Loss prevention

Category: Loss control & prevention · Reviewed by Simon Temme, Account Executive · Last reviewed

Loss prevention

Loss prevention comprises measures designed to reduce the frequency with which insured loss events occur. It targets the likelihood side of the risk equation; its sibling discipline, loss reduction, targets severity.

Examples in commercial insurance

• Sprinkler and fire detection systems reducing fire frequency.
• Driver telematics and training reducing motor fleet collision frequency.
• Cyber controls (MFA, EDR, patching, phishing-resistant authentication) reducing ransomware and BEC frequency.
• Pre-employment vetting reducing internal theft frequency.
• Engineering inspection programmes reducing plant failure frequency.

How insurers credit loss prevention

Loss prevention investments influence premium directly through:

• Schedule rating credits on commercial property and casualty risks.
• Experience rating — better past loss experience over multiple years.
• Deductible negotiation — higher prevention standards justify larger retentions in exchange for lower premium.
• Capacity availability — markets that would otherwise decline a risk may write it where prevention is demonstrable.

Loss Prevention Council (LPC) and FPA

In the UK, the Loss Prevention Council and its successor the Fire Protection Association maintain technical standards (LPC Rules for Automatic Sprinkler Installations, RC58, RC59 etc.) that insurers reference in policy conditions. Compliance with LPCB / LPS certified products and systems is frequently a condition precedent on commercial property cover.

References

• Fire Protection Association — LPC Rules and Risk Control guidance.
• Health and Safety Executive — INDG163.
• ABI (various) — Practical guides to fire safety in commercial premises.

Cross-references

• Loss reduction
• Property loss control
• Fire safety risk assessment

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