Blog Tag: indirect loss costs
The first half of 2017 was marked by significant loss – not only in dollars, but, more tragically, lives as well. Three tornado outbreaks ripped through various parts of the country, resulting in over $3 billion of damage. Parts of California experienced severe flooding after a massive rainfall that caused a $1 billion loss. Hurricanes Harvey, Irma and Maria triggered one of the most destructive hurricane seasons in history. Needless to say, 2017 has not been good to the insurance industry from a global perspective. The U.S. property and casualty industry has recorded a net underwriting loss of $5.1 billion for the first six months of 2017, compared to only $2 billion for the same period in 2016.¹
What Really Adds Up to TCOR
You’re my hero! Have you ever said that when someone did a simple favor like loaning you an umbrella during a storm or holding the door when your hands were full? I’m sure you appreciated the gesture, but were their actions truly heroic (which can be defined as brave, courageous, valiant, superhuman, etc.)? It’s become common practice in the English language to overuse words and phrases to the point that we dilute their value and begin to misuse them.
Accidents happen. We grew up hearing this phrase. While we try our best to prevent and avoid workplace injuries, the reality is that accidents can and will happen. That is why employers have workers’ compensation policies.
When it comes to these types of claims, however, some employers don’t seem to fully understand all of the related costs. It is generally understood that when claims arise they have several direct costs. These normally include medical costs and indemnity payments. It could also increase the insured’s premium at renewal time because more claims typically lead to higher premiums. But many people fail to consider the deeper financial impact that goes beyond claims costs and renewal premiums in the form of indirect loss costs. When we look at Total Cost of Risk (TCOR), indirect loss costs play a significant role.