Just Do the Math
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Today I’d like to discuss math. Don’t be scared, I’m not going to be assigning any word problems or reviewing high school calculus. Even if you don’t consider yourself a “numbers person,” you should embrace a few analytical tools that can be extremely useful when it comes to reviewing risk in your own organization as well as your clients and prospects.
In my experience with alternative risk structures, we rely heavily on our financial analytics team to provide us with the assessments we need to properly address risk levels and recommend the most appropriate risk transfer or financing solution. I’ll outline a few of the most common reports we use and why you should consider incorporating this information into your regular review, even if you purchase a traditional insurance program.
Loss projections can benefit just about any type of risk you can think of. Utilizing your loss history, historical, and projected exposures, financial analytics can project expected losses for the coming policy year. This comes in handy in several scenarios, including:
- Verifying deductible levels are set appropriately
- Reviewing carrier collateral requirements and justifying reductions in collateral
- Assessing risk levels and cash flow expectations in self-funded arrangements
Experience Modification Projections and Analysis
Experience modification factors can have a huge effect on insurance costs as well as a company’s reputation within their industry. In addition to reviewing your mod annually to verify the calculation produced by the state’s rating bureau is accurate, financial analytics can produce future mod projections and detailed analysis of several different aspects:
- Mod analysis reviewing the effect of changing class codes on current and past workers compensation policies
- Effect of state/jurisdiction changes
- How removing certain losses may change the mod factor – especially useful when working to quantify the potential financial benefit of enhanced risk management efforts
Reserve and Collateral Analysis
For companies utilizing large deductible and retro programs, or self-funding arrangements, analysis of set reserves and collateral can have a huge financial impact. It can allow you to negotiate a lower collateral requirement, or adjust reserves that are set too high and improve your cash flow.
Bottom line: when it comes to your risk management and assessment, numbers are your friends. Taking a proactive approach to reviewing your program can provide huge financial benefit, as well as a competitive edge. Luckily, Assurance’s Financial Analytics team is standing by to do the number crunching for you. Interested in taking a closer look at your program? Reach out to your trusted insurance advisor to discuss your options.
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