The easy answer? When you want to know that you are managing risk effectively and buying insurance in response to the plan.
Not everyone appreciates one of my favourite sayings, borrowed from the TV show The A-Team, and George Peppard’s character, John “Hannibal” Smith, which is “I Love It When A Good Plan Comes Together?
And my follow-up which is, ““If you don’t know where you are going, (or have a plan) any road will get you there.”
Managing risk is a deliberate plan and insurance is a loss financing tool used in the post-loss phase of risk management. Risk management is a process, not a project. It is continuous.
The first step is identifying risks. If you haven’t determined what can happen to your business, how do you buy insurance.
The second phase is to quantify risk, determine frequency and severity outcomes
The next phase is to select tools to manage risk, of which there are many, and
The fourth phase is to implement the plan, followed by the continuous management of the process.
Can you do all that alone? Not likely?
Are you buying insurance without a risk management plan? Possibly.