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Drivers of Total Cost of Risk (TCOR) For Casualty Insurance

Earlier this year we described an analysis of our databases of Total Cost of Risk (TCOR) metrics for Middle Market (defined as organizations having revenues $10 Million to $1 Billion) and Large ($1 Billion+) organizations to determine if there is similar risk cost segmentation occurring at each level of grouping.

Since then, we’ve expanded our understanding about the critical dynamics of Casualty (Liability, Workers’ Compensation, etc.) insurance programs. Related to these programs, have your board of directors been asking more pointed questions about the composition of insurance and self-insurance costs? Do they want to know how the programs have been analysed for expected and unexpected risks and costs? Are they inquiring about what resources are utilized to resolve risks in an efficient and expedient manner? These questions are normal given the variety of risks organizations face each day. How are you responding for your most regular risk profiles…casualty and related insurance programs?

For most organizations the activities and costs associated with risk modelling, monitoring, planning, compliance and administration are relatively small compared with the expected risk damages of casualty insurance programs. The key drivers of these programs are expected and unexpected damages, outweighing the costs of administration by far. By saving and reallocating some damage costs to predictive analytics, clients are gaining a significant Return on Investment (ROI) of 8-10 times or more.

After looking at over 100 programs since the beginning of this year, we have been able to narrow our observations to the root causes of claims and expected claims by the type of program. From these analyses, we have further been able to examine data in greater detail by selecting certain criteria for refined claim damage studies. Using these criteria and studies, we have found a remarkably similar way to predict the cost outcomes for casualty insurance and self-insurance. All of our recent experience has been updated in our free TCOR application for you and your board of directors’ to use in analysing these subjects.

For more refined best practice studies, we will be pleased to assist you develop a more granular view of your specific programs. For more information, please visit our News Archive for our latest news about TCOR, Artificial Intelligence (AI), Enterprise Risk Management (ERM) and more.

By Robert J. Blackburn, Managing Principal, Blackburn Group, Inc., contact him at This email address is being protected from spambots. You need JavaScript enabled to view it..

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