Total Cost of Risk (TCOR) has been the cornerstone of risk management calculations for almost 50 years. Risk managers, brokers, and risk services providers have used TCOR to quantify the buyer’s costs and outcomes. Like many other measurements, the original TCOR model of 50 years ago is now obsolete.
The “old” version of TCOR measures a small part of the financial impact of a risk management program. The most widely used TCOR version determines:
- Risk Financing Costs – The cost of risk financing, broker fees, securitization of claims payment, and other placement fees.
- Cost of Claims – The cost of the claim event and the amount that is retained inside the buyer’s organization.
While these measurements are important, they do not provide the buyer, broker, or risk services provider with an accurate Total Cost of Risk. They are simply the total cost of the transaction and claim events.
TCOR 2.0™ is a comprehensive and accurate measurement of the buyer’s total costs AND the resulting financial impact. Incorporating recent advances in cloud computing and data aggregation, TCOR 2.0™ includes the two components of the traditional TCOR model plus three additional critical measurements:
- Enterprise Cost of Claims – The ultimate cost of a claim event as it touches the many operating entities, business units, and budgets throughout an organization.
- Cost Reduction Techniques – Virtually all Risk Control, Claims Management, or Risk Management processes are designed to reduce the buyer’s costs. TCOR 2.0™ quantifies the financial impact of Cost Reduction Techniques, including claims management, risk control services, information systems, and brokerage resources.
- Buyer KPI Impacts – TCOR 2.0™ demonstrates how the risk management program has impacted the buyer’s business organization. To provide a meaningful and complete analysis, the broker or provider must attach their impact to the buyer’s Key Performance Indicators of EBITDA, margins, shareholder value, and/or productivity.
Leading brokers, risk services buyers, and financial executives are moving to TCOR 2.0™ from the one-dimensional view of insurance and claims costs found in the old TCOR model.
TCOR 2.0™ provides the most complete measurement of costs AND the is the best gauge of financial outcomes available today.
Interested in using TCOR 2.0™ to accurately quantify the financial impact of your services?