Introduction

The role of the Safety Professional is continually evolving and expanding. It is incumbent upon all Safety, Loss Prevention and Risk Control professionals to address the "Total Cost of Risk" (TCOR) by defining, identifying, mitigating and measuring key aspects that drive casualty loss in the organization. By leveraging organizational data to drive insights on loss, Safety Professionals can create more effective and sustainable risk control and claims management strategies that enable to respond to changing demographics and achieve annual cost savings for their firms. The intent of this whitepaper is to illustrate how a five-phased approach for managing TCOR can have a dramatic impact in a real-world application (Case Study).

The Calibrate and Diagnose phases are the primary drivers for data analysis and the identification of the key components driving the cost of risk through the evaluation and assessment of existing risk management systems, safety and health programs, as well as claims management protocols in an organization.

Upon identification of the cost drivers; Strategize and Execute phases are then implemented with specifically tailored Key Performance Indicators (KPI's) and dashboards that Measure safety/risk control, claims and risk management program's performance and help quantify achieved cost reductions on an annual basis.

Definition of TCOR

TCOR has traditionally been defined in three broad categories as illustrated in figure 2 below:

  • Premiums – cost of risk transfer to the marketplace (insurance carriers)

  • Losses – cost of retained losses; either high deductible or self-insured retention

  • Administrative expenses – cost of internal and external risk management functions that include staffing cost, consulting services costs, brokers' fees, claim funding cost, actuarial and ancillary services costs, etc.

However, as the drivers of casualty risk have evolved, so have our methods to measure and execute on them. This new risk profile identifies TCOR in fourteen (14) Cost Driving Elements as shown in figure 3 with the elements listed below:

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