Loss Runs and Underwriting

Why can’t carriers generate quality loss runs and underwrite appropriately using those loss runs?

I know, I know, they’re just waiting on AI to do all this for them. If that is the case, I strongly recommend all underwriters immediately begin looking for new jobs because your employer is not going to give you AI as an underwriting tool. They’re going to replace you even if they shouldn’t.

However, AI cannot work effectively with incomplete and inaccurate data. I was reviewing a national carrier’s auto loss run, and they insist, INSIST, they cannot provide a loss run that differentiates between liability, physical damage, and UM claims. When I was an underwriter in 1987, I had complete access to loss runs with this level of detail, and so did the agents. AI is not going to solve data and IT incompetency problems of this severity.

Either the carrier is lying, lazy, or has data issues so significant, they are likely entering a downward spiral. How in the world can underwriters underwrite without this kind of data? In fact, one insured had 5 claims in less than 24 months, and the carrier had not nonrenewed them. Any driver with 5 claims in less than 24 months is a bad risk in my book. The large claim is just waiting for a time and place. Even the 5 relatively small claims exceeded several years’ worth of premiums.

In this time of ridiculously high insurance premiums, it seems carriers may simply enjoy raising rates and whining about how they’re not making money (which is disingenuous given they made profits in 2024 that were almost three times more than normal). Maybe the better solution for everyone, other than carrier executives who need to show premium growth, is to actually underwrite.

Another significant factor is the prevalence of underinsured properties. The enormity of the underinsurance problem cannot be reasonably blamed on incompetence. There must be a purpose. I just had my own carrier tell me I could rebuild my custom home for $220 a square foot. I haven’t found a contractor who quotes anything less than $350 per square foot. $220 a square foot is up from the $158 per square foot they initially said was adequate.

Why might they be underinsuring property so severely? Incompetence for sure. Out-of-date data for sure. One reason they may be using a low number is they are purposely excluding foundations, dirt work, etc., but this is incompetence at a high level. A significant fire will cause concrete to distort, requiring the removal of foundations, completion of dirt work, and the pouring of new concrete. This is just an example of the coverage gap that happens when they exclude essential construction factors in their replacement cost estimates.

Another reason is financial. If they insured property to value, they’d have to increase their surplus, and they don’t want to do that. In some cases, some carriers do not have the financial wherewithal to increase surplus because they’re already in a hole. My suggestion for regulators is to require carriers to provide 100% full replacement cost, excluding Ordinance coverage, and waive the ITV/co-insurance penalties if they state the property is insured to value. In other words, the carrier should stand under the arch as Roman engineers did when the scaffolding was removed.

Some carriers are using alternative replacement cost estimators when adjusting claims, resulting in lower values. This practice should be banned.

Currently, state laws protect these carriers from losing the best business to alternative markets. Utah, though, recently approved captives for some personal lines risks. Good underwriting markets will eventually take the good business, leaving adverse selection with regular admitted carriers. Carriers promoting rate are cutting off their noses to spite their faces. Whether it is governmental price caps, as the Wall Street Journal covered in an Oct 21, 2025 article, or simply people willing to underwrite in new markets, good accounts should not be paying as much as they’re paying. They just need an alternative so they can jump.

This has already happened in commercial lines. Admitted commercial premiums are already covering far less than 50% of commercial assets, and likely less than 20%. Almost all commercial premium growth over the last five years, adjusted for inflation, has been in surplus lines and alternative risk transfer. Admitted commercial carriers are falling increasingly behind. Of course, a few exceptions exist, but collectively, they are daydreaming their way to oblivion.

The public is furious about the high cost of insurance today. Carriers are making record profits. Carriers are materially underinsuring property. The industry is clearly on a path that is damaging to the industry and the public. And yet, there are opportunities, with careful planning and thought, to reverse the downward spiral that is consuming many carriers today.

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NOTE: The information provided herein is intended for educational and informational purposes only and it represents only the views of the authors. It is not a recommendation that a particular course of action be followed. Burand & Associates, LLC and Chris Burand assume, and will have, no responsibility for liability or damage which may result from the use of any of this information.

None of the materials in this article should be construed as offering legal advice, and the specific advice of legal counsel is recommended before acting on any matter discussed in this article. Regulated individuals/entities should also ensure that they comply with all applicable laws, rules, and regulations.