July 5, 2022

Don’t be Hamlet When Making Loss-Reporting Decisions….

“To report or not to report?”

That is the Hamlet-esque question.

Insureds and brokers often learn of accidents, occurrences and events which they believe are unlikely to ever spawn a claim. Or, they may think that there is some small chance of a claim arising but they don’t think they have any potential liability exposure.

Should they report such a matter to their liability insurance company?

I tell brokers and policyholders, “When in doubt, report it out.”

They are often paranoid about how premiums and fear their cost may rise if they report. “Won’t my insurance cost go up if I report this loss?”

They don’t realize that the financial impact of “playing games” and suppressing reporting creates risks more significant than the marginal increase in premium from any incident/loss reporting. This decision often proves to be penny-wise and pound-foolish.

Better to report a loss and learn that it was nothing, versus assuming that it’s nothing and later have it morph into a serious claim.

Err on the side of caution. Report to the insurer, even if you ask them to log it as an “incident only.” That request may cushion you against future premium increases (no guarantees, though).

Why buy insurance if you don’t plan to use it? Didn’t you buy it to purchase peace of mind for bad things that might happen?

As an expert witness undisputed insurance claims around the country, numerous cases where clients engage me involve issues pertaining to non-reporting or late reporting of seemingly innocuous occurrences and coverage denials and controversies arising therefrom. This is particularly acute, but not limited to, transitions of claims-made policies from one carrier to another.

I often wonder how many tens (or hundreds) of thousands of dollars in litigation costs would be saved if the policyholder and/or broker had simply and timely reported an incident. Believe me, the costs involved here dwarf any feared increase in renewal premium. Sweeping the loss under the rug often later requires purchase of a very expensive carpet! (Roomba will NOT clean up this mess!)

Don’t raise data credibility issues and sow suspicion among underwriters or actuaries by under-reporting, due to fears that “my premium will go up.”

When your boss later asks why the insurer is contesting or — worse — denying coverage, do you really want to say, “Well … I didn’t think it amounted to anything and was worried that our premium would go up”?

That may be time to update your resume and contact a good headhunter.

Avoid this kind of drama in your professional life by reporting accidents, incidents and other occurrences which may not look like claims, or look like any valid claim.

When in doubt, report it out!

Thanks for reading. I am a consultant specializing in expert assessment of disputed insurance claims around the country. If you have a comment, a request for a future topic, or a question about your own case, please contact me at claimscoach@gmail.com or my office at (804) 796-1939.

Comments

  1. Sandy Eastling says:

    PREACH!

    • Yes… I’m probably “preaching to the choir,” but the issue does arise periodically. Bubbling up from policyholders and their brokers.

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