What purpose does a loss run serve for insurers?

A loss run serves a crucial purpose for insurers by providing a detailed history of an insured party's claims over a specified period. This information allows insurers to assess the risk associated with underwriting a new policy or renewing an existing one. By analyzing loss runs, underwriters can identify patterns in claims frequency or severity, which helps them make informed decisions about whether to accept the risk and under what terms.

Risk assessment is critical in underwriting because it directly impacts the insurer's potential exposure to future claims. By examining the historical claims data contained in loss runs, underwriters can establish appropriate premium rates and coverage limits that reflect the insured's actual risk profile. Thus, the loss run plays an essential role in the underwriting process, ensuring that the insurer adequately understands and mitigates the risks involved in providing coverage.