Total Cost of Risk. Why You Should Care

Written by: Categories: Risk Management

More than just a broker


When business owners think of insurance, most they think of the policy they have in place, a premium they pay for, and the peace of mind that if there is an insured loss there is someone to help them.

While this is part of the equation, there’s much more that the right insurance broker can assist you with, such as managing your total cost of risk.

Total cost of risk goes beyond insurance premiums


Total cost of risk is the sum of all aspects of your organizations operations that relate to risk, including retained/uninsured losses, related loss adjustment expenses, transfer costs, administrative costs, and insurance premiums.

These relate directly to your property and liability exposures, and if not managed properly – your total cost of risk could cost you your business.

If you are running a business, it’s important to have conversations with your insurance broker about ways they can support you in managing your cost of risk.

Every Bit Counts:  Wellness Plans can reduce Business Costs


Total Cost of Risk can be a bit daunting when thought of in its’ entirety; however, when broken down into easily manageable areas, it is surprising how the some simple changes can make a real impact.

In BC we have a Provincial Medical Plan, employers who provide extended health benefits, and WorkSafe BC in place for those injured on the job, so the idea of a Wellness Plan may seem unnecessary for most business owners.

But while the above services help with risk exposure, they are more what I’d call a band-aid.

Let’s use a ladder perspective and look at this from a bit higher up.  Unhealthy behaviours have a direct impact on a company’s bottom line:

  1. Inactivity, unhealthy eating, poor lifestyle choices all contribute to increased use of extended health plans.  Corporate premiums increase with significant employee usage.
  2. An unhealthy culture results in increased employee absenteeism, increased disability, increased workplace accidents, reduced workplace effectiveness, and negatively impacts work quality and customer service.
  3. Management time is focused on staffing issues instead of building and running their business.
  4. A 2010 survey found that 54% of Canadians report having 2 or more risk factors for chronic disease. Research demonstrates that employees with multiple risk factors have 50% more days absent and incur 2-3 times more healthcare costs.
  5. Heart disease and stroke combined are the leading cause of death in Canada. Cardiovascular drug costs are typically at the top-end of most companies’ pharmacological spending.

But if we think preventatively and stop a problem before it starts, then we’re really winning. We need a change of mindsets – from treatment-centric to preventative, and a Wellness Plan is a great place to start. Initiating a Corporate Wellness Program will help positively impact your total cost of risk in the following ways:

So what are you waiting for? Contact us to see how we can help you with your Wellness Program for your business.

Sources: 2010 Sunlife Canadian Health Index,, 2013