Tower Hill recently empowered its appointed agents to pull CLUE loss reports as part of the application process.  Three common scenarios appear on these loss histories:

  1. The client has lived at the home for several years and filed a claim for damages during that time.
  2. The risk location had a claim before the client purchased the property.
  3. The client had a claim at another location (rental property, primary or secondary home in another city or state).

Most of us are familiar with the first scenario.  We want to know:

  • When did the loss occur?  Did it just happen or was it over three years ago?
  • What damages resulted from the loss?  Were they fully repaired by a licensed contractor?
  • What was the specific cause of loss?
  • What was done to prevent future losses?

Answers to these questions help determine the probability of a similar loss occurring in the future.   A client who took immediate action to mitigate and repair the damage shows a concern for their property, regardless of insurance coverage.

What about losses at the risk location before our client purchased it?  For example, imagine the CLUE report indicates that a risk had water damage and $3,000 was paid on the claim. This wasn’t the current client’s claim, so why would this concern us?

  • Risks with prior losses are 2 to 3 times more likely to experience additional losses in the future.  The home itself may be poorly constructed or poorly maintained over its history.
  • We don’t know the cause of loss or if the damage was repaired.  The cause of loss may indicate a hazard that, if not addressed, could cause a similar loss in the future.   Did a supply line break in a 30 year old home?  Were all the other supply lines replaced after the loss, or only the one that burst?  If the resulting damage wasn’t repaired properly by the prior owner, we could be insuring a risk with existing damage or a high probability of future loss.
  • The prior carrier may have paid $3,000 in covered damages, but there could have been excluded damage as well.  Corroded plumbing, deteriorated roofing, and HVAC mechanical breakdown are all examples of excluded losses that present uninsurable hazards if they are not repaired.

The third scenario prompts questions such as, “What does it matter if they had a frozen pipe claim at their home in Ohio?” or “The claim didn’t even happen at the location we’re trying to insure.”

In reviewing losses that occurred at other locations the client owns, ask if the damage could have been prevented (e.g., a rusted 30-year old water heater the insured could not afford to replace that caused a water loss) and if the insured did anything to prevent a recurrence of the same loss (Did they replace the rusted water heater after the loss?).  These intangible factors can weigh heavily in decisions to make exceptions for prior losses.  There is predictive value: if a client couldn’t afford to maintain another home or neglected their property and a loss ensued, what is the likelihood they will maintain another home?

As agents and underwriters, we also review the “people risk” to determine if there is a:

  • moral hazard – the likelihood someone will intentionally cause or exaggerate a loss due to poor moral character or financial circumstances
  • morale hazard – someone who is less careful to prevent or mitigate a loss because “that’s what insurance is for.”

Often, you are the best source of information regarding the client’s character.   Some questions to ask are:  Is this a new insured for you, do you know them personally or have you had them insured with another carrier before?  Why are they choosing to move their policy to Tower Hill?  Are they capable of properly maintaining their property?

Ultimately, by making good decisions regarding loss histories, we are managing our loss ratio and capacity.  Our agents are responsible for reviewing policy eligibility prior to submission (including loss history) and requesting Underwriting approval when the losses have been vetted as noted above.  By managing all risks, we ensure the stability needed to make good on our contract when our customers need it and increase Tower Hill’s ability to protect more homeowners in Florida.

Brian Hunt, AIC, CPCU

About Brian Hunt, AIC, CPCU

Commercial Underwriter II
Tower Hill Insurance Group

Brian started his insurance career with State Farm in St. Paul, MN, in 1998. In addition to handling property and liability claims, he served as part of the National Catastrophe Team, following tornadoes, hurricanes, and hailstorms across the country. He made several friends named Charley, Frances, Jeanne, Ivan, Wilma, and Katrina. He moved to Florida in 2009 to manage a catastrophe office in Jacksonville, and because of a girl (now wife) his path led him to Gainesville and Tower Hill Insurance. In his free time, Brian is an Ironman triathlete and also enjoys writing about local and national history.