All-in-one insurance.

• Author: May, David G.
• Position: Includes related articles on Coca Cola's integrated risk program and on managing integrated risk

Each year, you estimate your loss potential, ask for bids from insurers, negotiate with a dozen carriers for better rates, then do the follow-up paperwork. Would you prefer to face the ritual with one vendor every five years?

In the last year, an entirely new way of insuring corporate exposures has materialized. The new strategy - integrated risk - is quickly emerging as an alternative to traditional insurance. More than a dozen major corporations have engaged such programs in the last year, including Coca-Cola (see page 42), Huntsman Chemical, Medtronic and Norwest, and carriers and brokers report dozens of new inquiries each month.

What's all the fuss about? Integrated risk programs give corporations the opportunity to combine many of their risks into a single multiyear contract. This development marks a major departure from centuries-old corporate insurance approaches.

Typically, companies buy a multitude of different insurance policies underwritten by different insurance carriers on an annual basis. Each policy has its own unique coverage limit and risk-retention levels. Together, the potpourri of policies, limits and retentions can create an administrative and management burden.

With an integrated risk program, however, many or all of your company's exposures to loss are covered by a single policy, a block of insurance capacity from one or more insurers. This strategy presents potentially significant premium cost economies and fewer administrative headaches.

Most any insurable exposure can be combined in an integrated risk program, including property; business interruption; general, products and automobile liabilities; workers compensation; marine liabilities and cargo; crime; directors and officers liability; errors and omissions liability; and various other exposures.

The scope of programs is limited only by the creativity of the brokers, insurers and corporations involved. Indeed, some firms have extended programs to areas in which coverage is difficult to obtain on a stand-alone basis, such as coverage for product tampering and recalls, political risks and even environmental liabilities. Others link insurance to movements in financial markets or blend programs with captives and finite risk features.

Aside from these multiline features, integrated risk programs also offer multiyear contracts - as many as five years. This long-term nature can provide your company with both comfort and security when you're estimating your future insurance costs.

Many insurance markets have lined up behind the new approach, offering close to $1 billion in capacity...