Whether you are a business owner, CFO, or the lead operational muckety-muck, you get a pit in your stomach when it’s time to renew your company’s insurance program—a common theme we have heard in 20-plus years consulting with businesses of all shapes and sizes. This occurs primarily because of the failure to invest the required upfront time to have a solid system in place that addresses and manages the two most important variables: the true total cost of risk of company’s financing and the program design.

True Total Cost of Risk:

I have yet to walk into a middle-market business (under $250 million a year in sales) where they truly understand their “cost of risk financing.” Invariably, the conversation starts with “This is how much we pay in insurance premiums, and this is our current coverage. What can you do?” They may have it nicely compiled in a spreadsheet, but they sit back and wait for me to tell them whether we can save them money on their insurance premiums. The only way these folks evaluate how well the organization is doing year to year on this one cost component is how much they are paying for their insurance premiums. Some even break it down as a percentage of gross sales, which is better than evaluating the purchase on a pure premium-cost basis. Sound familiar? Keep reading.

Continue reading The Two Biggest Mistakes Businesses Make When Purchasing Insurance – Part I →