The Cost of Ignorance – The Value of Loss Control in the Insurance Industry

The landscape of the insurance industry is on the brink of a profound transformation, bolstered by the integration of advanced technologies and artificial intelligence. Today, more than ever, the old adage from Benjamin Franklin remains true:

"An ounce of prevention is worth a pound of cure."

As one of the founding members of America's first fire insurance company, the Philadelphia Contributorship, Franklin's comment on fire safety prevention heralded the modern philosophy of "predict and prevent" in risk management. The challenge, however, lies in quantifying a service that protects against potential future incidents.

How Do You Measure the Value Of Prevention?

The shift towards a "predict and prevent" strategy is a significant pivot from the traditional reactive business models most of the industry has become accustomed to selling. When you transform your sales and service approach to become more predictive, you can expedite loss control services and streamline your processes, effectively reducing both claim frequency and severity.

Fortunately, a few studies shed light on the long-term value for those of us who can transform our mindset to support this approach.

Empirical Evidence of Effectiveness

One study by Risk Control Technologies examined 2,500 organizations across 13 common risk areas. The findings were telling: organizations that received integrated risk control support showed a 6 to 11% higher retention rate compared to those that did not engage in active risk mitigation.

Additionally, a study published in the Journal of Safety Research benchmarked organizations that had received carrier loss control support over two years. The results should not be too surprising:

• The group’s average loss ratio was 10% lower than that of the initial and comparison groups.
• Both the frequency and severity of Workers’ Compensation claims were significantly reduced.

The Long-Term Financial Impact

These studies illustrate the profound impact a proactive approach can have on the insurance process. The long-term benefits for organizations adopting this model include:

1. Increased Account Retention
2. Reduced Competition
3. Enhanced Brand and Reputation
4. Lower Claim Frequency and Severity
5. Improved Carrier Relationships

Imagine for a moment, the long-term impact on your success if you could achieve the above five benefits across even just your top 10 – 20% of clients in your book!

Actionable Steps to Shift the Dialogue

To capitalize on the benefits of predictive and preventive strategies, you need to adjust the way you speak about your services. Here are some actionable steps to begin your transformation:

1. Educate Your Team: Use this article to ensure that all team members understand the value of risk prevention and how to communicate it effectively to clients.
2. Reframe Client Interactions: Shift the focus of client and prospect meetings from reactive discussions about the product “insurance” to proactive conversations about risk prevention and control and how that leads to few claims, keeping more money in our customers’ pockets.
3. Highlight Success Stories: Share case studies and examples where predictive strategies have significantly benefited other clients, thereby illustrating their practical value. If you do not have any case studies of your own, speak with your underwriters and ask if they have case studies you can use in your marketing, sales, and service experience.
4. Offer Comprehensive Risk Assessments: Lead your prospects to more effective solutions with a risk assessment and prioritization program that highlights potential areas of concern and the strategies to mitigate discovered risks.

Moving Forward

As the insurance industry continues to evolve, the shift towards a predictive and preventive approach in risk management is not just beneficial but essential. By focusing on prevention, you can not only improve your operational efficiencies but also provide a superior service that translates into higher client retention and reduced costs. Embracing this shift will ensure that your organization remains competitive and relevant in an increasingly complex market.

Heed Benjamin Franklin’s wisdom and invest in preventive measures that promise not only to protect our communities but also transform our industry’s reputation and customer experience.