Most business owners understand that every day they absorb and assume risks. Most of these are very small and part of doing business. Insurance policies are bought to cover the very large risks or the risk that could be catastrophic and put the enterprise out of business. How much risk a business is willing to assume in the “middle” (between the very small and the very large) is the question every business owner needs to figure out. Why? because there is a lot of room to save money. Let me explain. Insurance policies are priced to cover many of the risks in the “middle”. If a business can self insure or absorb these risks they can reduce the cost of their insurance. If the insurance premium bill is reduced then that money goes to the bottom line. As long as the insurance savings is greater than the cost of absorbing or self insuring risks, the business has a financial gain.
How much to assume or self insure depends on many things. This is where the risk manager steps in with some risk analysis. There are a lot of metrics and tools that can be used to figure out the financial ability of a business who wants to self insure. In a lot of cases this type of analysis exposes risk in the “middle” that a business did not even know they were already exposed to. The business can then decide to transfer those risks to an insurance policy or continue to self insure them. Any way you look at it, the risk analysis can be good financially for the business.
If you have not spent time with your risk advisor to look into your ability to self insure, then you may be missing out.
Until next time be careful out there and know your risks.
Posted by G. Kevin Nemith. President CNC Insurance/ Pfister Insurance, Dover DE, Hilb MidAtlantic Group
Knemith@hilbgroup.com
www.hilbgroupma.com
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