred pricing.
The next item the insurance carriers will take into consideration is loss frequency. Even if your loss ratio is low, but you have a tendency to “be in the wrong place at the wrong time”, or if have frequent small losses, the insurance carriers will also use this against you at the time of your policy renewal. As you may know, insurance carriers give you a lower monthly rate when you choose a higher deductible, because higher deductibles on your insurance policy indicate that you will be responsible to pay for the small incidents that may come up in your business. It is often prudent to do so, as frequent small claims reported to your insurance carrier will often cost you more in increased premiums long term. In order to get the best pricing year after year, you need to have a low loss ratio and low frequency of claims.
How Can I Get a Copy of My Loss Run Report?
You can request a copy of your loss run report from your agent or directly from the insurance carrier in most cases. These reports usually take several days to receive, and some carriers have different procedures for how they provide these reports. Some will send electronic copies, while others will only mail hard copies. You may need to contact several insurance carriers if you have had coverage with different companies in the last few years, as most companies will require 3-5 years of loss run history to quote your account. Acquiring loss runs may be difficult to get in a timely manner from the carriers and agents alike, so make sure to request your loss runs at least one month prior to your policy renewal date.
Recently, some of the largest carriers have been working on a project called Commercial CLUE reports, which means that the carriers will report the same loss information to a central company, and that loss data will follow the driver, even if it does not show up on their motor vehicle report. More to come on commercial CLUE in future articles. For now, if you have any questions, please contact your TIS insurance agent.