Introduction
Building Resilience: The Key to Smart Insurance Practices
By Hindol Datta/ July 10, 2025
Introduction and Executive Summary
In three decades as a CFO and finance leader, I have often seen insurance treated like a dusty fire extinguisher hanging on the wall: rarely checked, rarely understood, and only pulled down when the smoke has already filled the room. That mindset is costly. Whether through insurance advisory, insurance consultancy, or internal governance, companies must see insurance as part of broader risk management and insurance strategy. It is not a side project of the legal team or a line item on the expense schedule, it is a strategic instrument of insurance management and risk protection, no different from debt covenants, equity raises, or treasury policy. When managed with foresight through strong insurance and risk management practices, it protects a company at critical moments without overburdening it with unnecessary cost. When neglected, it drains capital and erodes trust.
Smart insurance practice is about balance. Overinsure, and you leak cash every year into premiums that do not return value. Underinsure, and you gamble the balance sheet against risks that can destroy years of compounding effort in one bad week. The CFO’s job is not to maximize insurance. It is to optimize it.
The most resilient companies I have worked with understand insurance as an operating system. They embed it into quarterly rhythms. They audit coverage continuously, not just at renewal. They allocate ownership across functions, so that risk is mapped to the people who live with it every day. They use insurance as a mirror of culture and governance, not as a substitute for them.
Strategically, insurance has three implications that founders and boards often underestimate.
First, insurance reveals whether leadership is serious about systems. Premiums, exclusions, and claim responsiveness are signals. Underwriters reward companies that show documentation, cadence, and transparency. They penalize firms that treat risk management as an afterthought. A sloppy approach does not just raise premiums. It raises questions about leadership discipline.
Second, insurance is a cost lever. Boards sometimes assume that more coverage equals more safety. That is only partly true. A thoughtful CFO asks: what risks should we transfer to an insurer, and what risks should we retain because our balance sheet and operations can absorb them? Buying every coverage in sight looks safe but weakens return on equity. Carrying the right deductibles and limits, on the other hand, strengthens both cash flow and investor confidence.
Third, insurance influences how external stakeholders view the company. When I have led fundraising or M&A processes, insurance posture has been scrutinized as carefully as revenue recognition or churn metrics. Investors and acquirers know that insurance gaps turn into valuation haircuts. Conversely, an efficient, well-documented insurance program signals foresight and reduces perceived downside.
The art of smart insurance is therefore the art of managing variance. You cannot remove uncertainty. You can shape how it flows through your systems. The best leaders I have worked with do not fear claims. They prepare for them. They see insurance as one tool in a wider resilience toolkit, alongside governance, compliance, cyber hygiene, and capital structure.
This essay explores those practices in detail. Part I examines how companies build systems before surprises, embedding risk ownership into daily operations. Part II explores rhythm, language, and learning loops, showing how communication cadence and post-mortems build trust with insurers and reduce long-term costs.
My conclusion is straightforward: insurance is not an overhead item. It is a diagnostic lens on leadership maturity. Companies that overinsure waste cash. Companies that underinsure risk existential damage. Companies that balance correctly build resilience, conserve capital, and earn trust with every stakeholder they face.
Part I: Systems Before Surprises
If thirty years in finance have taught me anything, it is this: outcomes rarely surprise those who anticipate variance, model fragility, and act before noise becomes signal. The same holds true in insurance. The companies that consistently post the best loss ratios and encounter the fewest claim delays all share one trait. They behave as if the claim has already occurred. Not in paranoia, but in precision. They do not wait for the audit, the letter, or the breach. They build for inevitability, not exception.
The best-insured organizations I have worked with do not rely on brokers to remind them of renewals. They maintain living calendars that integrate insurance touchpoints into quarterly planning. Their reviews do not stop at premium and deductible. They walk through coverage alignment, recent changes in exposure, internal ownership, and open issues from previous years. These reviews occur not out of compliance, but out of habit. That habit, compounded over time, creates resilience.
This mindset emerges from systems’ thinking. Great insureds understand that risk, like any input, flows through processes. When systems remain unexamined, risk becomes invisible. But when leadership embeds regular scrutiny, risk becomes observable, classifiable, and transferable. In my early years, I often treated insurance as a necessary overhead. I have come to see it as a signal amplifier. It magnifies what an organization prioritizes. If you treat risk management as integral, your insurer notices. And they respond accordingly.
Audits Are Not About the Insurer
Internal audits, when properly designed, do not serve the insurer. They serve the firm. The best-insured companies perform quarterly or biannual walkthroughs of their controls, policy terms, and compliance artifacts. They test not just whether they have insurance, but whether it functions as designed. They check whether exclusion language has shifted. They map incidents against actual coverage. They ask operational teams to walk through mock scenarios.
I remember a company that held an annual tabletop exercise simulating a data breach. Each time, they updated their cyber protocol. Not because the insurer demanded it, but because they viewed readiness as a leadership discipline. That company filed a real claim three years later. The payout was swift, clean, and complete. Not because the policy was generous, but because their behavior was predictable.
