The total cost of risk uncovered

  • Organisations face many risks that they are not insured for, and by measuring the total cost of risk, informed decisions can be made to manage exposure
  • Misconceptions about the total cost of risk still exist
  • Our infographic can help you understand your total cost of risk

This total cost of risk (TCOR) is a compilation of all of the risks facing an organisation – insurable or uninsurable, known and unknown. We can help you understand your TCOR – allowing you to make informed decisions, manage your overall risk profile and avoid underinsurance.

The TCOR can be more easily explained as an equation – adding up the insurance premiums, direct costs, indirect costs and risk management expenses. These terms are further defined as:

Insurance premiums: all insurance premiums, brokerage expenses. Direct costs: deductibles, uncovered losses. Indirect costs: lost revenue, loss of productivity, lower competitiveness, damage to brand, increased HR costs, penalties, third party liabilities. Risk management expenses: internal costs including salaries, training and legal counsel; external costs including claims, loss control and consulting fees.

The benefit of measuring the TCOR is that it allows decisions to be made about the trade-off between self-insurance, insurance and risk management investment. It also helps track the benefit of investing in risk management activity – as investments in preventing losses can be seen in the changing TCOR over time.
Total cost of risk