Insurance just another risk handling tool
Dec 13, 2011
I recently convinced Tina, a friend and the owner of a small business to purchase suitable insurance covers for her business.Seven months later, her offices were broken into resulting in the loss of 13 brand computers. This incident proved to my skeptical friend that insurers do settle legitimate c
By Flavia Mpagi
I recently convinced Tina, a friend and the owner of a small business to purchase suitable insurance covers for her business.
Seven months later, her offices were broken into resulting in the loss of 13 brand computers. This incident proved to my skeptical friend that insurers do settle legitimate claims.
Tina’s doubts turned into blame, on both me and the industry when she discovered that she would not be compensated for her data on the stolen computers. Insurance policies contain exclusions because not all risks are insurable.
Who then shoulders the burden for non insurable losses? While insurance is that safety net that cushions falls, we all have the obligation to plan and prepare for eventualities. The burden of assessing risks can be outsourced, at affordable rates, to professional risk managers.
The nature and range of risks faced by businesses are wide and so are the methods of handling them.
The nature and range of risks faced by businesses are wide and so are the methods of handling them. The methods include risk control, where risks are managed to reduce on both their likelihood and impact to levels routinely tolerable by the entity.
Financial losses can also be transferred to another organisation; business methods and relationships can have the effect of ensuring that identifiable losses and failures fall on one of the parties in that relationship.
Example could be the tenant-landlord relationship whereby liability for accidental structural losses, like those caused by fires, can be negotiated in the lease agreement.Rental costs can thus be determined on the basis of risk carried by each party.
Unfortunately, there are some losses for which there may be no real available options for the transfer of financial exposure away from a business.
Each of the many options that exist to contain and handle risk comes with pros and cons. The option (s) chosen should be cost effective and suitable for the types of risks faced.
No one risk handling tool is suitable for all risks faced by an entity. Setting aside time and finances to look into and cover risks ultimately pays off.
The writer is an insurance and risk management specialist