Why You Should Stress Test Your Insurance Programme

Like many other industries, manufacturing is facing a challenging time due to the COVID-19 crisis and associated lockdowns. With many facing restrictions on cashflow and liquidity, having a better understanding of the risks being faced is essential.

Many businesses have been focusing on understanding their insurance costs as the measure for quantifying their risk exposures — but this does not take into considerations the true cost of risk.

How do you consider the true cost of risk?

Total Cost of Risk (TCoR) is the sum of direct and indirect costs your company is exposed to when understanding risks. This includes the following:

• Insurance premiums
• Retained losses in the form of deductibles and uninsured losses
• Claims, loss adjustment, and administrative costs
• Cost associated with risk management
• Transaction costs
• Loss of reputation
• Overtime and additional training
• Costs associated with finance

It is increasingly important to perform a thorough evaluation of your business’s insurance and risk management processes. Whilst this process may sound complicated, it can be simplified with an organisational assessment checklist. This will give you a better understudying of where your company stands with regard to its total cost of risk, helping you decide what your next steps should be.

The science behind the Self-Assessment Checklist: Total Cost of Risk (TCoR)

With the still looming pandemic, it has never been more important to protect liquidity and cashflow, and understanding your TCoR can aid in this. The restrictions and challenges brought about by COVID-19 will continue to test the best insurance and risk management strategies. Looking at your TCoR will ensure you are utilising your risk and insurance costs in the most efficient way.

Take the first Step

Benchmarking your risk costs against similar companies and evaluating where you stand is the first step to unlocking possibility. Our checklist provides you with a guide to addressing your risk exposures and the next steps to navigate through your risk landscape.