Bryan’s Blog: Selling Insurance using the “Burden of Risk”

Often it is hard to find the positives when talking to a client about why or how much insurance they should buy. One approach is to talk about the “Burden of Risk” and how insurance relieves some of the burden. Of course you need to talk about it in their language.

Many business owners and senior managers are risk takers when it comes to business. They have either chosen the uncertainty of owning their own business over the relative security of employment or they have climbed to the top of their organisation by taking some risks along the way. Each would have considered risk vs reward and would be pretty clear on why they have taken the risks they have to achieve as much as they have.

No matter their risk vs reward equation, there is an ongoing “Burden of Risk”. The burden is that despite all their best efforts, a risk event may occur that will bring their world undone. They must worry about, or at least be cognisant of, risk to ensure they manage outcomes in their favour. This presents an opportunity for risk professionals to sell the benefits of insurance. Ask your client to consider the following:

1. Cash is king but also a burden – The alternative to insurance is to carry the risk yourself and in that case you will need cash or access to cash to meet any losses that eventuate. This is itself a burden as you could be using the cash elsewhere in the business.

2. Let cash make you king – For a relatively small premium, insurance alleviates a potential cash burden that you can invest in your business and likely create a return that will pay the premium many times over.

3. Psychological burden – Most of us carry a psychological burden from exposure to risk – a concern about the many uncertainties in business. Why worry more than you have to when you have a proven solution for a big portion of your risk?

4. Most risk is uninsurable – A rule of thumb is that insurance accounts for 10-40% of all business risk (depending on the industry). Therefore insurance alleviates a significant portion of your business risk to allow you to get on with managing the myriad of other risks you are facing.