Insurers, in my experience, do not reward optimism. They reward clarity. The audit process, when led by finance or legal, forces organizations to align intent and execution. I have seen companies discover gaping holes in coverage simply because no one updated policy schedules after a product pivot. The best companies do not rely on renewal season to discover those gaps. They surface them continuously. They treat audits not as events, but as habits.
Ownership Lives in the Org Chart
Proactive insureds embed risk ownership into roles. They do not isolate it in a single function. The GC may own legal risk. The CTO may own data protection. The CFO owns claims management. But all of them contribute to the company’s overall insurability. When a breach occurs or a claim arises, these companies activate quickly. Not because of policy, but because of clarity.
In my early career, I saw too many teams scramble during incidents. No one knew who owned the policy. Emails flew. Delays mounted. Evidence went missing. Today, I coach companies to map risk categories to department heads. When a new contract is signed, the legal team assesses insurance triggers. When a customer expands into a new jurisdiction, the finance team checks whether foreign coverage exists. That organizational discipline reduces claims friction. It also strengthens renewals.
Great underwriters can smell operational alignment. They read between the forms. They sense whether a company has embedded insurance thinking into daily operations. The best pricing and broadest coverage typically go to those who display that alignment without prompting. It is not magic. It is management.
Part II: Rhythm, Language, and Learning Loops
Most insurance relationships erode not during the claim, but between the claims. Companies that treat insurers as vendors receive transactional service. Companies that treat them as stakeholders receive insight, leniency, and flexibility. The best-insured firms build a communication rhythm that transcends the policy cycle. They provide quarterly updates. They notify underwriters of material changes. They signal before silence becomes liability.
I often advise startups to adopt a quarterly insurance memo. One page. Sent internally and, when appropriate, shared with brokers or carriers. It includes coverage updates, claims status, regulatory shifts, new vendors, and known gaps. This memo costs nothing to produce. But it builds a narrative. A narrative of control. A narrative of care. Over time, that narrative translates into trust.
Language, too, matters. The best-insured companies speak the language of risk transfer. They understand key terms. They avoid loose phrasing. When they speak with insurers, they use precise definitions. They prepare summaries before they engage. This reduces misunderstanding. It reduces redlines. It compresses the timeline from notification to payout.
Insurers want to support companies who respect the craft. If you treat insurance as a commodity, you will receive commoditized service. If you treat it as a dialogue, you gain leverage. That leverage manifests when tension arises. A familiar voice gets more benefit of the doubt. A respected risk manager gets a call back faster. Behavior compounds.
Post-Mortems Without Mortality
When a claim occurs, the best-insured companies do not close the file and move on. They debrief. They analyze. They log lessons. Even if the claim was denied, they examine what failed. Was it language? Was it timing? Was it documentation? They do not punish. They upgrade.
I once helped a founder walk through a post-claim autopsy. The claim had been partially paid. But the incident revealed gaps in vendor indemnity and a narrow cyber trigger. We mapped the chain of decisions. We reviewed emails. We reconstructed the timeline. The founder turned that review into a company-wide learning module. That single incident improved five policies across three geographies.
This behavior reflects decision-making under uncertainty. You cannot eliminate unknowns. But you can reduce ignorance. You can shorten feedback loops. The best-insured companies think like data scientists. They treat each claim, denial, or payout as a data point. Then they update their priors.
Conclusion: Insurance as a Lens on Leadership
I used to believe insurance existed outside strategy. Today, I see it as diagnostic. It tells you how clearly a company sees its exposure. How seriously it builds resilience. How thoughtfully it models loss. The best-insured companies do not win because they buy more coverage. They win because they manage attention. They review, audit, clarify, and reflect. And they do so with rhythm.
When a founder builds these behaviors into the company’s operating model, insurance stops being a friction point. It becomes an amplifier. It reflects the company’s ability to govern under pressure, navigate ambiguity, and respond without delay.
Insurers notice. Boards notice. Markets notice. Because ultimately, the best insureds do not prepare for claims. They prepare for complexity. And they embed that preparation in every decision they make.
Ten Questions a CFO Must Ask to Balance Insurance and Cost
- Which risks are truly existential to the company and must be transferred to insurers?
- Which risks can we reasonably retain because our balance sheet can absorb them?
- How much premium are we paying annually relative to historical claims recovered?
- Are our deductibles set at levels that encourage discipline without straining cash?
- Do we review policy exclusions regularly and match them against our operating model?
- Is there overlap in coverages where we are paying twice for the same protection?
- Have we benchmarked our coverage levels against peer companies of similar scale?
- How do we ensure that new products, markets, and contracts are reflected in our coverage?
- Are we capturing lessons from past claims to optimize future coverage and cost?
Does our insurance program support capital efficiency, or does it dilute return on equity?
