Loss control spending up despite pressure to economize

Despite corporate pressure to reduce expenses, risk managers are paying more for loss control, says a study by Chubb & Sons. In “Managing the Cost of Risk”, Chubb finds that last year, 50% of respondents report an increase in spending on loss control services, and only 5% reporting a decrease in such expenditures. Overall, loss control spending increased 17% last year.
Driving this increase in spending is the bid to extract better terms and pricing from insurers by reducing exposures, say almost half of the respondents. Other factors include an increase in loss activity and terrorism risk.
And topping the list of services getting the most attention is security, followed by disaster preparedness and corporate governance. Analysis by Chubb suggests that these non-traditional risk areas received attention in many cases at the expense of more traditional areas such as property and workers compensation.
“While the increased focus on loss control is prudent, many risk managers may be robbing Peter to pay Paul by merely shifting loss control dollars to emerging risks,” says the survey’s press release. “Decreasing spending in traditional loss control categories such as workers compensation and product liability may be shortsighted as these areas are plagued by serious issues.” Among these are rising health care costs in workers compensation and escalating jury awards in product liability and other cases.