Insurance Management vs Risk Management
Our definition of Insurance Management is the management of all of your insurance needs, both professional and personal, by a single expert vendor. Practically speaking, that means our clients bring us onto their management teams and hand off their insurance portfolio to us to manage. Purchasing insurance, however, is not risk management. Risk Management ensures that an organization identifies and understands the risks to which it is exposed. Risk management also guarantees that the organization creates and implements an effective plan to prevent losses or reduce the impact if a loss occurs. “Good” risk management doesn’t have to be expensive or time consuming; it may be as uncomplicated as answering these three questions:
- What can go wrong?
- What will we do, both to prevent the harm from occurring and in response to the harm or loss?
- If something happens, how will we pay for it?
Insurance is a valuable risk-financing tool. Few organizations have the reserves or funds necessary to take on the risk themselves and pay the total costs following a loss. Needless to say that spending your hard working capital to pay for damages might not be such a good idea. Purchasing insurance, however, is complimentary to risk management in protecting your business. A thorough and thoughtful risk management plan is the commitment to prevent harm. Insurance pays for the damages if the risk were to occur. Risk management provides a clear and structured approach to identifying risks. Having a clear understanding of all risks allows an organization to measure and prioritize them and take the appropriate actions to reduce losses.An effective risk management practice does not eliminate risks. However, having an effective and operational risk management practice shows an insurer that your organization is committed to loss reduction or prevention. It makes your organization a better risk to insure. Moreover, an organization should have a risk management strategy because:
- People are now more likely to sue. Taking the steps to reduce injuries could help in defending against a claim.
- Courts are often sympathetic to injured claimants and give them the benefit of the doubt.
- Organizations and individuals are held to very high standards of care.
- People are more aware of the level of service to expect, and the recourse they can take if they have been wronged.
- Organizations are being held liable for the actions of their employees/volunteers.
- Organizations are perceived as having a lot of assets and/or high insurance policy limits.
At EXL Consulting we can manage all of your insurance needs, both professional and personal. We can also help you put in place a comprehensive risk management plan. Therefore practically speaking, we think it might just be such a good idea to bring us onto your management team and hand us off your enterprise risks. And we can take it from there.