Avatar exists to make the world a safer place. That’s why we get so frustrated when someone tells us they’re using safety materials they got from their insurance provider. Yikes! They’re getting scammed.
Our outcome-based strategies help you get better safety results. We produce hiring systems to help you identify and avoid risky applicants, education and training curricula you can use to teach your employees how to safely do their jobs and leadership courses to teach your front-line managers how to look for unsafe behaviors and take corrective action before they result in losses. Together these strategies form the basis for an effective corporate safety program.
So, what’s wrong with the safety materials you got from your insurance company? Simply put, they aren’t designed to do anything. In fact, your insurance company hopes they won’t do you a bit of good. I know, I was an executive in the insurance industry.
Insurance Companies Make Money
Believe it or not, insurance companies love death and dismemberment, accidents and injuries, fires, floods, tornadoes and earthquakes. They love tragic accidents that cost millions of dollars. Without all those losses, insurance companies would go broke. Think about it. Would you buy insurance if you never ever had a single accident? What would be the point? More losses mean more premiums.
On the front end, insurance is legalized gambling. Insurance companies are betting to break even with you between the premiums you pay and the claims they pay. It’s called COR, or Combined Operating Ratio. You’re probably wondering how they can make any money if they’re just trying to break even. Here’s the secret: insurance companies make all their profits by investing your money over time.
Where Your Premiums Go
You pay premiums in advance. They invest those premiums, usually getting returns in excess of 10%. Claims don’t get paid until two, three or even four years later. During those years, your premiums are working hard for the insurance company returning 10% compound interest year-over-year. By the time they pay your claims, they’ve amassed 30 to 40% EBITDA on your money.
Premiums are always based on past losses, yours or industry averages. Higher past losses mean higher premiums and that means more money to invest. Sure, if you have a big loss this year, it’s a temporary setback for them. But they’ll just charge you more next year and for many years to come. It’s just like those big, beautiful Las Vegas Casinos. They know how to gamble and win. No matter how they spin it, they aren’t there to help you reduce losses.
Big insurance companies do a great job of marketing safety. They offer safe driver discounts and first accident forgiveness. It sounds benevolent, but it’s nothing more than public relations spin. Many of them provide loss control consulting that amounts to nothing. A few provide “training programs.” None of these services are intended to reduce your losses. If you had fewer losses year-over-year, your premiums would go down and they would have less money to invest.
If you’d like to reduce your losses and enjoy lower insurance premiums, stop using their placebos and get proven outcome-based materials from Avatar. We are here to help you become safer.