Zurich’s Focus on Total Cost of Risk Sets It Apart
Some business risk is easy to control, but much risk is difficult to predict. When it comes to casualty risk exposures, smart risk management organizations follow a “big picture” philosophy to reduce that difficulty.
Most of all, they pay close attention to the concept of Total Cost of Risk, or TCOR.
With that in mind, Zurich Global Corporate in North America (GCiNA) has effectively built its Domestic Casualty value proposition on the principle that nothing truly supersedes the calculation of TCOR as a means to reduce both premium and claim costs.
And, said Brandon Fick, head of Domestic Casualty, Zurich GCiNA, Zurich leads the casualty industry because it not only offers a TCOR proposition as a prime benefit to insureds, it also puts skin in the game to back up its TCOR beliefs.
“TCOR is a major focus at Zurich because it can be a clear differentiator,” Fick said. “There are very few companies who can match our offerings regarding TCOR. Our customers are not just buying insurance; they are also buying Zurich’s expertise as an extension of their risk management department.”
Fick explained that in the large corporate business casualty market, companies typically take on the majority of the risk themselves through large deductibles and retention programs. Of course, they also buy insurance coverages for added protections. But in the very competitive casualty business, the drive for better ways to manage risk — all the factors that go into determining TCOR on an insurance program —are often pushed aside for the sake of price. That’s a very shortsighted approach, Fick said.
Fick said Zurich’s decision to focus on TCOR makes sense because it leads to high business retention and creates a strong customer-carrier interaction that ultimately results in keeping losses and costs down.
“We are always looking to help our customers drive a better outcome,” Fick said, adding that Zurich initially takes a holistic, 360-degree look at pre- and post-loss activity to see if a business is getting the most for its risk management dollar. “We offer data insights through sophisticated tools that can measure results and identify opportunities to improve.”
“TCOR is a major focus at Zurich because it can be a clear differentiator. There are very few companies who can match our offerings regarding TCOR. Our customers are not just buying insurance; they are also buying Zurich’s expertise as an extension of their risk management department.”
— Brandon Fick, head of Domestic Casualty, Zurich GCiNA
Once Zurich performs that initial analysis, the company’s claims and risk engineering team jointly creates a detailed plan that will go a long way towards reducing both claim frequency and severity.
According to Fick, the Zurich differentiator lies in its extensive — and proprietary — tool kit, which has been years in the making.
In fact, about five years ago, a prospective customer was feeling some pressure in their program and was looking for a carrier that could help them identify areas that needed improvement. Zurich specifically drilled down into the customer’s transactional outcomes by using an internal tool to identify any potential missed financial opportunities through overpayment of claims. The result was a substantial savings of 20 percent that Zurich was confident they could deliver. When they told the client about their findings, the response was, “Prove it.”
So Zurich Casualty discussed the results in detail with the customer and offered something unprecedented — a guarantee that its analysis would prove accurate and deferred an amount of the total premium. The basic proposal was that if Zurich’s calculations were right, Zurich would recoup the deferred amount and receive a bonus too.
“Within two years, we knew we had proven our findings,” Fick said, adding that the experience gave Zurich the confidence to expand the program. “We concluded we have this unique tool, why are we not using it nationwide?”
The basic TCOR premise is taking a “forensic” approach when auditing the claims process. And while the original concept was focused on claims alone, Zurich started looking at the pre-loss side as well, delivering accurate ROI numbers to clients when they agreed to commit to the entire TCOR process.
“Big data is the buzzword today; everyone in the industry is talking about it,” he said. “We’re actually taking big data and using it to create a tailored solution for the customer.”
Zurich’s underwriting team has the company so confident, Fick said, in the impact their TCOR proposition will have on driving better outcomes. Their belief is so strong that they empower their underwriting teams to offer up front premium considerations that are normally afforded later in the relationship.
“Again, we want our customers to think of us as an extension of their risk department,” he said. ”I have yet to meet a risk manager who has commented about being overstaffed. Our customers realize they need partners; most of them don’t have the resources or tools to do an in-depth analysis of their results to identify where they may have some pressure in their program.”
Fick noted that Zurich Casualty’s TCOR approach is not for every customer. It really is set up specifically for customers who are dedicated to continuous improvement and are already using some form of analytics to help in decision making. They also must share Zurich’s belief in the value in collaboration and demonstrate the commitment to execute on Zurich’s TCOR recommendations.
“It’s a 6 to 12 month life cycle,” Fick said. “Before we even look at a number on a piece of paper it requires having a lot of detailed discussions with the customer so that we can understand what they have done to manage their risk.”
Zurich formally rolled out its complete TCOR core strategy during the first quarter of 2014. But, Fick said, the company has been implementing elements of the final product during the past three years. It started out on the claims side, but today covers every aspect of risk. Since it began using its TCOR strategy with clients in 2010, Zurich Casualty has increased its new business writings 270 percent — an impressive showing by any measure.
“This is the next wave of underwriting,” Fick said. “Everyone may be talking about big data, but you have to deliver insight, solutions and a differentiated product to the customer. We believe strongly that our TCOR proposition is that critical differentiator.”
This is intended as a general description of certain types of insurance and services available to qualified customers through the companies of Zurich in North America, provided solely for informational purposes. Nothing herein should be construed as a solicitation, offer, advice, recommendation, or any other service with regard to any type of insurance product underwritten by individual member companies of Zurich in North America, including Zurich American Insurance Company. Your policy is the contract that specifically and fully describes your coverage, terms and conditions. The description of the policy provisions gives a broad overview of coverages and does not revise or amend the policy. Coverages and rates are subject to individual insured meeting our underwriting qualifications and product availability in applicable states. Some coverages may be written on a nonadmitted basis through licensed surplus lines brokers.
This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Zurich. The editorial staff of Risk & Insurance had no role in its preparation.