The Truths of TCOR

Total Cost of Risk is one of the most misunderstood methodologies inside the insurance brokerage and risk management community. This observation is based upon over 35 years of experience as both a successful working broker and brokerage consultant. In fact, I was there when TCOR was first conceived. (Unlike Al Gore who did not invent the internet!)

Total Cost of Risk is one of the most misunderstood methodologies inside the insurance brokerage and risk management community. This observation is based upon over 35 years of experience as both a successful working broker and brokerage consultant. In fact, I was there when TCOR was first conceived. (Unlike Al Gore who did not invent the internet!)

By being there, I mean being in the industry as a working broker when TCOR was first introduced by Risk Managers. Why did they create it? It allowed them to have some deeper discussion with their bosses and financial management of their respective firms. Now, known as the C-Suite.

Since then, Total Cost of Risk has stood the test of time. The acronym TCOR is well known and established. As many of you know, our firm has built its reputation on helping successful brokerage firms create a quantifiable value proposition for large clients, based upon developing a TCOR business model.

Over the past 15 years, since the inception of Consultative Brokerage™ the TCOR delivery system; we have been fortunate to work with many of the top brokerage firms in North America. In that capacity, we have run the gambit of firms, producers and buyers who are all espousing their version of TCOR.

In many cases, each TCOR advocate shows their various adaptation of Total Cost of Risk and claims it to be the Holy Grail of TCOR. So, let’s separate the wheat from the chaff regarding the truth of TCOR.

  1. TCOR is made up of 4 distinctive parts. They are Risk Financing Costs, Loss Costs (Direct and Indirect), Administrative Costs and Taxes/Fees. A TCOR calculation that does not include all of these is not Total Cost of Risk. In many cases, they are not provided because the broker is not in a position to capture and demonstrate each section. Therefore, they rely upon simply converting the insurance costs. Or, in many cases, they make up new words and lump them under the banner of Value Added Services. Without being able to demonstrate the Value!

  2. Total Cost of Risk is not an enthralling topic. Yeah, I know, this sounds like blasphemy from the guy who is credited for bringing TCOR to upper middle market brokers and clients. But, ask yourself this question; “When was the last time you witnessed a group of C-Suite executives sitting around a table and swapping tales of their TCOR accomplishments?” What makes it an enthralling topic is the outcome it provides clients as regards profitability, productivity, competitiveness, human capital expense and owners equity impact. This brings up the next point.

  3. Total Cost of Risk impact is the only way a broker has to actually create a Value Proposition. The Value Proposition is created by the impact of resources and client projects as they relate to demonstrable, evidence based, quantifiable cost reduction to clients. Everything else simply revolves around the marketing and placement of the insurance products. Here is a little secret: Many of the brokerage firms all represent the same markets and products . . .

  4. Total Cost of Risk leads clients to REAL Metrics. Now, stay tuned for an upcoming briefing on this subject alone. But for today it is enough to know this. The term metrics and analytics are becoming a huge buzzword in our industry. In most cases, when these metrics are evaluated, you will find them to be simply variations of comparing prices of insurance carriers and risk financing placements. These pricing comparisons and placement and Metrics are very narrow and simply show the buyer a product comparison. Of course we all know that the product is only 20% of the buyers cost structure!

Consultative Brokerage™ was born 15 years ago. The Consultative Brokerage Methodology is based upon the development and delivery of Total Cost of Risk by brokers like you who are striving to make a quantifiable impact for your clients. During the course of that time, C. R. & Company has worked with successful brokerage firms who control over $3 Billion in revenues and fees.

By the way, if you intend to be in the agency/brokerage business over the next decade, it would be best to learn it now. The ship is sailing and the “me too” TCOR players will begin to fall of the vine.

But don’t worry, if you feel like you might be beginning to fall . . . we are here to help catch you!

-Rob Ekern

For more information on how to quantify TCOR, manage projects, build a value proposition, and consistently deliver stewardship reports and new business presentations to your customers, check out the Major Account Development System (MADS), an on-line consultative broker's toolkit. Available now!

Ready to learn more about Consultative Brokerage Sales Training? Visit the Consultative Brokerage Academy.

To learn more about C.R. Ekern & Company, please visit our website
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