Performance Based Insurance offers a compelling ROI for many companies, and will transform the insurance landscape in the coming decade. Safety conscious companies will typically reduce their insurance premiums 25% to 50%. The best in class performers can reduce premiums more than 50%. Let’s look at an ROI scenario for Performance Based Insurance.
Two construction companies each pay $150,000 to Travelers. One has $30,000 dollars in losses and the other has $200,000 in losses. Instead of returning the unused portion of the premium to the contractor with $30,000 dollars in losses, that premium is used to subsidize the contractor which has $200,000 dollars in losses. Multiply that example by thousands of companies in each insurance company’s portfolio, and it’s easy to see how traditional insurance (SBI) penalizes “good” companies. Companies that should be using Performance Based Insurance are forfeiting hundreds of thousands of dollars every year to subsidize companies with problems.