Using Loss Ratio Reporting to Optimize the Relationship with Carriers and Clients

Amongst the several responsibilities that agents are tasked with, effective management of relationships between agents, clients, and carriers is crucial to an agency’s success. One powerful tool at an agent's disposal is loss ratio reporting, a process that evaluates the relationship between premiums collected and claims paid out. However, the process of generating loss ratio reports poses significant challenges for insurance agencies, ranging from accessing the relevant Loss Run data, performing time-consuming manual calculations to dealing with potential errors in data consolidation.  

For an agency, gaining access to Loss Run data allows for two key outcomes. Firstly, to calculate a cutomer’s loss ratio (the ratio of incurred losses to earned premiums). This means an agency can quickly calculate the profitability and value of a piece of business to the carrier. Secondly, to note trends in losses and allow for deep advisory and consultancy from the agency to the customer. By understanding the data within loss runs, agents can consult on informed decisions and help both customers and carriers take proactive steps to improve risk management practices.  

Challenges in Loss Ratio Reporting

The traditional method of creating loss ratio reports is often labor-intensive and complicated. Agency finance and administration teams find themselves navigating through different systems and websites, downloading Loss Runs from carriers, and manually calculating loss ratios outside of their agency management systems (AMS). This adds time to the process and loss ratio reports can sometimes take finance teams / administrators weeks to complete, costing the agency valuable time and resources. The absence of an integrated solution forces finance and administration teams into using Excel spreadsheets and creating pivot tables and VLOOKUPs to generate accurate loss ratio figures.

[Related topic: Addressing High Staff Turnover Through Intelligent Data Management]

Managing Risk Based on Bad Information Hurts Client and Carrier

Agencies will flag high loss ratios as they indicate potential client risks or inadequate coverage. These insights allow them to then work closely with both carriers and clients to address any underlying issues.  

Preferably, agents want to get a threshold notification when any loss ratio exceeds 50%, and at various phases as this percentage increases. When a loss ratio creeps above 50% it signals a flag for agents and carriers, and indicates the profit margin of doing business with a specific client is on the decrease. Carriers often incentivize agencies to sign business that has favorable loss ratios. However, Agencies struggle to easily track loss ratios as they have no way of aggregating Loss Run data and proactively managing the insured clients behavior. This means that agents risk losing out on potential bonuses and kickbacks from the carrier or agency.

Carriers become frustrated when agents sign high-risk clients, anticipating a surge in claims payouts. Simultaneously, clients experience frustration when they receive an unexpected increase in premiums without prior warning or explanation. A lack of data accessibility and visibility increases the risk of client dissatisfaction.  

These frustrations create a ripple effect, as carriers may perceive the agency as failing to adequately monitor client behavior, especially those with a higher likelihood of substantial claims. This perception not only jeopardizes the existing relationship but also undermines the agency's credibility.  

An Automated Solution That Guarantees Better Outcomes

Synatic offers a transformative solution to the challenges posed by traditional loss ratio reporting methods. By automating the entire process, The DIH streamlines data collection, reconciliation, and calculation, enabling agents to not only interact with carriers and clients more efficiently, but to better manage and adhere to loss ratio targets set out by carriers. 

  • Automated Loss Run Collection: Synatic can access carrier websites and extract loss run data seamlessly, overcoming the limitations of other data retrieval methods. This automation eliminates the need for manual intervention, saving time and reducing the risk of errors. 

[Related Topic: Revolutionizing Loss Run Reporting with Synatic]

  • Real-Time Loss Ratio Calculations: By automating loss ratio calculations, Synatic provides agents with real-time insights into the financial health of policies. This allows for proactive measures, such as setting threshold notifications, managing client behavior and meeting internal and external loss ratio targets set by the agency and carrier, respectively.

  • Timely Reporting: By automating the entire loss ratio calculation process, Synatic enables finance and operations teams to generate reports promptly. This timely information allows agents to engage with carriers and clients early on, managing expectations and fostering positive relationships. 

  • Consolidation and Reconciliation: Synatic consolidates loss run data, reconciles policy numbers between carrier and agency systems, ensuring accuracy in the reporting process. This alleviates the complexity associated with handling policies from multiple carriers. 

Using Good Data to Build Better Relationships

Today’s insurance industry is built on data insights, but that doesn’t eliminate the importance of good relationships. In fact, making use of accurate and well-prepared loss ratio reports helps agents and brokers gain an understanding of each client in terms of profitability, empowering them to navigate their way around high-risk and low-risk clients, and ultimately allowing agents and brokers to perform better and and meet business targets.  

Carriers are more open to working with agencies that help them to achieve their business goal. Solid data helps agents collaborate with carriers to deliver proper risk assessment and implement loss prevention measures. This means agents can endear themselves to carriers who see their value, giving agents a competitive advantage. If you want to learn how you can begin viewing loss ratio reporting as a valuable agency differentiator, rather than an administrative chore, contact Synatic today.

Jamie Peers
February 13, 2024
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