Risk & Insurance Philosophy

Risk First Insurance Last

Most people start with the policy. We always start with the risk.

We help identify your risks. Evaluate the cost. Control or eliminate what you can. Absorb what you can financially. Only then do we recommend transferring the rest to insurance.

The Chadwicks Approach

Sound risk practice always starts with reduction. Not insurance.

Effective risk management means knowing at any stage:

  • Risk First
  • What are your risks? Risk Identification
  • What do they mean in financial terms? Risk Analysis
  • How those risks should be managed? Risk Treatment
  • What can be done to eliminate or reduce them? Risk Control
  • What financial resources you have to absorb them? Risk Retention
  • Insurance Last
  • What Insurance is required for the remaining risks? Risk Financing

By answering and dealing with the first four questions properly, the fifth step becomes effective, risk and premium wise.

Insurance is a financial mechanism that, in return for premium, spreads the cost of uncertain, insurable loss, particularly the catastrophic financial risks that remain after proper risk management has occurred.

Wherever possible, reduce the chance of loss through proper risk loss controls and safeguards. Where you cannot eliminate the risk, transfer it contractually. Most businesses already do this, for example, through their standard terms and conditions which contractually transfer certain exposures to clients, suppliers, contractors or other parties. Only after these steps are properly analysed and treated should the remaining risks be considered for insurance transfer.

The original purpose of insurance was always catastrophic loss, the kind of event that could destroy a business or ruin a family’s financial position. Over time that purpose has been diluted. Attritional losses, like cellphone insurance, minor motor damage, small household claims have been packaged and sold as “insurance”. Our view is that this is a distortion. These are risks insurance was never designed to carry. They are day to day costs that should as far as possible be managed, reduced or absorbed. Not transferred to an insurance policy.

Most financial service providers skip straight to step six, insurance and that is the trap. You end up paying premiums on the wrong risks, paying for things your should have removed, reduced or absorbed yourself.

Risk First. Insurance Last.

Review My Risk

The Diluted Purpose

Insurance was built for catastrophic loss.

The original purpose of insurance was always catastrophic loss, the kind of event that could destroy a business or ruin a family's financial position. Over time that purpose has been diluted. Attritional losses, like cellphone insurance, minor motor damage, small household claims have been packaged and sold as “insurance”. Our view is that this is a distortion.

These are risks insurance was never designed to carry.

They are day to day costs that should as far as possible be managed, reduced or absorbed. Not transferred to an insurance policy.

Review My Risk

The Chadwicks Risk Approach

  • Risk Management
    • Risk Identification
      What are your risks?
    • Risk Analysis
      What do they mean in financial terms?
    • Risk Treatment
      How should those risks be managed?
      • Can we eliminate or reduce it?
        • Yes
          Risk Control
          What can be done to eliminate or reduce risks?
          • Severity Reduction
            Limiting what a loss costs when it happens.
          • Frequency Reduction
            Making that loss less likely in the first place.
        • No
          Can we carry the loss ourselves?
          • Yes
            Risk Retention
            What financial resources do you have to absorb the loss?
          • No
            Risk Financing
            What insurance is required to fund what we cannot carry?
            • Insurance
Learn more about frequency and severity