TCOR: A Broker's Secret Weapon

TCOR: A Broker's Secret Weapon

To get the most out of the concept of the total cost of risk (TCOR), brokerage firms must:

Create a client benchmark. The principles of TCOR are based upon 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 brokers who do 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. The utilization of a firms resources allows a broker to impact all four quadrants.

Demonstrate the TCOR's impact on the clients bottom line. The most powerful sales presentation a broker can ever make is the one that shows a client or prospect the overall impact your firm 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 clients profit margin.

To effectively demonstrate TCOR, the successful broker must be masterful at conceptual presentation techniques. This allows the broker to compete effectively when prospective clients are choosing an insurance broker.

TCOR gives the producer the ability to demonstrate the impact on a buyers cost without “using the marketplace” (that is, getting bids). The success is dependent upon a firms ability to explain their approach in verbal and written form. Conceptual presentations include stewardship reports in addition to new business presentations.

Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, October 8, 2001. Copyright 2001 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.

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