When analyzing risk for a contractor, why is loss experience relevant?

Loss experience is highly relevant when analyzing risk for a contractor because it helps determine the type of insurance needed for that contractor’s specific operations and risks. By reviewing past loss experiences, insurers can identify trends related to particular types of claims, including their frequency and severity. For example, if a contractor has a history of significant losses related to liability claims, this indicates a need for higher coverage limits or specific endorsements to address those potential exposures.

Understanding loss experience enables insurers and brokers to tailor insurance policies that are adequately aligned with the contractor's risk profile. This can lead to a more precise coverage that not only meets regulatory requirements but also ensures the contractor is protected against the specific risks they face, ultimately supporting the contractor’s operational stability and growth.