What impact does a loss run have on the underwriting decision?

The correct answer is based on the critical role that loss runs play in the underwriting process. A loss run is a detailed report that summarizes a policyholder's claims history over a specific period, typically showing any losses or claims made against the insurance policy.

In underwriting, one of the primary goals is to assess the risk associated with insuring a particular client or property. By reviewing the loss run, underwriters can gain insight into the frequency and severity of previous claims. This information is essential for evaluating how likely a policyholder is to incur future losses and how those losses might impact premiums.

Underwriters use this data to make informed decisions about whether to offer coverage, what terms to set, and how to price the policy. A history of frequent or severe claims may lead to higher premiums or denial of coverage, while a clean loss run can result in more favorable terms for the insured. Therefore, loss runs directly inform risk assessment by highlighting past behaviors that are predictive of future risk, making it an essential element in the underwriting decision-making process.