A company’s Total Cost of Risk (TCOR) are the costs of insurance premiums, indirect costs of claims and the administrative costs in carrying out safety and risk management programs. TCOR is important because it plays a major role in the overall profitability of your company.

What are indirect costs of claims and administrative costs? These costs are found in some of the following areas:

Lost Productivity
Loss of Reputation
Loss of Opportunity
Additional Training
Loss of Use
Loss of Collateral
Claim Reporting and Investigation
OSHA Fines

The Indirect Costs of Claims often times cost more than the actual claim itself. For example, OSHA conducted a study that determined that on average a workers compensation claim of $10,000 created $11,000 of indirect costs to the company—costs not covered by insurance. That is $11,000 plus the premium paid for insurance coverage.

Knowing your company’s Total Cost of Risk (TCOR) is important as it helps establish a “game plan” to increase productivity, efficiency, and profitability. A true TCOR evaluation will provide you information so that you know what your TCOR rate is for every $1,000.00 of revenue. It will also benchmark and compare your progress in reducing costs through the implementation of your safety and risk management programs.

TCOR is becoming the new “measuring” stick for many companies today. Premiums historically have been used to determine how a broker and client are performing. The interesting fact about premium being used as the predominant measuring stick is that it is one of the least controllable costs by the broker and client! Insurance rates, while they do vary from one company to another, are determined by outside forces such as weather related events, the stock market, and the insurance market place. For example, coming out of a soft market, we have seen companies that have seen premiums decrease three consecutive years, but have given up any gain from the market place lowering their premiums because they had increased indirect costs of claims and administrative costs. True cost reduction is most impacted by lowering indirect costs.

Indirect Costs – how can you lower them? We believe that this is where you derive value from your broker. At HSH Insurance our goal and the value that bring to our clients is to help them to lower their Total Cost of Risk by the deployment of our resources and to help them accomplish their goals.

We have developed the HSH 4 Quadrants of resources to specifically help our client’s lower their TCOR and increase profitability.

HSH 4 Quadrants of Resources


Through a TCOR Analysis and deployment of specific resources based on the analysis, we are helping our clients reduce costs across their business, not just insurance premiums.

If you would like to learn more about TCOR then please contact HSH Insurance.