Underwriters often require Insurance carrier loss runs when a firm has claims, disciplinary activity, or insurance coverage non-renewed or rescinded. Underwriters may require loss runs prior to providing a quote and/or binding coverage. An insurance carrier loss run report(s) shows claims reported to a malpractice insurer during the time the firm was insured by that insurer. The insurer claims department or underwriting department normally generates loss runs. Loss runs are obtained directly from the insurer(s) or agent(s) that formerly wrote the malpractice insurance. Normally all malpractice insurers that provided insurance coverage in the last 5 years should supply loss runs. The firm may need a signed release to obtain the loss runs. The loss runs typically show the claims made (or if no claims have been made), date a claim is made, when the matter originated, amount reserved for claim (indemnity & expenses), amount paid for claim (indemnity & expenses), and whether it is open or closed. There is no standard format for loss runs or the data provided.
General commercial risk underwriters normally require loss runs on every account, but malpractice underwriters have been more selective. Just because the malpractice underwriter requests loss runs does not mean in of itself there is a problem. Expect to provide loss runs for any claims activity within the past 5 years count to get new business quotes. And do not be surprised if you are asked for loss runs at renewal for any open claim(s) that were made against the previous insurer.
The uses for loss runs are:
1. Verify that the information on the application for disclosed claims reported and the amounts match. The firm may or may not know the total amount that a claim was settled for or the claims expenses. If the inventory of claims does not match what was disclosed on the application, you will be asked why.
2. With new business underwriting, if the incumbent insurer’s premium seems out of line with the expiring premium the loss runs can verify that there are no hidden non-disclosed claims.
3. With renewal accounts with open past claims with another insurer, loss runs help underwriters to see what claims development has happened over the past year and if it has been closed.
4. Decline claims coverage for claims previously reported to another insurer (remember this is claims-made coverage).
Past claims experience is one of the best predictors for future malpractice claims activity. The frequency and severity of claims is a key malpractice insurance underwriting component. Underwriters may not even a give ballpark premium number for firms with reported claims without this vital tool.
Lee Norcross, MBA, CPCU
Managing Director, CEO
(616) 940-1101 Ext. 7080