What You Don't Know about Performance-Based Insurance™ Can Save Your Company Millions

By Robert Phelan

The Story


THE COST OF IGNORANCE is a riveting novella by business insurance veteran Robert Phelan. It punctures confusing insurance jargon and introduces a powerful new concept for middle market companies: a little-known form of insurance known as Performance-Based Insurance™ (PBI) costs less and can save a company millions of dollars over time.

The tale is told through the misadventures of Timothy Franculli, owner of a wholesale manufacturing company that is about to go broke because of escalating liability and health insurance costs. Timothy attends a conference in San Francisco where he runs into an old friend and learns about PBI, a type of insurance that could save his struggling company hundreds of thousands of dollars per year.

But there is a catch. Typically, in order to qualify for PBI, a company must have a strong safety culture where worker injuries and accidents are controlled and reasonably predictable. Franculli has a lot of catching up to do after a series of employee injuries the year before caused his worker’s compensation premiums to skyrocket 40 percent. Buy the book to find out what happens next…


“Bob has provided us with performance-based insurance solutions for over 30 years. You need to understand this concept. It could save you millions.”

- Richard Ducci, President Ducci Electrical Contractors, Inc.


  • Q: Why haven’t I heard about PBI?

    A: You may have heard of similar concepts with different names (captive insurance, for example). The author came up with the term Performance-Based Insurance™ (PBI) to demystify insurance jargon. PBI programs are simple. Instead of paying some of your premium to subsidize the losses of others, the premium you pay is based strictly on your company’s own “performance.” For financially stable, well-run companies with a strong safety culture, PBI is the only program they should consider. Almost all large, sophisticated companies use some form of PBI.

  • Q: Why the novella format?

    A: Every book ever written about the captive concept has been filled with insurance, legal and tax jargon – totally unintelligible to the business owner who needs to understand the concepts. The author’s goal is to introduce the PBI concept as a means to help business owners more easily understand how a PBI program can benefit them. A novella based on his personal experiences seemed to be the best way to do that.

    Timothy and Bill (the main characters) are composites of various business owners Bob has known over the years. As each of these characters experiences, it’s usually some type of crisis which ultimately changes their thinking about safety and their method of buying insurance.

  • Q: Tell me a little more about PBI

    A: PBI comprises all the forms of insurance where the ultimate cost is variable, based on performance. Conventional insurance is called “Guaranteed Cost.” You pay a fixed premium regardless of your claim levels. If you have a PBI program, 30-40% of the premium is fixed and the rest is allocated to a loss fund. Whatever you don’t use in the loss fund is returned to you. However, if the loss fund is inadequate, you may have to pay more than Guaranteed Cost. Safe, well-managed companies can reasonably save 25% on average.

  • Q: So if I have a bad year PBI could cost me more money?

    A: The short answer is, yes. If you don’t have confidence that you are reasonably controlling workplace injuries and accidents, PBI may not be for you. However, even the best companies have a bad year from time to time. There are safeguards built into PBI programs to minimize the impact of adverse experience. Many types of PBI allow you to decide the risk/reward ratio that is acceptable to you.

  • Q: What if I like the concept and see the potential but my company doesn’t have the safety culture in place?

    A: We look at a business to see whether it is “PBI-eligible.” Insurance shouldn’t be like going to the casino. You need to be able to reasonably predict what your losses will be and have confidence you will maintain that record going forward. If you’ve had a few tough years or your safety program needs some work, we would help you with loss control and claim management until you are “PBI-eligible.”

  • Q: What’s the biggest advantage of PBI vs. Guaranteed Cost?

    A: You control the premium you pay. No more unpredictable premium swings, no more subsidizing the losses of unsafe companies and no more going through the hassle of going out to bid. If you maintain very low loss levels you could literally get a 50% discount. Think of it as getting every third year for free!

  • Q: You’re kidding about an insurance book being a page turner, right?

    A: We’re serious. Sign up for the free chapter below. Or click here to buy the eBook edition on Amazon and start reading immediately. We guarantee you’ll be hooked once you’re introduced to Timothy Franculli.

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Author Bio


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Bob Phelan (Click to Download)

Robert (Bob) Phelan is a 30-year veteran of the insurance industry. As chairman and CEO of Litchfield Insurance Group, he has led his firm to national prominence by providing value-added services to clients. His company was one of ten U.S. insurance brokers recognized for innovation by Best’s Review.

Inspired by his father who introduced him to the business, he considers his clients’ successes to be his greatest achievement.

Bob earned his BA from Tufts University, holds the Associate in Risk Management (ARM) designation, and is a graduate of the Buckley School of Public Speaking. He’s the author of Broke: The Broken Contractor’s Insurance System and How to Fix It and is a co-author of Secrets of Peak Performers.

A thought leader in his industry, Bob speaks across the U.S. and Canada about PBI and other value-added services. He was recognized by the National Alliance Research Academy as one of “The 25 Most Innovative Agents in America.” Risk & Insurance Magazine named him one of six “Power Brokers” for the U.S. in Construction.

Bob is an Editorial Advisory Board member for Rough Notes Magazine, the largest trade journal for the insurance brokerage industry.

Cover & Credits

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Publisher: Voxie Media Books
Book designer: Alex Miles Younger

ISBN:  978-0-9886203-0-8
eISBN: 978-0-9886203-1-5

eBook development: eBookArchitects
eCover: 1106design
Editing: Barbara McNichol Editorial
Proofreading: Great Green Editing

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Hardcover (Click to Download)

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