What are the Key Questions that need to be Asked When Assessing Insurance Loss Run Reports?

An insurance loss run report is a comprehensive document of claim activities of the insured on each of his/her insurance policies. For an insurance company, it acts as an initial assessment to determine the level of risk associated with a customer and assists the company to draw the price and policy terms for a customer accordingly. In addition, an insurance loss run report also assists an insurance company to take a call on whether they want to renew the insured’s policy.

Understanding the Criticality of Loss Run Reports

As per the standard practice, an insurance company sends a request for loss run reports covering a tenure of five years or based on the duration of an insurance coverage. The claims history enlisted in the loss run report is extremely critical for underwriters to frame the policy and set the terms accordingly.

An insurance loss run report will generally include the following details that a customer had filled during the initiation of the policy:

• The client’s name
• The dates of claims or in other words, loss incidents, made by the client and the actual dates of the submission of each claim
• Detailed documentation about the loss incident
• The actual date when the total claim amount was paid
• The total amount of fund set as a reserve to accommodate claims account for the client
• The status of the client’s claim, if it is open or closed

For an insurer, it is an essential as well as a daunting task to know what exactly to look for and ask while reviewing a customer’s insurance loss run report. Before we directly delve into this topic, lets first look at the disposition of insurance loss reports from both the insured and an insurer’s perspectives. An insurance loss report is a holistic representation of the customer’s insurance claims history.

The lesser the number of claims or high-value payouts in the report, the more viable is the customer to be offered an insurance coverage. On the other hand, this philosophy motivates customers to provide insurance loss run reports that are half-hearted documentation of claims histories which cloak the risk-factor of customers. This is just the tip of the iceberg when it comes to the challenges faced by an insurer while reviewing the loss run reports of a customer.

In a few cases, a loss run report request is sent to the current insurer as part of the insurance loss run processing. The current insurer is under no obligation to invest time and resources to furnish a dexterous loss run report. Rather, the loss run report request will serve as a cue for the current insurer to lodge aggressive retention tactics to hold back the customer in case he/she is profitable enough. Current insurers tend to furnish loss description sans the cause of loss. This forces the broker to speculate the loss cause by manually browsing through numerous claims in a loss run report. Evidently, this will further cloud the actual facts and figures in the loss run report which has potentially posed as a significant challenge for insurers who review the loss run report.

In light of these potential challenges and also to secure insurance loss run processing, it is essential for enterprises to know what to look for and to ask while assessing a customer’s loss run report. Here’s some of the key questions that must be addressed and certain actions to be done during an insurance loss run report assessment.

Create a Common Loss Run Format

There is no common format or language to enlist types of policies, policyholder’s line of business, among others which makes renders the insurance loss run processing service a cumbersome task. The option of data extraction from unstructured documents including PDFs is viable but the training algorithms that drives the extraction is extremely complex. In the current state, professionals with a sound knowledge of these algorithms is scarce which makes the entire task all the more daunting. One way of addressing this challenge is to create a comprehensive industry-wide dataset that furnish information on policy, claim, payment types in a common and a readable format.

Ensure that the Insurance Loss Run Reports are Current Valued

It is an ideal practice to ensure that an insurance loss report is dated 60 to 90 days in advance of a customer’s policy expiration date. An insurer must look all the information without any open-end stated below to ascertain getting a current valued insurance loss run report.

• Start Date – exact date of the start of a policy
• End Date – exact date of a policy expiry
• Insurer – exact name of the current insurer
• Policy Number – accurate quotation of the policy number
• Premium amount- quotation of the last and the final audited premium.
• Total amount of paid claims – total number of claim amounts paid by the current insurer
• Total claims recorded – amounts that are actually not paid but is set aside in anticipation of a possible payout.
• Total claims incurred – the sum total of paid and incurred claim amounts.
• Loss Run POC – Details such as name, email address, phone, fax number of the person who is responsible to publish the loss run data.
• Valuation date of Loss Run – The exact date of valuing the loss run report.

