Defend Against a 'Loser'

As valuable as loss data is and in light of every insurer's insistence on having "hard copies of insurance-company loss runs" in order to underwrite and rate a risk, one would think they would be easier to obtain. These days, however, obtaining insurance-company loss runs can be a daunting task.

By Charles Cox

Policyholders with significant loss frequency or severity should obtain full-detail loss runs at least quarterly, if not monthly, from their insurance companies for all lines of coverage until all claims are closed. Unfortunately, when policyholders change insurance companies, previous insurers are often reluctant to provide loss data with such frequency (unless there is a contractual agreement to do so). Even current insurers often stumble in this area, though an alert and effective insurance broker or agent should make sure loss data is provided on a regular basis.

To give credit where credit is due, some insurers do provide valuable data. The good ones make loss data available to their policyholders online for download whenever needed. Claims details are available 24/7, including adjusters' notes, and some insurers even alert their policyholders by e-mail when changes in claims reserves have been made so the policyholder can view the latest claims information.

Welcome to the 'Big Data' Era (09/15/11)
The Pillbox Defense (09/15/11)
A Surprising Reticence (10/15/11)
Perils and Promises of the Cloud Providers (10/15/11)
Finally Going Mobile (09/01/11)

Then there are those that provide loss data without totals by policy term, without (or with inadequate) claims details or data that require a translator to make sense of it. And there is at least one insurer that willingly provides loss runs on directors & officers or fiduciary liability coverage, but blacks out the claims details and reserves under the guise of confidentiality! How many other insurers accept such loss data?

Regardless of the effort needed to secure loss data, make no mistake about its value. The need for loss data when soliciting quotes from other insurance markets is well-documented. The value of loss data to track claims settlement and reserving practices cannot be overstated. By getting loss data regularly, you will have the opportunity to track the status of claims and question reserve increases, as well as expense or claims payments, that appear out of line.

Are claims being held open with significant reserves over long periods of time without explanation or substantiation? Are claims being paid or reserved when a contractor has agreed to defend and indemnify you for those claims? Only if you obtain, review and question your loss runs will you know the answers. In most cases, your claims experience will have a direct impact on your insurance costs (if not your out-of pocket costs where self-insured retentions are involved), so your proactive involvement is essential.

Loss data is also invaluable for analyzing alternative risk financing methods or alternative loss retention levels. In addition, detailed loss data helps policyholders (or self-insureds) identify problem areas where loss-control efforts should be focused.

As you review claims reserves and payments, problems or questions that arise may warrant a claims-review meeting with the individual(s) responsible for the claim(s), in person or via telephone conference. These meetings provide an opportunity to review and discuss the claims status, anticipated reserve changes, deposition issues and trial dates. Input provided to the claims handlers by insureds (or self-insureds) may assist in the defense of claims and/or lead to claims reserve reductions.

Claims handlers who know they are being monitored are more likely to push claims along through the settlement process rather than allow them to languish on their desk. The squeaky wheel does get the grease.

CHARLES COX, a principal of the Orchard Park, N.Y., consulting firm of Aldrich & Cox, writes a regular column for Risk & Insurance®.

September 15, 2005

Newsletter Sign-up