Policy E includes a greater tail coverage with a lower premium, median loss decrease is higher, includes risk mitigation efforts, and has a higher certainty (95%) that the Policy actually lowers costs. Select E despite the fact that C has a greater ROI.
There is about a 5% chance that insurance will cost more than the incurred losses.
Assumptions Used in Monte Carlo Simulation
Records Breached follows U shaped distribution
Opportunities: Is Urban Healthcare Overinsured?
Limits Sensitivity Analysis
Recommend negotiating annual limits down to $2M and event limits down to 500K by reducing premium and deductible, or by adding a 4th year of tail coverage.
(ROI: 80%, median loss reduction : $330,000)
Insurance will not cover state or federal fines
Insurance reduces risk but does not eliminate it, and can be used as a good way to manage risks in conjunction with a robust risk control practice
In every policy there is a chance that the cost of insurance can exceed losses incurred