Ensure that the Figures and Facts Quoted in the Loss Runs are Accurate

A reviewer must keep a sharp eye on open claims in particular. A majority of insurers tend to place a representative amount as the claim amount as opposed to the actual reserved amount. It generally happens when a claim is new and is yet to undergo a complete assessment. It is also done with an intent to keep third parties such as claimants, attorneys in oblivion about the total amount of money that is reserved for the insured.

Ensure that there are No Gaps in Coverages Enlisted in the Loss Runs

Any gap during the tenure of a policyholder’s insurance coverage can be indicative of losses which are sometimes not covered in the loss run report. In such cases, the reviewer must ask for a no loss letter also known as a statement of no loss. This statement, which is a written agreement between the current insurer and the policyholder, serves as a testimony to the fact that the current insurer witnessed no claims or losses during the gap. Additionally, the reviewer must ensure that the policyholder had paid all the due premium amounts and applicable fees for the current insurance coverage.

Ensure that the Line of Business Matches to Your Proposal

It can be used as the first form of filtering customers seeking insurance coverage. The reviewer must ensure that the line of business specified in the loss run report is relevant to what the new insurer proposes to offer. For instance, an automobile insurance loss history is relevant if the new insurer offers transportation pollution coverage. One easy way of doing it is to tally the rating variables of the type of insurance loss history to that of the new insurer’s product portfolio. The nature of rating variables differs significantly for each insurance product. For example, the rating variables for workers compensation insurance is occupation class code while, limit of liability, territory, and specialty are considered as rating variables for medical malpractice insurance coverage.

How does Outsourcing the Insurance Loss Run Processing Services Benefit You?

Insurance loss run reports play vital roles in helping the reviewer in determining the true value as well as the risk factor associated with a customer. However, in most cases, the whole process is marred by gross human errors and delay in the receipt of reports, which makes the task of the reviewer even more challenging. According to experts, outsourcing this task to insurance loss run processing companies, will serve insurance companies with multifarious benefits. Let’s take a look at some of the immediate benefits offered as you outsource loss run processing services.

Faster Turnaround Time– Outsourcing insurance loss run processing services allows you an access to professionals who have sound domain knowledge. This enables them to collaborate with insurance companies to help in retrieving loss run reports on time. They have the requisite expertise to process a bulk of loss run report requests in a single day with minimal effort.

Safety and Security– While handling a person’s financial information, it becomes even more crucial to create a safe haven for the confidential information. To outsource loss run processing services will mean an access to cutting-edge security measures. As their core competence, insurance loss run processing companies scale that extra mile to build a robust security firewall against any possibilities of cyber-attacks or threats.

Updated infrastructure– With digital technologies making constant inroads in the insurance industry, it has become essential for companies to upgrade their technology infrastructure. This would entail skyrocketing expenditure for any company. Insurance loss run processing companies are equipped with the latest and the most pertinent tools and technologies to execute these services that are core to them.

Read this blog to know how outsourcing policy checking services to Tech-enabled Vendors will help you more than just saving costs.

Scalability in service– Insurance loss run processing companies have the bandwidth to commission additional time and resources during a surge in the volume of loss run requests on a daily basis. This makes their service extremely scalable as and when it deems necessary.

Gain better control on quality– Processing loss run reports in a bulk double the chances of human error that can be detrimental for the underwriters and reviewers in the long run. Outsourcing insurance loss run processing service will open access to professionals who have specific expertise in handling multiple loss run reports with greater accuracy and quality. They ensure a meticulous auditing of loss reports as per the gold standards to bring accuracy in the facts and figures included in the reports.

Who We Are and What Makes Us a Expert in Insurance Back-Office Processes?

A Flatworld Solution subsidiary, Insurance Back Office Pro is an ISO Certified company [ISMS (ISO 27001)] with its branches spread various locations across the globe. We are a holistic insurance back office support service provider with proven expertise in handling critical processes that range from assessing insurance policies to renewal summaries and loss run processing. We boast of a decade of enriching experience in the insurance industry and has a deeper understanding of minute details that make big difference in offering a robust insurance back-office support. We store well-curated policies for data security as we strive to store your data with the utmost confidentiality. We have round-the-clock functional teams that offers us the time zone be