3 Part Solution
3 Part Solution
At TriPoint we emphasize to our clients that they have to “Own” their risk. This means that they take responsibility for preventing losses. In addition, they work with us to identify and insure catastrophic exposure areas that could cripple the company or eliminate their financial rewards. They need to own this responsibility. That’s what risk management is all about. You don’t leave risk to chance and you don’t expect everything to be covered by insurance. You identify and exposure and figure out the best way to handle it.
Safety is included in Risk Management as well. In order to earn financial rewards, losses need to be prevented. This is another responsibility you have to “Own”. Many companies think that safety can be delegated to a Safety Director or Safety Department. You can delegate there but you’ll never get the results you want. Mainly you’ll get OSHA compliance and people to run safety committee meetings and do inspections.
So how do you manage safety? First, it has to come from the top. The CEO/Pres has to lead and be the Chief Safety Officer. Everyone needs to know throughout the company that safety is a high priority. As high as growing sales or increasing ROI. The safest companies set a “Zero Accident Culture” as an annual goal. Many of you reading this may think that’s ridiculous. However, there are very large companies in very hazardous industries that hit this goal every year. But you’ll never hit it if you don’t set out to do it.
Many companies who have a Zero Accident Culture still have claims and those without such a culture will definitely have claims. It’s important to have a process to manage injuries and claims and to limit them to their lowest possible. Don’t think for a minute that reporting a claim to an insurance company will end up with the lowest settlement. It takes knowledgeable Injury Management Consultants who know how to intercede and drive claims to their lowest possible values. At TriPoint, this is one of our greatest strengths. Because we are trying to maximize the Financial Rewards for our PBI clients, it’s essential that we reduce claims to their lowest level. This second pillar can make the difference between high financial rewards and average.
Since you’ve never received Financial Rewards from insurance, you might be wondering what it means. So let me simply explain how PBI can deliver Financial Rewards. Right now you have conventional or what we call Subsidy Based Insurance™ (SBI). With conventional insurance, you can have zero claims or $1M in claims and you pay the exact same amount. Seems like there’s something wrong with that picture, right?
Normal insurance company overhead is about 35% which means the balance of your premium or 65% is allocated for claims. To keep it real simple, let’s say in a given year you have Zero claims and your annual premium is $500k. If the insurance company overhead is 35% of $500k or $175k, that means $325k is allocated for claims. If you had zero losses, what happens to the $325k? Many would think it’s insurance carrier profit. It isn’t. Remember that example above where we used the $1M claims example? Well what if that company only paid $100k in premium or even $5k where is the deficit coming from? It’s coming from you. It’s the old Robin Hood thing. The low claim companies subsidize the bad claim companies. That’s why we call it SBI.
What if you could turn that on its head? Instead of your claim allocation subsidizing others, you keep all of it. That’s PBI. You create a strong safety culture and you keep all the financial rewards. As Matt Damon famously said in the movie, “Good Will Hunting”, How do you like them apples? We’ll show you how to build big piles of apples
What is Performance Based Insurance?
Essentially, Performance Based Insurance, or PBI, means that a company’s premium is not based on market rates but on their individual claim performance. In other words, their premium is determined by their losses not insurance carrier rates. Why is this a big idea? First, it allows a company to determine their own insurance destiny instead of relying on the insurance market. Second, they earn financial rewards for low loss levels and a strong safety culture. With conventional insurance, those with the lowest loss levels are subsidizing those with the highest loss levels. We call this Subsidy Based Insurance or “The Robin Hood Rip Off”. Your poorly managed competitors rob you of the financial rewards you have earned through your hard work. With PBI, you retain the money normally used to subsidize other companies. To learn more about how PBI works, watch this quick video.
Advantages of Performance Based Insurance:
You have complete control over your insurance destiny
Your premium is based on your claim performance and not market rates
The financial rewards or dividends you earn can reduce your premium from 20-50%
Little or no subsidy to others (your competitors)
The more you control claims, the The stronger your safety culture, the more you save
Eliminate the hassle of going out to bid
Disadvantages of Subsidy Based Insurance
(AKA as Traditional – what you have now)
You subsidize your unsafe competitors
You have no control over your insurance destiny
Your premium is subject to unpredictable market/price swings
The insurance company earns the financial rewards
You’re out to bid every year to keep the system honest
You earn no underwriting income – the insurance company earns the reward
Everyone else’s experience – even your competitors’ – determines your cost
Who is Performance Based Insurance For?
As creators of the Performance Based Insurance concept, we are one of the few insurance brokers in the U.S. devoted to these alternative insurance solutions. Many Performance Based Insurance type programs are only offered to companies spending $500,000 or more on their business insurance. We’ve seen companies spending millions annually who have never seen these concepts. Yet we offer Performance Based Insurance solutions to companies whose annual business insurance spend is as low as $100,000.
There are 3 primary types of Performance Based Insurance
A “group” of companies collectively insure each other by forming their own insurance company. This is the most popular for middle market companies paying between $100k and $1M in premium for workers comp, GL and auto. This market has doubled in the last 5 years and thousands of middle market companies now participate in group captives.
An insurance company that is wholly owned and controlled by its insured entity; its primary purpose is to insure the risks of the insured company and its insureds benefit from the captive insurer’s underwriting profits. This is common for companies paying $1M+ in premium.
A cash flow workers compensation (and GL and Auto) insurance program that allows the insured to retain a portion of each loss through a substantial deductible. Because of the deductible, there is a large upfront premium savings. The premium savings depends on the size of the deductible.
Budget-Friendly Yet Comprehensive Coverage
Every company isn’t a good fit for PBI. At TriPoint, we understand the importance of having budget-friendly yet comprehensive coverage in place, no matter how big or small your business venture may be. We pride ourselves on developing loss control strategies to prevent claims by proactively identifying and mitigating a company’s risks no matter the industry. From long term care and manufacturing to wholesale and construction, we have the experience and expertise to recommend the most thorough business insurance coverage to insulate your company, your employees, and company owners from the risks they face every day.
Types of coverage include:
Umbrella & Excess Liability
Errors & Omissions
Employment Practices Liability
Directors and Officers
Pollution and Environmental Liability
A Custom Solution
We can customize a business insurance policy that protects your assets, employees, and profits with services that include, but are not limited to: