A The US-based global pharmacy chain wanted to use analytical tools to look at its risks in a different way when it switched insurance brokers to Willis Towers Watson PLC in 2020.
The company, with annual revenue of more than $100 billion, wanted to take a strategic approach in a tough insurance market and get better value from its insurance program, which covers everything from property/casualty and professional liability to marine cargo and cyber risks. Amy Mattle, Chicago-based executive vice president, global client advocate and co-retail market practice leader for North America at Willis Towers Watson.
The drug retailer wanted to “understand what insurable risks it faced and how self-insuring parts of them would affect its balance sheet or operating margin,”; Mattle said.
The WTW brokerage team began a risk optimization study of the organization’s insurable risks, using its analytical expertise and interviews with the company’s C-suite executives in risk, finance, finance, legal and tax to better understand its risk tolerance.
Through those conversations, the broker gained insight into what the managers saw as the company’s biggest risks and how they felt if something was uninsured.
The company’s complexity, due to its focus on retail pharmacy and health care, means it faces different risks than other retailers, Mattle said.
In addition to being a brick-and-mortar space where people can buy shampoo, it dispenses medicine, provides vaccinations and provides general health advice, she said. Drug liability and cyber liability are among its biggest risks, and the company also makes many acquisitions in the healthcare space.
Using its analytics software, WTW ran thousands of potential scenarios, analyzed the company’s exposures and losses across different lines of coverage, and applied different deductible and retention structures to its estimated losses.
The brokerage team developed various options to deliver the most effective insurance program for the company’s renewal in 2021. As a result, the company decided to self-insure more of its risks – including business interruption and some of its professional liability – significantly increased its retentions and made greater use of its captive insurer, so that only catastrophic risks were transferred to the insurance market.
The changes recommended by WTW resulted in more insurers being open to providing capacity and led to multi-million dollar cost savings for the retail pharmacy upon renewal, Mattle said.
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