Cost of Risk Part Two

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“Total Cost of Risk” is the sum of the costs arising from all classes of risk faced by an organization. Insurance is one component of a risk management strategic plan that protects your assets. There are many benefits to this new approach.

Benefits of a total cost of risk approach

  • Making effective risk management decisions.
  • Measuring progress toward risk management objectives.
  • Understanding that insurance is only a piece of the puzzle, not the entire puzzle.

Total Cost of Risk

  • Internal Risk Administration- This is the cost associated with managing your insurance program. For example, if you have to spend more time getting basic insurance issues answered, your cost of risk goes up.
  • Legal and Claims Expenses- These are costs associated with claims. If your agent is not willing to step in and help, you will spend more time managing the process.
  • Deductible Costs- Every policy has certain deductibles. These are direct costs. It is always important to check quotes to make sure deductible are consistent. Lower premiums may turn into higher costs if the deductibles are higher.
  • Uninsured Loss Costs- Policies do have exclusions and will impact your costs. For example, if you operate a restaurant, your policy better have food spoilage coverage. Knowing the risks of your industry can actually reduce overall cost.
  • Safety Program Costs- Safety programs do have a cost. Some are paid internally and some can be supported by the insurance company.
  • Insurance Premiums- These are direct insurance costs.
  • Contracted Costs- You may enter into contracts for services, and having the right language can improve overall costs. For example, if you are remodeling your building and don’t require the contractor to have insurance, you may be responsible for his injured employees or more. This will increase your risk costs.

The key is there are ways to lower costs in each of these areas that don’t have anything to do with insurance. Having a trusted advisor who can help you evaluate this will serve you well in the long run.

A New Way to Think About Insurance

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Congratulations! You got past the title and are now embarking on a new way to look at the insurance buying process. Over the next few months we would like to offer you an alternative way to think about insurance that will change your purchasing experience.

We will start with a few basic truths that we believe in. We will share these truths in greater detail over the next few articles.

  • Insurance is a service not a commodity.
  • You can never get the right insurance for you needs online in 7 minutes.
  • There is more to insurance than a policy.
  • Insurance was designed to be a relationship between the customer, agents and insurer.
  • Your insurance agent should be as valuable as your CPA, attorney and financial advisor.
  • If all you get from your agent/company is a policy, then they are overpaid.
  • Insurance ads are confusing because they make you believe that all insurance is the same, and we all know that not to the case.
  • To get proper coverage, a knowledgeable agent and great service, buyers need not pay any more.

The very core of what we value is that providing reasonable solutions to people and businesses should come before everything else, even if what we recommend means not selling you insurance. That is what we will do.

We want to inform you about the value and importance of developing a relationship with your agent. The qualification of the agent can make a difference in your insurance coverage.   The national companies spend millions of dollars in advertising while offering only a minimal amount of coverage. The main purpose of insurance is to have your claims covered. In order for your claims to be covered you need an individualized policy that addresses your risk and needs. Only then, will you have the right coverage.

We hope you will join us on this journey, and in the end decide that there is a better way to buy insurance and have true peace of mind.