Risk Assessment: Evaluating Coverage from a Loss Perspective

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...problems, the client will better understand how their policy will respond in a loss situation — or more importantly, how their business could be affected if the appropriate coverages are not in place. Similarly, when additional coverages are required, the client will more readily appreciate the need for them— if that need has been properly demonstrated in the walk-through.

The insured will also be in a better position to evaluate cost versus risk. Too many firms view their insurance program as just another line item in the budget, an item that may get attention only when there’s a need to control costs. Effective risk assessment should leave the client convinced that their insurance program is an essential and efficient solution to some very real potential problems — problems that could devastate the company.

Besides providing the client with a better understanding of their insurance needs, risk assessment allows the broker to demonstrate an interest in the client’s business that is significant irrespective of the insurance purchase transaction.

While portions of what follows might appear fundamental, a review of several ingredients that make an assessment meaningful can help both experienced brokers and those new to the field do a better job of performing this valuable service.

The Walk-Through

Start the risk assessment by conducting a walk-through of circumstances the insured might experience following a disaster. Create an imaginary fire or other loss, anticipating problems that might occur. Build a rapport with the client through which you’ll be able to elicit responses that will project these problems. It’s not practical to think that you can identify every conceivable scenario, but by brainstorming together and using the experiences of other insureds as examples, you will be able to develop an extensive checklist. Don’t forget to use your own experience and knowledge to further the client’s thinking.

“Effective risk assessment should leave the client convinced that their insurance program is an essential and efficient solution to some very real potential problems — problems that could devastate the company.”


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