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