What are loss runs?

“Loss Runs” is the insurance industry’s lingo for a claims history report. A loss run report will show the number of claims a business had during a specific policy period(s) with an insurance carrier.

Do my loss runs change?

Yes. When a claim is opened, certain expenses are incurred by the insurance carrier right away. These will show on the loss run report as paid expenses. On claims that may be open for an extended period, i.e. a significant Workers’ Compensation claim, the insurance carrier will set a reserve. The reserve is the insurance carrier’s educated guess on how much money will be paid out over the life of the claim.

How do my loss runs impact my premium?

Loss Runs are used to calculate an account’s loss ratio. A loss ratio is the percentage of the total claims paid out by the insurance carrier (including reserves) divided by the premium the insurance carrier has earned from their customer. As an example, if a business paid $1,000,000 in auto premium for the 2024-2025 policy period, and during that period they had $500,000 of claims, their 24-25 loss ratio would equate to 50%. Businesses with better loss ratios are going to have cheaper premiums, since they are more profitable for the insurance carrier.

What are good vs. bad loss runs?

Insurance carriers are for-profit entities. They want to make money, too. With that in mind, depending on the line of coverage, there are different break even points where an insurance carrier will or will not make money on an individual account. Top performing businesses are usually experiencing a combined loss ratio of 40% or less year over year. Typically, an insurance carriers breakeven profitability point on an individual account is between a 60-70% loss ratio.

So – why is Amazon so interested in the networks loss runs?

It’s no secret that the DSP insurance market is in crisis. That is, after all, the driving reason we created OVD Final Mile. Amazon is aware of this and is looking to solve the issue. Existing insurance carriers – namely Old Republic, which is exclusively distributed by Marsh – can better quantify the performance of the network by regularly reviewing the loss runs of all 3000 DSPs. Theoretically, if insurance carriers can understand who the best performers are, those businesses should be eligible for cheaper rates. Inversely, the worst performers should expect to see their rates increase, which in some cases can put a DSP out of business.

Should I be concerned about sharing my information with Amazon?

In the opinion of our team, no. However, we understand the concern amongst the network and realize that this may feel invasive. That said, no successful insurance program has ever sustained without consistent, ongoing data review.

What can I do to make my businesses Loss Runs as good as possible?

When it comes to experiencing claims within our industry, it is not a matter of if, it is a matter when. Wishful thinking that your business will not experience claims is not a sustainable strategy. While this is far from an exhaustive list, here are a few practices we see the best DSPs using within their operation to control claims:

• Report early – there is a direct correlation between the total cost of a claim and the time it took the business to report the incident to their insurance carrier. The sooner you alert your insurance carrier of an incident, the more likely it is they can handle the claim cost-effectively, and efficiently.
• Know your limit – the best DSPs have learned, often through trial and error, at what dollar figure they will report a claim to their carrier vs. what types of claims they are comfortable self-insuring. For example, a simple fender bender that causes $5k of damages may be best handled out of pocket. However, if an employee has an injury that will undoubtedly require surgery, it’s usually best to get the insurance carrier involved right away.
• What’s rewarded is repeated – incentivize your employees and management team to perform safely, and your Loss Runs will be rewarded, too. The top DSPs have a clear, consistent, and repeatable safety incentive metric built into their payment model. Everyone within their organization, from the top down, knows that safety is paramount to the success of the entity. Those that don’t meet the expectations will feel it in their wallet, and repeated offenders aren’t accepted at the company.
• Control the narrative – claims will happen! It’s a part of our world. When a claim occurs, document everything while it’s fresh in your own and your manager’s minds. Be prepared to explain large claims to insurance carriers during the renewal process. The best DSPs learn from their experience, if you have an unfortunate claim, what can you do in the future to lessen the likelihood that a similar incident happens again? “Luck” is created, so go create yours.

Being a DSP is hard work, and business insurance is a complicated, sometimes infuriating reality of our industry. Our team at OVD Final Mile is here to help. We have several resources, coaching philosophies, and subject matter experts that can help you perform at the top of the DSP network. Reach out today – we’ve love to meet you!

The information and suggestions provided is for general informational purposes. The content is not intended to substitute for consultation with a qualified legal professional.