Middle market companies can learn a lot from the Fortune 500. For example, from our perspective the Fortune 500 separates the world of insurance into two categories: Subsidy Based Insurance (SBI) and Performance Based Insurance (PBI). There is a big difference between these two categories.
When it comes to Subsidy Based Insurance, as the name implies, successful companies subsidize the poor performance of other companies, which might even include competitors. When it comes to Performance Based Insurance, companies “know” the other companies in their risk pool, and unused claims are returned, lowering effective premiums and controlling unpredicted premium swings. Performance Based Insurance can save middle market companies hundreds of thousands to millions of dollars over traditional Subsidy Based Insurance plans. That’s why all 500 of the Fortune 500 uses some type of Performance Based Insurance to control their insurance destiny.