Better Business Efficiency With InsuranceWhen you eliminate risk from the equation, businesses are able to operate more efficiently. Here is a look at why. Price equals efficiency One thing to consider when you are looking at insurance and how it improves efficiency is the cost. The cost of an item directly impacts how efficiently the creation and distribution of the product is. The less risk, the lower the price of an item, while the higher the risk, the higher the price. If you are too concerned with the risk of a product, the whole system slows. Take away some of the risk, and you are able to focus on the smaller details that help a business to run efficiently. An example - exports Let's pretend that you have decided to invest in an exporting business. You know that the business will be successful and that you will easily make your money back and then some. However, you then think of all of the risks entailed - what if the ship catches fire or sinks? The delivery trucks are robbed? Products are damaged by the weather? Now the investment seems more like a gamble. With insurance, however, these risks are eliminated and you can invest freely without worry. Many businesses would not want to risk shipping their items across the ocean if they didn't have some form of insurance, similar to the idea that somebody would not want to drive across the country without some kind of cheap auto insurance. It also goes further than that. No one would trust money or important duties to someone else, wasting valuable time doing the jobs themselves. Small businesses would go under with one workman's comp claim. Employers and employees Thanks to insurance, business partnerships are more attractive. This is because the heirs of a business may not want to continue if one partner dies. They would then ask for their share of the assets. Without insurance, the partners would have to try to come up with money, which could lead to difficulties for the business. However, if the business owner had a life insurance policy, the heirs are able to collect their money immediately without putting the business at risk. In addition, some businesses opt to pay for insurance for the employees. This often causes the employees to believe that the company is interested in their well-being, which can lead to improved employee retention and productivity. Merchants and loss If a company extends credit to a customer, they are making the assumption that the customer will pay them back. They know that this doesn't happen, however, and a certain percentage of money will be lost. Therefore, the smart business thing to do is to factor this loss into the cost of the product. However, there is always the worry that the cost increase will not match the losses. One or two bad customers can cause an otherwise good business to go under. By having a credit insurance policy, the business owner can help reduce this risk and make sure that his business continues to operate. |
