An Insurer’s Guide to Spotting a Risky Insurance Customer

For insurance companies, a risk is the possibility of a financial loss or an adverse event that can interfere with their ability to fulfill their mandate and can call for the submission of an insurance claim. The various risks associated with insurance include changes in morbidity rates, mortality rates, catastrophic rates, and others. Hence, risk management is one of the critical concerns of insurers that encompasses the practice of identifying and analyzing potential threats in advance and taking appropriate measures to mitigate those. For assessing risks, also called underwriting, insurance carriers employ specialists called underwriters. Insurance underwriters rely on ‘loss run’ reports to gauge the degree of risk that insurers could face when they insure a customer.

New Age Risk Assessment

There is a stark difference between the insurance sector scenario today and the one that existed a decade ago. Over the years, the insurance landscape has witnessed drastic shifts in customer demands, the growing need for insurance in the market, increasing operational complexities, and the need to consolidate business while pursuing profits and delivering exemplary customer service. These have led the sector to embrace technology to keep pace with the evolving dynamics of the market. Consequently, the insurance risk assessment process has undergone significant structural changes brought about cutting edge tools, resulting in more accurate risk spotting and analysis, thus propelling insurance companies towards growth and profitability.

Today, insurance loss run processing services are an integral part of the ecosystem. They help insurers with software solutions programmed with predetermined algorithms to enable underwriters to gauge potential risks accurately. These digital solutions are tailored to the insured entity’s key indicators to spot common and unique threats. Backed by the possibilities of Artificial Intelligence, Machine Learning, and data analytics, these risk assessment tools have enabled insurers to cut down on the instances of fraud and high-risk prospects, something that is not possible with manual underwriting.

Loss Run Report

As discussed above, insurance underwriters and providers primarily count on the loss run report to get a clear picture of the risk probability associated with the business being insured. The loss run report carries details about the type of claims the business has filed in the past, the financial impact, and the frequency of the previous claims. In short, underwriters get a comprehensive report of the claims history of the business that is seeking insurance now.

For any business that has no experience in filing a claim, the loss run report will state ‘no losses reported’; otherwise, the report would comprise the following details,

• Name of the company
• Policy number and term
• Date of loss report valuation
• Date of previous claims
• Incident description
• Type of claim or insurance policy
• Money paid so far by the insurer in legal costs
• Money paid by insurers in medical expenses, settlement costs, property damage, etc.
• Amount the insurer has ear-marked for future costs
• Current status of the claim

Whenever there is a policy renewal, or the insured applies for a new policy, the insurer seeks the loss run report. Based on the claims history stated in the report, the underwriter frames the insurance policy and sets the premium. The need for an accurate loss run report can be summed up as follows:

• Informational: The loss run report gives a detailed account of the claims activity of the insured entity across policy terms.
• Initial Assessment: The insurer can assess the risk level of insuring the business, and therefore determine the pricing and other terms of the policy.
• Ongoing Assessment: The insurance company relies on the loss run report to decide whether or not to renew a policy.

Inconveniences of the Traditional Loss Run Approach

Once the loss run report’s nature and need have been established, it’s important for insurers and underwriters to be equipped with the best tools for effective and handy loss run reports. As the world moves towards digitization, the insurance sector finds itself amidst some major developments that would determine its survival and success in the foreseeable future. For insurance loss run reports, the traditional method falls way short of expectations in terms of efficiency, accuracy, and costs. As discussed above, today, technology has made positive impacts on all aspects of the insurance sector, including loss run reporting to turn things around in its favor. Here’s a brief analysis of the downsides of traditional loss run reports vis-à-vis the ones backed by modern technology.

Lack of process standardization

One of the biggest pitfalls of traditional loss run reporting is the absence of a standard workflow to govern the process. In the traditional approach, not every insurer considers the same data points for compiling their loss run reports. Even if there is an agreement regarding the field, the values within that field usually vary significantly from insurer to insurer. Besides non-standardized data points, each insurer’s loss run reports look different, making it cumbersome to evaluate the data.

The modern way

With insurance loss run processing services assisting underwriters and carries, the loss run reporting process can be streamlined and standardized by employing smart and automatic workflows. External insurance service providers can make the process transparent and smooth by facilitating unhindered stakeholder collaboration, standardizing data entry, and getting all stakeholders on the same page.

Static Images

In the traditional way, most loss runs are submitted to insurance companies in the form of static images. These images are then fed to the insurer’s system to convert those into a digital format, making the process time-consuming and error-prone. This absence of electronic data also creates an obstacle for carriers that want to leverage automation and predictive modeling solutions for making their process more efficient.

The modern way

Today, insurers can discard the practice of relying on static images and adopt the use of dynamic/electronic images that offer a substantial boost to the process. Information from electronic images can be transferred directly to the desired file(s) using technology such as optical character recognition (OCR). The evolution of the loss run reporting process has made it easy to store, retrieve, and share critical information about the business being insured.

