If you’re not reading your clients’ loss runs, you're leaving money on the table (and possibly your clients’). These reports hold the data that underwriters use to price risk. If you, as an independent agent, don’t know how to read them, you’re essentially left guessing, which helps no one. That doesn’t cut it when dealing with premium clients or trying to scale a serious practice with captive insurance.
Loss runs are a treasure trove of information that can be helpful, regardless of your client being with the traditional or captive insurance markets. They help look at patterns that your client can rectify. That, and reading them will make you a better agent for all of your clients. And if your agency’s staff better understands how to read loss runs, they can talk to insureds about how they can better manage their risk.
This guide will teach you how to read a loss run like a risk manager. This will cover what matters, what doesn’t, and how to translate raw claims to price leverage and help your client with the underwriting process.
What Is a Loss Run?
A loss run is a report that shows an insured’s claims history. This includes:
- Policy details (number, period)
- Claim dates and descriptions
- Status (open, closed, or reopened)
- Amounts paid
- Reserves (what the carrier thinks will be paid)
- Total incurred (paid + reserves)
Something to note: there is no standard format for a loss run. Some bury necessary information, while others omit useful context. Sometimes both. You’re the one who needs to make sense of them and pull out what matters.
Step-by-Step Guide on How to Read Loss Runs
Here’s how you can methodically break down the data so you can ask better questions, uncover underlying issues, and help your clients make decisions that let them manage risk better:
Step 1: Check the Basics
Before looking at trends and figuring out strategies, confirm:
- Named Insured: Is this even your client?
- Policy Period: Are you reviewing the correct policy term?
- Valuation Date: Has this loss run been updated in the last 90 days?
Outdated loss runs are a waste of time for everyone. You want fresh data if you plan to present it to underwriters or base a captive strategy on it.
Step 2: Know the Math
Loss runs break down claims into three important numbers:
- Paid: What’s been paid out
- Reserved: What’s expected to be paid
- Incurred: Total of both
The “incurred” number is what underwriters focus on. This is what drives pricing decisions. That said, carriers may over-reserve claims. This bloats the loss ratio, which can make your client look bad.
If a reserve hasn’t moved in over a year, challenge it. Never assume it’s accurate. Carriers often “forget” to lower their reserves unless someone presses them.
Step 3: Look for Patterns
Start identifying trends:
- New hires: Are claims clustering in the first 90 days of employment? This can indicate a training issue.
- Repetitive losses: Are you seeing injuries from issues like slips and falls? This is a risk control failure.
- One employee: Are there multiple losses resulting from one employee? That’s a personnel problem (and might mean it’s time for your client to part ways with said employee).
- Injury types: Consistent injuries could indicate poor Personal Protective Equipment (PPE) compliance or process breakdowns.
Connect the dots and see what no one else is seeing.
Step 4: Know the Traps
Even the most experienced agents can get tripped up here:
- Abbreviations vary by carrier. AL might mean Auto Liability and include PD (Property Damage); PD could also mean "Physical Damage." You need to understand each carrier's loss run abbreviations.
- “Collision” might not always mean what you think. In garage keepers’ legal coverage, “collision” could refer to liability for damaging a customer’s vehicle. Collision can also refer to physical damage to owned/covered vehicles.
- Incomplete data is common. Sometimes you'll need to ask the carrier for clarification, especially when separating Auto Liability and Auto Physical Damage loss amounts paid/incurred.
Step 5: Use the Loss Run as a Strategy Tool
Loss runs are like a blueprint that helps your clients make better decisions and a stronger case to underwriters.
Here’s how you use them:
- Spot bloated reserves and push for fair takedowns
- Flag recurring issues your client can fix
- Isolate large claims and explain what’s changed since
- Show progress and make the case for better terms
Break everything down, build the story, and help your client see exactly how past issues are being addressed.
For example, you can point out that while there was a $1 million claim in 2021, it was an isolated incident. The problematic employee is gone, and a process has been implemented to prevent that issue from happening again. Not only have there been no repeat issues, but your client is improving.
The Mistakes Most Agents Make
They collect loss runs, submit them, and hope for the best. They don’t review reserves, identify trends, or translate findings into actionable steps for their client.
What You Should Do Next
Here’s what you should do:
- Pull the last five years of loss runs from your premium clients.
- Check the basics, like the valuation date, named insured, and open/closed status.
- Break down incurred totals and flag old reserves.
- Identify trends like employment issues, the cause of loss, and recurring incidents.
- Make it a part of your underwriting and risk strategy.
Why This Matters More in Captives
In the traditional market, loss runs are used for pricing. In captives, they’re used for everything, like:
- Determining eligibility
- Setting retention levels
- Forecasting funding needs
- Helping with risk improvement
Captive underwriters want you to explain this data. They look for patterns, red flags, and signals of control. Explain what the numbers mean to protect your client’s credibility. It gives them better terms, smoother onboarding, and more control over their insurance-related costs.
Read Loss Runs to Help Your Clients With Captives
Reading loss runs is for independent agents who are serious about captives or premium clients. Spot the problems, help solve them, and prove to underwriters that your client knows what they’re doing (and that you do, too). So pull the data, read it, and ask the hard questions. Help your clients get the results they’re paying you for and maintain your book of business.
Next, read our article on what to do when you can’t get a loss run. If you have a newer client, you might face some roadblocks, but they’re not impossible to obtain. Know practical solutions to get a hold of them.
Captive Coalition has helped hundreds of independent agents who are building real businesses inside the captive insurance space. We know how to turn passive policy management into risk consulting. It starts with understanding the loss data better than anyone else.
Want to learn more about captives and have access to more resources for free? Become a member of Captive Coalition!
