Insurance should be viewed through the same lens as any other capital decision. Every Euro spent on premium competes directly with investment, growth, and operational priorities.
In most organisations, insurance still sits in the same place it has for years: a necessary cost, reviewed once a year, negotiated on price, and renewed with minimal change. At a surface level, this feels efficient, however, on closer inspection, the consequence is clearer.
Companies are operating in a fundamentally different risk environment than the one their insurance programmes were built for. The result is not subtle. It shows up in two ways: paying for coverage that adds little real value, while remaining exposed where protection is actually needed.
The issue is not awareness. It is application. The question is what follows from this reality – and how insurance should be approached differently as a result.
The Wrong Question
Most insurance discussions still start with the same question: “What is the premium?” It is the wrong starting point. The more relevant question is: “What risk are we transferring and should we be transferring it at all?”
Every organisation already absorbs risk as part of its normal operations. Delays, inefficiencies, and minor disruptions are part of the cost structure. They are not insurable in an economically meaningful way and nor should they be. Insurance is not there to smooth everyday volatility. Its purpose is to protect the business from events that threaten liquidity, stability, or long-term strategy. In practice, however, most programmes still blur that distinction. This is where value is lost.
How Legacy Structures Create Inefficiency
Insurance programmes are rarely designed from first principles. They evolve. New policies are added, limits are adjusted, deductibles shift incrementally. But the underlying logic often remains unchanged.
Over time, this creates a disconnect between what the company actually needs and what the programme delivers. The consequences are predictable:
- Low-impact risks are transferred at excessive cost
- High-impact risks remain underinsured or poorly structured
- Coverage exists on paper but fails to respond in practice
The outcome is not a lack of coverage, but a lack of alignment. Insurance becomes a default expense rather than a deliberate decision.
Insurance as Capital Allocation
This is where the shift becomes more fundamental.
Insurance should be viewed through the same lens as any other capital decision. Every Euro spent on premium competes directly with investment, growth, and operational priorities. It must justify its role. Seen this way, insurance decisions are no longer procurement decisions. They are balance sheet decisions.
At a minimum, management teams should be able to answer three questions:
- What risks are we deliberately retaining?
- What risks are we transferring, and why?
- How does this support our financial and strategic objectives?
Without clear answers, insurance remains disconnected from the business it is meant to protect. With them, it becomes part of the company’s financial architecture.
The Turning Point: Understanding Your Own Risk
For most organisations, the critical step is not market placement, it is understanding their own exposure.
This requires a structured view of risk: identifying critical dependencies in operations, assessing financial tolerance for disruption, testing realistic scenarios, and defining what the company can absorb internally.
Without this level of analysis, insurance decisions are driven by assumptions, benchmarks, or market norms. None of these reflect the specificity of a business. And in insurance, assumptions are expensive.
When risk is clearly understood, decisions become simpler, more targeted, and more effective.
What Should Be Insured and What Should Not
One of the clearest outcomes of this process is deciding what belongs in the insurance programme. There are two fundamentally different categories:
- Operational risk (to be retained)
Frequent, manageable events that form part of the operating cost base. Transferring these risks often adds more cost than value.
- Tail risk (to be transferred)
Low-frequency, high-severity events that could materially impact the balance sheet or strategic continuity.
This distinction is straightforward in theory but rarely applied in practice. The objective is not to eliminate risk, but to allocate it intelligently. Well-structured programmes do less but do it where it matters most.
Why Timing Matters More Than Negotiation
Another structural issue is when insurance decisions are made. In many organisations, the process begins too late – driven by renewal deadlines. At that point, the discussion is limited to pricing and market conditions. But insurance quality is determined long before it reaches the market.
The real value lies in structuring the programme based on risk analysis, preparing the risk for underwriting, and aligning coverage with operational realities. This requires early engagement.
Transparency: The Missing Link
A consistent gap at management level is transparency.
Insurance is often delegated without a clear framework for decision-making. As a result, fundamental questions remain unclear:
- What is the actual financial exposure behind existing policies?
- Where are the real gaps in protection?
- What is the company effectively self-insuring without recognising it?
Without this visibility, alignment with strategy is not possible. Insurance remains disconnected from financial planning and investment decisions.
From Cost Centre to Strategic Lever
When properly structured, insurance does more than transfer risk. It enables predictable financial planning, supports stronger positioning with lenders and investors, and improves resilience following disruption. In this sense, it moves from a cost centre to a strategic lever.
A Necessary Shift
The operating environment is becoming more complex, across digital, operational, and regulatory dimensions. Incremental adjustments to legacy programmes are no longer sufficient.
What is required is a more disciplined approach: challenging inherited structures, investing in understanding risk, and aligning insurance with business strategy.
Design, Don’t Inherit
Insurance programmes that are not actively designed are, by definition, outdated.
Closing the gap between perceived protection and real exposure does not require more insurance. It requires better decisions – about what to retain, what to transfer, and how those choices support the business as a whole.
Companies that make this shift gain something more valuable than coverage. They gain control. And in today’s environment, control over risk is not just protection – it is a competitive advantage.
Andrej Krvavica
General Manager
GrECo Croatia
