Insurance consumers experience all types of property losses and, depending upon how serious the loss is, property owners have to decide what to do. Typically, the next move is to get an insurance company involved. When a loss amount is high, this may be the only practical thing to do. However, when a loss involves a more modest amount, it may be smart to carefully consider if it is appropriate to file a claim.
If you carry insurance, it’s important to think about the consequences of filing minor claims. Insurers are focusing more of their attention on loss history. They closely scrutinize how past losses affect a given business that they insure or are considering insuring. In the current insurance environment, reporting a minor loss could make you a two-time loser. First, depending upon loss circumstances, coverage may be denied. Second, the fact that the loss occurred may cause your insurer to take a closer look at you.
Insurance companies want to have as much information as possible to decide whether to offer or continue to provide coverage. Loss history has always been important to insurers. However, an increased emphasis is being placed on using past losses as a way to predict the likelihood of future losses. The difference is that insurers have abandoned asking only about losses that exceed a certain amount. They now look for information on every conceivable loss. This increased sensitivity to losses may cause an insurer to raise premiums or even decide to terminate coverage when, in the past, minor or unpaid claims were not treated as problems.
Insurance consumers need to be aware of how they handle losses and of how insurers currently respond to their customers’ (or applicants’) loss activity. You owe it to your organization to manage losses in a manner that is in sync with the new reality. Handling more small losses as an operating expense instead of through your insurer may be good business and could help preserve insurance availability for serious situations. More organizations are becoming aggressive and creative in managing losses, especially as insurers have changed their attitude toward losses and underwriting.