If you buy contractors insurance, you will want this snappy summary of what you need to know about claims. Understanding this information can save you a lot of money.
Claims really cost contractors money. It is no surprise that claims work against you, when it comes to getting renewal pricing. When you have a loss, you likely will end up paying for it in increased insurance costs later. Your goal is to keep claims as low as possible when they do happen. Keep on the initiative for suppressing and preventing claims.
When a claim is filed, the claim adjuster books an estimate of the total claim. This is a guess as to what the total loss will be. It is often called a reserve. This estimate is seldom correct, and when it is overstated, your renewal quotes will also be overstated.
When a claim is paid and closed, it is over. You can have no influence over it's effect, other than to write up a good explanation of what happened, and what you did to make sure it never happens again. Include such letters in your bid specs, as they can help underwriters justify giving you a break.
When a claim is open (still not closed), pay attention to it's progress. Stay connected with your ongoing open claims. Find out what happened last, what is going to happen next, and who is responsible. Know how much your reserves are and why. Is this particular loss stalled in some way? Humans routinely fail to do what they could do to help you on a timely basis. Keep in touch with the claims adjuster, and keep asking what must happen for the claim to close. Keep asking what the claim is reserved at, and what can be done to lower the reserves. This king of attentiveness can save you a lot of money.
Get your loss runs to learn where you stand right now with your claims. Ask the insurance company for them, or your broker. If you have active claims, get your loss runs updated at least every 90 days. When you look at them, you are looking for the open claims, especially those with large reserves. Ask your broker to explain them to you. See if the reserves make sense to you. You and your broker can argue the reserves, and many times get them to go down.
You may see a claim you have never heard of. The claim may belong to a different company. A clerical error loaded someone else's claim onto your loss runs. Discovering that can be worth a lot to you.
Pay attention to your loss runs. Make sure you understand them, and you will avoid wasting money over the years. Demand regular updates on your claims reports, and study them when you get them. Ignoring an open claim can be very costly.
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