What is the primary purpose of a loss run report during underwriting?

A loss run report serves a critical function in the underwriting process, primarily by helping to evaluate the claims history of a policyholder. This report provides details on the claims that have been made over a specified period, including information on the types of claims, amounts paid, and any ongoing claims. Underwriters use this information to assess the risk associated with insuring a particular individual or business.

Understanding a policyholder's claim history is essential for determining the likelihood of future claims, which directly impacts pricing and coverage options. A strong claims history may indicate higher risk, potentially leading to higher premiums or the need for certain exclusions in coverage. Conversely, a clean claims history can result in more favorable terms and lower rates. This evaluation assists insurers in making informed decisions to protect their financial interests while providing appropriate coverage to policyholders.

The other options do not accurately reflect the primary role of a loss run report in underwriting. Identifying potential new customers, providing legal documentation for claims, and outlining terms of coverage relate to different aspects of the insurance process and do not focus on claims history evaluation as the primary purpose of a loss run report.