Are you familiar with the adage "honesty is the best policy"? Are you a firm believer in open, complete communication? Both of these positions are important to hold as you operate your business. However, you may want to re-evaluate how handle minor losses. Why? Because what you say may incriminate you...at least to your insurer.

Daily, insurance consumers are asked to reconsider filing a claim, not because of its merits, but because of the possibility that insurance affordability or availability could be harmed. Insurers are focusing more of their attention on loss history and how past losses affect a given business that they insure or are considering insuring. In the current insurance environment, reporting a minor loss could make you a two-time loser. First, depending upon loss circumstances, coverage may be denied. Second, the fact that the loss occurred may cause your insurer to take a closer look at you.

Insurance companies want to have as much information as possible in order to decide whether to offer or continue to offer coverage. Loss history has always been important to insurers. However, an increased emphasis is being placed on using past losses as a way to predict the likelihood of future losses. The difference is that insurers have abandoned asking only about losses that exceed a certain amount. They now look for information on every conceivable loss. This increased sensitivity to losses may cause an insurer to increase premiums or even decide not to renew coverage when, in the past, minor or unpaid claims were not treated as problems.

Look, you have to be honest with your agent and insurer. However, insurers have changed the rules on viewing loss activity. So you owe it to your organization to manage losses in a manner that is in sync with the new reality. Handling more small losses as an operating expense instead of through your insurer may be good business. More organizations are becoming aggressive and creative in managing losses, especially as insurers have changed their attitude toward losses and underwriting.

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