Simple Solutions Blog

What is the difference between loss prevention and loss reduction?

 February 2, 2023     UFG Insurance    Business  Read Time: 3 min

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Risk is an unavoidable part of business, which is why business insurance exists in the first place. Whenever human beings are involved, your odds of perfection plummet. Sometimes, when things go really wrong, it can result in a loss, a lawsuit or an insurance claim.

Of course, just because you can’t bank on perfection doesn’t mean you shouldn’t try to push your risk as low as possible. Here at UFG Insurance, we offer expert risk control services to our policyholders and agents to help with just that. Every industry has its unique risks and requirements, and our risk control consultants use a variety of resources and strategies to keep your business and customers safe.

Three of the most common risk management strategies our experts rely on include:

  • Loss prevention.
  • Loss reduction.
  • Avoidance.

Avoidance is self-explanatory, and simply means avoiding specific activities or actions where the expected loss outweighs any expected gain. But what’s the difference between loss prevention and loss reduction? Aren’t they just different ways of describing the same thing?

The difference between loss prevention and loss reduction

While both of these strategies are used to reduce the risk of a loss within a business, they go about it in different ways. 

Loss prevention aims to reduce risk by reducing the frequency, or chances of an adverse event happening. Loss prevention tactics are often thought of as proactive, and try to head off risks before they can cause injury or damage.

Examples of loss prevention tactics include:

  • Greasy rag storage for greasy and oily rags, which can easily catch fire.
  • Machine guards on a drill press to prevent workers’ hands from getting caught.
  • Slip-proof flooring in kitchen and customer service settings to prevent slip-and-fall accidents.

Loss reduction is focused on reducing the severity of a given accident or loss. Loss reduction tactics — many of which are required by code — don’t seek to stop losses from happening, but rather aim to limit their impact when they do occur.

Examples of loss reduction tactics include:

  • A fire suppression system in a paint booth.
  • A sprinkler system in a warehouse.
  • Having clear evacuation procedures in place for customers and employees.

Indeed, loss prevention and loss reduction strategies work in tandem to keep your risk low, which is why they are two of the most common tactics employed by risk control consultants. By lowering the frequency of adverse events, and having systems in place to minimize the impact of those events when they do happen, you can rest easier knowing you’ve done everything possible to minimize the risks to your business and customers

At UFG, our risk control consultants work side-by-side with business owners to prevent losses, identifying and resolving workplace hazards and risks with manageable plans of action. We offer assistance and guidance in all areas of safety, helping to make the businesses we insure safer and stronger.

If you're a UFG policyholder or agent, and have a safety related question or concern, reach out to UFG Risk Control staff to learn more about protecting your business through more effective risk management.


The information provided is for informational purposes only. Every attempt is made to ensure that the information is accurate; however, it is not intended to replace professional advice. For more information, see Disclaimers & Other Legal Documents.