One of the common mistakes of business owners and managers is to think of insurance only as a cost. They falsely see that insurance premiums are the Total Cost of Risk. This is a false premise.

Insurance Premiums are the cost of transferring risk from the owners of the business to an insurance company.

In simplistic terms, the Total Cost of Risk is made up of insurance premiums; commissions and fees; costs of risk evaluation and analysis; risk control; administration; uninsured or self-insured losses due to under-insurance; lack of cover; and the application of policy deductibles; as well as a myriad of other indirect costs outside the scope of BI Explained.

A saving in premium is not a saving in the Cost of Risk, if the premium saving comes at the expense of insurance coverage. The problem for many buyers of insurance is that they do not fully appreciate the additional risk they are assuming through having inadequate cover or not understanding the insurance coverage they are actually purchasing. If you are in any doubt seek expert advice.