| Scenario | Revenue | Payroll | Property | Deductible | Controls Spend | Risk Score | TCOR |
|---|---|---|---|---|---|---|---|
| Growing distributor | $2,500,000 | $1,200,000 | $1,800,000 | $25,000 | $20,000 | 45 | $170,000 |
| Higher retention | $2,500,000 | $1,200,000 | $1,800,000 | $75,000 | $25,000 | 42 | $160,000 |
| Improved safety | $2,500,000 | $1,200,000 | $1,800,000 | $25,000 | $35,000 | 35 | $150,000 |
1) Base loss by exposure
- Liability Base = Revenue × Industry Loss Rate
- Property Base = Property Value × Property Rate (rate increases slightly with locations)
- WC Base = Payroll × WC Rate
- Cyber Base = (1000 + Records × 0.10) × Cyber Maturity Factor
2) Trend and modifiers
- Trended Loss = Base Loss × (1 + Inflation%)^Years
- Expected Loss = Trended Loss × Claims Factor × Safety Factor × (1 − Controls Reduction)
3) Retention and premium
- Retention Ratio ≈ Deductible / (Deductible + Avg Severity) (bounded to 95%)
- Retained Loss = Expected Loss × Retention Ratio
- Premium (est.) = Transferred Loss × Load × Underwriting Factor × Market Factor × Limit Factor
4) Total cost of risk
- Admin Load = Revenue × Admin%
- TCOR = Premium + Retained Loss + Controls Spend + Admin Load
- Enter revenue, payroll, and property value for the current year.
- Select your industry class and market condition for pricing pressure.
- Add claims history and adjust safety score to reflect controls.
- Set deductible and insurance limit to match your program design.
- Enter annual risk controls spend and choose included exposures.
- Press Calculate to see risk score, TCOR, and action priorities.
- Download CSV or PDF to share scenarios with stakeholders.
Portfolio baseline and exposure mix
Start with annual revenue, payroll, and property value to size key loss drivers. Liability scales with sales, workers compensation scales with payroll, and property scales with total insured value. Choose an industry class to set baseline loss rates, then select market condition to reflect the cycle. Disabling an exposure sets its component to zero for scenario testing.
Claims history and trending assumptions
Claims count increases frequency pressure, while claims total increases severity pressure. The calculator converts both into a bounded claims factor, then applies an inflation trend multiplier for the selected years. If you have loss runs, use incurred amounts (paid plus case reserves). Compare one-year versus three-year trends, and stress inflation from 3% to 9%.
Retention, transfer, and total cost of risk
Deductible selection changes the retention ratio using an average severity estimate. Retained loss is expected loss multiplied by that ratio, while transferred loss is the remainder. Premium adds underwriting load, market factor, and a limit factor based on limit relative to revenue. Total cost of risk combines premium, retained loss, controls spend, and an administrative load tied to revenue.
Control investment and expected reduction
Controls spend is compared with a baseline percentage of revenue. Up to a capped reduction is applied to expected loss, reflecting prevention and detection maturity. The recommended controls budget band scales with the risk score, roughly 0.4% to 1.7% of revenue from low to high risk. Low cyber maturity or weak safety performance triggers targeted action prompts.
Using the score for program decisions
Interpret the risk score as a decision index, not a guarantee. Scores below forty often align with stable operations and disciplined controls. Scores above seventy signal volatility and deserve leadership attention. Re-run scenarios after changing deductible, limit, or controls spend to prioritize budgets and governance. Use the loss breakdown chart to target the biggest component first. Validate results by comparing the expected annual loss percentage against recent audited financial statements.
What does the risk score represent?
It summarizes expected loss drivers, modifiers, and program design into a 0–100 index. Use it to compare scenarios, not to predict a single outcome. Higher scores indicate higher expected volatility and cost of risk.
How should I enter claims history?
Enter the number of claims and total incurred dollars for the lookback period you track internally. Incurred means paid plus outstanding reserves. If you only have paid data, use paid amounts and note that results may understate severity.
Why does the premium estimate change with market condition?
Market condition applies a pricing factor that reflects insurer appetite and competition. A hard market increases premium for the same transferred loss, while a soft market reduces it. Use it to stress test renewal budgets.
What is the retention ratio?
It estimates how much of the expected loss you keep under the deductible, based on average claim severity. Retained loss equals expected loss times the ratio. Transferred loss is the remainder that insurance is assumed to cover.
How do controls spend and safety score affect results?
Safety score adjusts loss upward or downward, and controls spend can reduce loss up to a capped amount. If spend is below the recommended band, the calculator will flag prevention gaps. Use these levers to evaluate ROI.
Can I use this to set limits and deductibles?
Yes, for directional planning. Change limit and deductible to see how premium, retention, and TCOR respond. Then validate with broker indications and policy terms, because real pricing depends on underwriting details and coverage wording.