ASK THE UNDERWRITER – Unreported Claims and Your Frequency Score

In this series we explore the expert opinions of senior insurance executives to answer our readers questions about their commercial auto liability.

Today we put our question to veteran underwriting executive, Tat Wong.

Tat is a bare-knuckled underwriter who has spent many years in the commercial auto trenches keeping his beloved truck fleets rolling.  And he has the scars to prove it.


Dear Underwriter,

A friend of mine who runs a haz mat operation told me that he is not reporting all losses to his insurance carrier.  He thinks that by settling claims for cash that are less than, or even a little higher than his deductible, that he is keeping his frequency score down and therefore reducing his premium at renewal time.

 This scares the jeepers out of me!  What’s should I tell my friend?


Tank Yanker


Dear Yanker,

Please, please tell your friend that he is putting his operation in grave danger!  When the underwriters find out, and they will find out, he could face cancellation of coverage on the spot.  I have seen it happen.  Such an action is most likely in direct violation of their contract.

What your friend does not realize is that poorly handled claims can very quickly “run away”.  All too often the minor fender bender of today can become a personal injury claim weeks and even months after the first harmful event.

What’s worse is when we find out that the plaintiff’s attorney is suing us before the client has warned us about the loss.   This can only strain any relationship of trust.

As a result, this can quickly lead to inadequate reserves being set aside for potentially severe and even catastrophic claims down the road that expose the insurance carrier to financial instability further straining the relationship.

But more importantly, since the relationship with your insurer involves large sums of money, there must be a bond of trust.  Late claims, unreported claims and claims without good documentation shatter that trust like a cheap wine glass.

Yes, we consider frequency of losses in the underwriting calculation, and for good reason.  But underwriters also must use their intuition and that requires trust.  Any underwriter worth their salt will gladly give grace to a client who provides detailed and timely information about their losses, whether they result in a claim or not.

Bad news does not get better with age.  Most of us learned this in childhood.  Late and unreported losses and the resulting mistrust can swing your pricing model by as much as 50%.  It’s the same reason you got grounded when you lied to your parents about doing your homework in the third grade.   Rebuilding that trust takes time and positive action.   In the meantime, you will likely pay more for your insurance.

You work hard to build trust with your other relationships, why not this one?  So if you want to keep your premiums in control, report every loss right away.  And the more detail the better.  Your crash response should be efficient and immediate. And finally, leave the claims handling to the pros.

Otherwise, don’t come crying to me when your premiums hit the ceiling at renewal time; or worse, we don’t renew your insurance.    If you don’t surprise me, I won’t surprise you.



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