The unfortunate truth among small-to-medium sized business owners is that we, as insurance agents, have traditionally preached that insurance products are the only way to mitigate risk within your organization. In this post I will discuss why reducing your organization’s risk goes much further than simply purchasing generic insurance products.
It has become the standard for most organizations to meet with their insurance agent once a year to discuss their “Risk Management Plan,” which results in purchasing more insurance products and increased costs. This yearly renewal meeting falls short on many different levels.
According to the rules of Risk Management 101, there are five ways to address organizational risk and insurance is simply one of them. When addressing organization risk, your options include:
Doing nothing. Also known as self-insuring. You accept the potential harm that the risk(s) at hand may cause to you and your organization. In the unfortunate event of a loss or damage to your organization, you’ll simply have to pay the costs out of pocket.
Mitigation. You can mitigate the risk through controls, programs, procedures and other techniques.
Avoidance. You can shape your business or lifestyle around a particular risk to avoid it completely. A good example would be choosing not to own a trampoline; In order to completely avoid the risk of injury that the trampoline may potentially cause.
Transference. Better known as insurance, you can pay an insurance company to assume your risk.
Risk Sharing. You can self-insure risks that you share in common with similar organizations.
Please note that insurance is only one of the tactics that can be utilized to drive down organizational risk. In order to strategically drive down your organization’s risk, you first need to identify the risk at hand and then decide which tactic best suites your needs.
As a Strategic Risk Advisor at McClone, my job is not solely focused on selling insurance products. I want to show our clients a different way. Wouldn’t you prefer to have a better understanding of the risks you face and the strategies to address them before you decide what insurance policies you need?
Without this understanding, it would be like a doctor making a diagnosis without reviewing your symptoms or family history. The treatment plan could be more dangerous than the disease.
So the next time you sit down with your agent, remember these concepts. In some cases insurance may be your best option; however it’s always worthwhile to weigh your options when addressing organizational risk(s).
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