Total Cost of Risk
What this clause says
Total cost of risk comprises insurance premium, retained losses within the deductible or retention, the cost of collateral, claims administration and brokerage, and the internal cost of the risk management function.
What this actually means
Total cost of risk is the whole number rather than the premium line. It adds retained losses, collateral cost, claims administration and internal risk management to the premium, which is the only way to compare a low-retention program against a high-retention one honestly.
What it means for an operator
The reason this matters is that almost every apparent premium saving in senior care is a transfer rather than a reduction. Raising the retention lowers premium and raises retained loss and collateral. Moving to a captive lowers premium and adds capital, fronting fees and administration. Neither is wrong, and both look like savings on the only line most boards see. Present three numbers rather than one: premium, expected retained loss, and everything else, and show the limit alongside them, because a board approving an insurance budget without seeing the limit is approving a cost without seeing what it bought. Then track cost of risk per occupied bed per year, segmented by care setting, against your own history rather than against a peer benchmark, since a peer comparison mostly measures where the beds are.
Why the Policy Checker does not score this
This term is worth understanding and cannot be checked from a declarations page. There is no single field that would answer it, and scoring it from an assumption would produce a confident wrong finding, which is the one thing a tool like this must never do. It is defined here and left out of the check.
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