Use the Total Cost of Risk approach to get— and keep — quality business.
To get the most out of the concept of the Total Cost of Risk (TCOR), your agency must:
- Create a client benchmark. The principles of TCOR are based on the reduction of client costs over a period of time. These benchmarks are set at per-$1,000 cost of client revenue and tracked over a period of years. Unfortunately, many agents who use TCOR find their benchmarks solely based on last year’s premium.
- Reduce costs in the four quadrants of TCOR. The four quadrants are risk financing cost, loss costs, administrative expenses, and taxes and fees. Using your resources allows you to impact all four quadrants.
- Demonstrate the impact of TCOR on the client’s bottom line. The most powerful sales presentation you can ever make is the one that shows a client or prospect the overall impact that your agency can make on their financial statement. One way of doing this is to convert the bottom-line savings to a top-line revenue stream using the client’s profit margin. To effectively demonstrate TCOR, you need to become skilled in conceptual presentation techniques. This allows you to compete effectively when prospective clients are choosing an insurance broker.
TCOR gives the producer the ability to demonstrate the impact on a buyer’s cost without “using the marketplace” (that is, getting bids). Success depends on your ability to explain your approach in verbal and written form. Conceptual presentations include stewardship reports, in addition to new business presentations.