Resource-intensive Task

Owing to the inefficient, manual, and non-standard way of loss run reporting, the insurance carrier has to take the brunt. When operating in an immensely competitive market such as insurance, cost optimization is an indispensable requisite. If the information is antiquated, the insurance carrier usually incurs huge costs while providing loss runs to their agents and when leveraging the data within its underwriting and pricing.

The modern way

Today, professional insurance service providers have crafted effective loss run report workflows for industry experts. They are backed by cutting-edge technology that makes them cost-efficient and client-centric. They cut down on the need for a human workforce and eliminate the possibility of errors from inaccurate loss runs.

The Best Approach to Loss Run Reports for an Accurate Insurance Risk Assessment

As a thorough risk assessment of the insured business is critical for the insurer to keep financial losses at bay, the practice of underwriting remains paramount to company performance. For the ideal loss run report, one of the easiest ways is to enlist the services of an insurance BPO that specializes in assisting its clients with loss run and other critical documents. By working with such an expert, insurance carriers can standardize the workflows for ordering loss runs, maintaining updated data, and requesting information as needed for quotes, renewals, and policy changes. Below is a quick look at how an insurance service BPO is the best bet for insurers to get a correct picture of risky insurance opportunities to ensure the maximum gains.

Loss Run Experts to Handle the Job

Most insurers operate with an understaffed team that is usually busy with daily firefighting and might find it overwhelming to take on the additional responsibility of loss run. In contrast, when such requests are handled by dedicated industry professionals who carry years of domain experience under their belt, processing loss run reports becomes efficient and cost-effective.

• Outsourcing experts follow up with all concerned stakeholders on behalf of their client, thus relieving the client’s team of such less-value adding tasks and ensuring seamless paperwork.

• Once the claims history of the business to be insured is received, the BPO service providers process the report to get the loss run data needed for the purchase or renewal of the policy.

• The team prepares the claim reports after a meticulous analysis of the loss run information before sending it to the client’s team for further evaluation.

Faster Turnaround Times

The phrase ‘time is money’ applies to the insurance sector too. The nature of loss runs is such that it can consume substantial time and resources of the carrier, thus adding to the chances of process inaccuracies and business loss. But by employing professionals who are accustomed to the ins and outs of end-to-end loss run reporting, BPO services reduce the reporting time and allow the client’s in-house team to get more done in less time.

• Seasoned insurance loss run processing services maintain unhindered collaboration with all stakeholders to get the required loss run information to ensure quick reporting to boost productivity.

• They possess up-to-date technology and the latest infrastructure designed for accurate and faster reporting. Not all insurance carriers are equipped with such a rich IT arsenal to tackle complex operational challenges.

• It’s in the best interest of the insurance loss run processing services to deliver a quality job at the earliest. This might get them rewarded with incentives and more business from the client.

The Much-needed Flexibility

Operating in the insurance sector, the players are in dire need of flexibility in costs, workforce, operational capability, and more. This is precisely what insurance BPO outsourcing partners deliver to their clients. Scaling the bandwidth and resources as per the work volume is exceedingly easy with the scalable solutions and partnership plans of external insurance service companies.

• Insurance BPOs are known for their stringent quality control and audit standards to make their loss run reporting error-free. They employ special QC tools and audit professionals who follow a standard procedure to ensure consistent quality throughout.

• Concerns about data safety are put at bay when insurers choose to work with an insurance loss run processing service provider. All reputed BPOs sign non-disclosure agreements (NDAs) with their clients to ensure the confidentiality and security of the data.

• Most insurance BPOs sign contracts with their clients that allow the latter to enhance or trim the external workforce without much formalities or any penalty, allowing them to plan their finances better.

For insurance companies, the quality of their loss run reporting determines their profitability in the long run. The complex process of loss run includes tasks such as sharing loss run requests with previous insurers, receiving reports, managing loss run data for policy renewal, analyzing loss run data for preparing claims reports, notifying underwriters about the absence of loss runs, and several others. As most insurance carriers are well short of the adequate resources to do justice to this critical and complex requirement, they choose to outsource insurance loss run processing services to an external service provider.

Who We Are and Why Our Expertise Matters

At Insurance Backoffice Pro, we boast of a long list of reputed clients spread across the globe who outsource insurance loss run processing services to us for our high-quality job. In the past, we have demonstrated our ability to handle any volume of loss run processing requests, helping insurance agencies to stay focused on their business growth and customer experience. We collaborate directly with insurance carriers to obtain loss run reports before their insurance renewals, all at cost-effective rates. Our state-of-the-art infrastructure, command over the latest technology, and years of domain exposure enable us to handle loss runs in a timely manner and send those to the underwriters’ desk at the earliest.