Trucking Insurance: Your Total Cost of Risk
Total cost of risk in insurance terms describes the cost of both pure and speculative risk. It is synonymous with the price of your risk management program. For example, if you are faced with a union strike, how do you estimate losses? It is difficult, at best, to quantify this scenario. In contrast, other components of your cost of risk are easily calculated, such as insurance premiums or claims for on-the-job injuries.
Managing your total cost of risk should be an integral part of running your transportation or warehousing business. And CMB Insurance Brokers can help. The structure of your risk management program should look to the endgame: your price. To reach that goal, we help you to:
- Analyze your exposures
- Implement control measures to those exposures
- Determine risk transfer or financing options
- Manage current and future exposures
What Keeps You Up at Night?
As part of our risk management interview process, we confirm that your risk management approach supports your overall business objectives. We want to know what keeps you up at night. If that concern happened, how would your income or cash flow be affected if there were unforeseen depletions of capital or a shutdown? Discussing the qualitative aspects of your business provides the important details needed to solidify the game plan to your endgame—price. Exposures are both qualitative and quantitative. Analyses into both offer the foundation for developing forward-thinking approaches to those exposures.
What is your viewpoint on risk? Is your company risk-averse? Is it in a financial position to take on more risk instead of transferring that risk to another party or contractually to a carrier? We ask questions to determine where you are at on the risk scale.
Additionally, we consider norms for the transportation industry, and your market position and competition to tailor your risk management solution to the changing needs of your business.
Quantitative analysis supports the qualitative interview. We look at the “hard numbers” and prior losses to identify trends in your performance. We also analyze those losses to identify a variety of variables, such as:
- Average incurred costs per loss
- Total incurred trends
- Top loss drivers
- Locations with high frequency issues
- Fraudulent behaviours
- Reporting lag time
- Frequency vs. severity ratios
The results of our in-depth analysis will reveal opportunities to approach the critical areas driving your total cost of risk. We will isolate the root causes of these problematic areas and look to implement control measures to mitigate this exposure.
Pre- and Post-Loss Control Measures
Identifying exposures directs us to focus our resources on delivering the best control measures. An estimated 75 per cent of commercial insurance expenses are claims-driven. We look to control and reduce this percentage through pre- and post-loss control measures.