What is the purpose of

by rolive » Tue May 05, 2009 11:30 pm
Posts: 1
Joined: 05 May 2009

What is the purpose of reviewing losses with the Insured?

Total Comments: 13

Posted: Wed May 06, 2009 05:37 am Post Subject:

What is the purpose of reviewing losses with the Insured?



This is actually a great question! Cool! :)

Loss review should be done on at least an annual basis with the insured(s). Even if there aren't any losses, get with the insured. The purpose is manifold, and critical- especially in commercial exposures. The personal lines loss review is basically after the same goals as the commercial end of things.

Here's the deal. My hunch is that you're familiar with the simplistic aspect of loss ratio. Claim dollars going out vs. premium dollars coming in. Insurers love low loss ratios, but not tooooooo low, which is another story. Since one of an insurers measures of profitability is to have a good control over losses, which obviously contributes to the bottom line, they like insureds who take active measures in loss prevention.

One of the methods of handling risk is what's called "risk reduction." This is when you take steps to lessen the likelihood of a loss occurring, and if a loss has occurred, to take steps to decrease the severity of the loss.

So, insurers prefer agents who take active measures in helping their clients identify causes of past losses and educate that client on how to best prevent a similar loss in the future. As well, the proactive agent will look for obvious other exposures presented by the insured that should be addressed with that client.

As well, there are benefits for the agent that don't seem so apparent. Insurers love agents that are proactive in their business. You get on the good side of a commercial underwriter and you'll be amazed and the leniency you'll get. Same goes for personal lines, but not so much. As well, independent agencies can receive sizable (and I mean sizable) annual bonuses from insurers based on production levels and LOSS RATIO stats. My agency used to haul in a load every year in "contingency bonuses." Sweet. :D So- if you're in the right position, you can profit handsomely by reigning in losses and having a good production volume. :!: :!:

Hope this shed some light on the subject!

InsTeacher 8)

Posted: Wed May 06, 2009 11:04 am Post Subject:

Teacher says it all.........its worth learning.

Yes it did illuminate the subject.... and must say it was very neatly explained.

Posted: Wed May 06, 2009 01:53 pm Post Subject:

reviewing the losses is extreamly important as there should not be unfair with you or with insurance company.
Insurance company talley and check wheather the loss is up to that extent as you claim for compensation

Posted: Wed May 06, 2009 03:47 pm Post Subject:

How can one make payment without varifying?

Posted: Thu May 07, 2009 02:36 am Post Subject:

Wow... teacher is right on the money! there's not much else to say except that it'll behoove you to do an annual check... more to your benefit than the insurance companies.

How can one make payment without verifying?

if I understand your question correctly you're referring to making payments on a policy that has been changed by the ins co?

If that's the case it's probably because once you have a contract with an insurance company anything they change (price/terms etc) is considered an amendment to the original policy.

You have a period of time to accept or decline their "new offer". If you continue to make the "new" payments then it is assumed that you've accepted the new terms.

Posted: Thu May 07, 2009 10:38 am Post Subject:

Here's the deal. My hunch is that you're familiar with the simplistic aspect of loss ratio. Claim dollars going out vs. premium dollars coming in. Insurers love low loss ratios, but not tooooooo low,



What is the ideal loss ratio for the insurers?

One of the methods of handling risk is what's called "risk reduction."



Does loss reduction involve pulling out from a region where the loss is likely to occur, like- State Farm did in FL?

Posted: Fri May 08, 2009 03:02 am Post Subject:

Kelvin asks:

What is the ideal loss ratio for the insurers?



Another great question loaded with permutations. There are many different loss ratios that insurers look at. The one I described is generally termed a "static annual simple loss ratio." In normal person words: what happened this year in terms of how much we made in premium versus how much we paid out in claims? Normally reviewed at the end of the fiscal or calendar year. Very simple calculation: We made $10,000,000 in premium and paid out $5,000,000 in losses. That's a 50% (or .50) "simple" loss ratio. Another way to look at it: For every dollar we made in premium, we paid out $.50 in losses. There are lots of different loss ratios: underwriting LR; before investment income LR; post investment income LR; 12, 18, and 24 month moving LR, and more. Some of the "names" have been changed to protect the language impaired :lol:

What's ideal? That reeeeeeeeeally depends on the line of insurance. Medical expense insurers are thrilled with a 95% LR right now, which means that they aren't that profitable, and many aren't profitable at all. (take THAT, you left-wing freaks). For comparison, preferred risk auto carrier like their LRs in the 50s. Homeowners insurance can be all over the place, but normally performs pretty well with decent underwriting and loss review/prevention techniques. Commercial is crazy as well, given the inestimable number of exposures out there that are covered by insurance and the different tendencies toward risk exhibited by insureds.

Whew...lots of big words...I have a headache now. :D

Does loss reduction involve pulling out from a region where the loss is likely to occur, like- State Farm did in FL?



Not really. They're trying to stem a flood, no pun intended, and this is their reaction. State Farm's freakin' because they're paranoid of things like hurricanes after they got trashed by losses, the declining economy, the fact that their reserves have plummeted, and like everyone else, is having financial problems. After reading about what they're doing, I'm kind of torn. I feel that any company has the right to sell only what they want, yet is this gonna leave some people high and dry? On the other hand, this certainly isn't the first time a carrier has done this. You should have seen what happened in California about 20 years ago with the infamous Proposition 103. That was a circus surrounding hordes of carriers that wanted to pull out of Cali. In the end, nobody really got hurt and everyone found the necessary coverage; for the most part, it was a bunch of much ado about nothing. Sure, a few people got whacked, but people get "whacked" by insurers all the time. But- insurers get whacked by people more.

InsTeacher 8)

Posted: Fri May 08, 2009 05:31 am Post Subject:

Not really. They're trying to stem a flood, no pun intended, and this is their reaction.



Okay, if that is not a loss prevention act of the insurer then I'd be interested in knowing what are the standard loss-prevention techniques followed by the insurance companies.

Posted: Sat May 09, 2009 02:18 am Post Subject:

"Loss prevention" techniques have nothing to do with a carrier leaving a state. Read my previous post.

InsTeacher 8)

Posted: Sat May 09, 2009 04:25 am Post Subject:

"Loss prevention" techniques have nothing to do with a carrier leaving a state. Read my previous post.



Got you Teacher :) Though it seems the most plausible option to leave the area where you are suffering the maximum loss. You can't blame me if I have thought it was their way to reduce loss :wink:

However, I was interested in knowing the 'loss prevention' techniques used by the insurance companies.

Kelvin

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