I’m sure you’re familiar with the expression, “All give and no take.” This reminds me of conversations I have had with CFOs and Risk Managers through the years. More than once, I’ve been told about insurance costs rising year after year despite few or no claims. To paraphrase their frustration, “Years and years of premium payments are simply rewarded with rate increases next year… when will our good track record pay off?” I’ve also had my ear bent by complaints about staggering rate hikes after a loss. The same theme rang true: Where is the reward for years and years of payments with no losses. “After years of paying premiums, we had a loss and our rates skyrocketed…WHERE’S THE LOVE?”
That is a great question. WHERE IS THE LOVE? For simplicity’s sake, let’s prognosticate that THE LOVE is the goodwill that should have been built up by faithfully paying insurance premiums and striving to control losses in the past.
Often, THE LOVE was spent to build and operate towering buildings in the hearts of major cities.
THE LOVE paid for cool marketing campaigns.
THE LOVE was already paid out to shareholders to keep the stock price strong.
Unfortunately, THE LOVE can quickly be diluted.
Looking For THE LOVE In All The Wrong Places?
Businesses that are weary of “Looking for THE LOVE in all the wrong places” are often rewarded in the Alternative Risk Transfer (ART) market. Alternative Risk Transfer (ART) approaches and vehicles have fueled an ongoing shift in the business insurance marketplace. More and more companies with solid risk management practices and good loss histories are moving some or all of their risk into the ART market. ART programs often include captive insurance companies (CICs) and risk retention groups (RRGs) and enable businesses to reap greater rewards from strong past performance. ART approaches can help provide cost control, flexibility, the ability to reap insurance profits and reward businesses for a good loss history.