Imagine trying to assess a client’s risk profile, but one major problem is you can’t get their loss runs. This can be frustrating, whether due to an uncooperative prior agent, a carrier’s lack of responsiveness, or simply taking over an account without the necessary records. Loss runs are essential for accurate risk assessment, impacting everything from pricing to underwriting. It’s like trying to find your way out of a dark cave when you’ve dropped your unlit flashlight.
At Captive Coalition, we understand these issues independent agents face when creating a complete submission, which generally includes at least five years of currently valued loss runs. Even for the most experienced agents, this part of the submission process can be intimidating and challenging. We will provide some strategies and an understanding of alternatives you can use to obtain loss runs.
This article will discuss how to approach situations where records are unavailable and offer workarounds to help you meet your client’s needs.
Why Loss Runs Matter
Loss runs are important in revealing an insured’s claim history, which is needed to evaluate risk. Carriers use this data to assess how much coverage to provide and at what price. Usually, insurers look for five years of loss runs to spot patterns, assess risk trends, determine whether to underwrite coverage, and where to place the price point.
Without loss runs, accurately pricing premiums is difficult (putting it lightly). A missing claims history could mean missing important red or green lights based on trends. This can lead to potentially overpriced or undervalued coverage.
Challenges Agents Face in Accessing Loss Runs
Several common obstacles prevent agents from getting loss runs, including:
- When You Don’t Currently Control the Account: It can be challenging to pinpoint which policies were in force with which carriers over the past five years.
- Carrier Bureaucracy and Delays: Especially in the excess and surplus lines marketplace, carriers can be difficult to access or work with.
- Carrier Out of Business: Even when the carrier has gone out of business, records still exist. However, locating them takes extra effort and patience.
- Non-Current or Incomplete Data: Current valued loss runs are always required, meaning they have been updated within the past 90 days.
Steps Agents Can Take to Secure Loss Runs
When you don’t control the account, there are strategic steps that can help secure loss runs:
- Engage the Client Directly
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- In most cases, clients can request their loss runs directly from the carrier. As their agent, you can show them how to approach this and what information to include.
- Inform the client that carriers are often required by law to provide policy details within 30 days. This allows your client to request and receive their records promptly.
- In most cases, clients can request their loss runs directly from the carrier. As their agent, you can show them how to approach this and what information to include.
- Explore Online Services for Loss Runs
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- Online services like Loss Run Pro™ specialize in obtaining records. They can act as intermediaries to request loss runs directly from carriers on behalf of clients. Note: the success rate can vary depending on the service and the carrier’s responsiveness.
- Consider Broker of Record (BOR) Options
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- Sometimes, a BOR approach can help. With client authorization, you may obtain official BOR status, which provides a direct line to the carrier, allowing you to request and receive records even when the policy has long expired.
- Use Industry Relationships
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- If you or your agency has connections with specific carriers or Managing General Agents (MGAs), this could expedite the process. A mutual agent can often smooth the request process, especially if you’re dealing with surplus lines or hard-to-reach providers.
- Request Documentation from the Previous Agent
- Though not always successful, a simple call to the previous agent requesting loss runs–backed by authorization from the client–might yield results. Some agents are willing to cooperate, especially when approached professionally and with formal client authorization.
How Missing Loss Runs Impact Underwriting
Agents who lack complete loss runs face limitations, especially in competitive pricing. Nearly all underwriters hesitate to quote without them, and some carriers require an entire five-year history even to consider a submission.
As an agent, there are ways to work around this. Explain to clients how providing this information may lead to more competitive pricing and broader options.
Give Yourself Time to Obtain the Data You Need
For optimal results, give yourself time to gather the data you need. Loss runs are not optional. They are necessary for the underwriting process to be completed. Always allow enough time to obtain the data you need.
Carriers often require current data within a 90-day period. If you’re dealing with an approaching expiration or need additional time to gather data, work with the client to adjust the submission or renewal timeline if feasible.
Moving Forward as an Agent
Lack of access to loss runs can be frustrating, but it doesn’t have to be a deal-breaker. Independent agents who understand captives have an edge and understand that captive insurers need the same loss data as the traditional marketplace. With the proper data, captives can present unique solutions.
By clearly explaining these options, you’ll help clients see how a captive structure can benefit them and that their claims data is a necessary part of the total picture.
Read our Captive Insurance Prequalification Checklist to see if your best clients would be a good fit for a captive insurer.
When you have access to your client’s loss runs, use the Captive Coalition Insurance Calculator to see the initial investment required to join a captive, potential underwriting profit, and maximum out-of-pocket costs in a high claims year.
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