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Cost Reduction Strategies
R&K’s industry veterans have been providing alternative risk and cost reduction solutions for over fifty years with some of the most creative and innovative insurance and reinsurance markets in the industry.
Alternative Risk Financing
Many businesses recognize the advantages to assuming and financing a portion of their own risk. R&K can develop customized insurance architecture through a variety of alternative risk transfer and financing mechanisms – each designed to meet your unique needs.
With exceptionally broad domestic and international market access and years of experience in underwriting, consulting, constructing and placing alternative market solutions, our risk management practice professionals work you to optimize program design and lower your total cost of risk.
We provide a wide range of alternative risk solutions and services, including:
Solutions
- Retention & Custom Dividend Plans
- Incurred & Paid Loss Retrospective Plans
- Large Deductibles
- Self-Insured Retentions
- Captives & Rent-A-Captive Solutions
- Bonding for Qualified Self- Insureds
- Risk Retention & Safety Groups
- Loss Cap & Transfer Products
Services
- Actuarial Modeling
- Loss Forecasting
- Claim Reserve Reviews & Analysis
- Collateral & Securitization Reviews
- Client Retention Level Analysis & Modeling
- Premium Rate & Policy Limit Benchmarking
- Cash-Flow Analysis & Modeling
- Custom Program Design
Cost Reduction Strategies
Controlling total cost of risk begins with a clear understanding of your organization’s components of cost, and identifying pathways for critical improvement. R&K’s critical analysis starts with benchmarking and robust data-analytics.
We specifically target:
- Identifying Program Inefficiencies
- Claim Avoidance Strategies
- Organizational Risk Management
- Contractual Risk Management
- Coverage & Contract Gap Analysis
- Administrative Expense Mitigation
- Claim & Medical Expense Cost Containment
- Program Architecture Benchmarking – Premiums, Limits, Coverage, Retentions/Deductibles
- Litigation & Claim Severity Mitigation
- Premium Tax Mitigation
- Alternative Risk Financing
- Alternative Securitization
- Broker Compensation Analysis/ROI
- Safety ROI
- Program Waste Elimination
Components of cost will vary by business, by line of coverage, program design, and each policyholders’ appetite to retain or transfer risk.
| Component of Cost | Typical Range |
|---|---|
| Claims & Claims Related Expenses | 50% to 80%+ |
| Claims & Claims Related Expenses: This represents the actual cost of your organization’s claims and expenses specifically related to your claims, including investigation and legal expenses. | |
| Underwriting & Risk Assessment Expense | 8% to 20% |
| Underwriting & Risk Assessment Expense: This is the cost the insurer incurs in writing business, including the cost of maintaining a professional underwriting, loss control (risk assessment), administrative and underwriting support staff. | |
| Insurance Company Profit | 5% to 20% |
| Insurance Company Profit: That portion of the premium contained within the line of insurance designed to produce insurer margin. This varies by line of coverage. | |
| Claims Department – Adjustor Expense | 5% to 20% |
| Claims Department: Adjustor Expense – Also known as unallocated loss adjustment expense; the cost of maintaining a claims adjustment team, and associated administrative and support staff. | |
| Broker Compensation | 0% to 20%+ |
| Broker Compensation: That portion of the insurer’s base rates or loss costs which they file with state regulators as a portion of the premium they pay to their agents or brokers. | |
| Premium Taxes | 2% to 4% |
| Premium Taxes: Statutory taxes paid by the insurer. This is a pass-thorough expense. | |
| Insurer – Boards & Bureaus | 1% to 3% |
| Insurer – Boards & Bureaus: The insurer’s cost of participating in various, typically pooled, industry organizations. Example: Rate & Loss Cost making organizations. | |
| Premium Audit | 1% to 2% |
| Premium Audit: The cost associated with maintaining a dedicated premium audit department or the cost of outsourcing the premium audit function. A premium audit determines the final cost of an insured’s program from the estimated cost the insurer charges at policy inception. | |
Claims & Claims Related Expenses – Represents the actual cost of your organization’s claims and expenses specifically related to your claims, including investigation and legal expenses.
Underwriting & Risk Assessment Expense – Cost the insurer incurs in writing business, including the cost of maintaining a professional underwriting, loss control (risk assessment), administrative and underwriting support staff.
Insurance Company Profit – Portion of the premium contained within the line of insurance designed to produce insurer margin. This varies by line of coverage.
Claims Department – Adjustor Expense – Cost of maintaining a claims adjustment team, and associated administrative and support staff (also known as unallocated loss adjustment expense; the cost).
Broker Compensation – Portion of the insurer’s base rates or loss costs which they file with state regulators as a portion of the premium they pay to their agents or brokers.
Premium Taxes – Statutory taxes paid by the insurer (this is a pass-thorough expense).
Insurer – Boards & Bureaus – Insurer’s cost of participating in various, typically pooled, industry organizations (Example: Rate & Loss Cost making organizations).
Premium Audit – Cost associated with maintaining a dedicated premium audit department or the cost of outsourcing the premium audit function (A premium audit determines the final cost of an insured’s program from the estimated cost the insurer charges at policy inception).