Insurance Risk Management Consulting : Food for Thought
Posted by Premier Risk Management Admin on June 28, 2009 · Leave a Comment
Whether your business is small or large, public or otherwise, the purchase of insurance has become extremely complex.
The issues surrounding business survival in the event of loss can be nearly insurmountable even with a comprehensive insurance program in place. Keep in mind that insurance does not cover it all, nor is it meant to.
So how then do you protect your company and save money?
Step #1: First, an assessment of a business’s true needs must be performed to identify company risk and exposure to loss.
Step #2: You need to develop a well-thought-out program on how to lessen, mitigate or eradicate potential exposure to those identified risks.
PROTECT AND SAVE
The true purpose of this exercise is to ensure the protection of company assets and the company’s future should a loss occur.
But let’s go even deeper than that. In a real and practical sense it all boils down to Return On Investment. From the actual cost (hard dollars) of the insurance products (policies) you buy … to loss control and safety programs you institute … to deductibles paid and retentions assumed … to uninsured losses to underinsured losses … to a variety of other factors — all these make up what is called your Total Cost of Risk.
Depending on factors such as a company’s risk appetite, exposures, losses, and insurance coverage purchased, the cost of risk can vary from year to year.
Most businesses have cycles. Just like all real world expenses, over the years we have seen significant swings in the cost of insurance.
As a C-Level exec you’re savvy enough to know that the insurance industry has market cycles (soft – meaning insurance company capacity is high, broad coverage terms are plentiful and premiums are low; hard – capacity is diminished, coverage is restrictive and premiums are high).
Here’s the point: The objective of any insurance and risk management program should be directed toward steadying, if not lowering, costs over a long period of time relative to a particular company’s production (revenue).