The Total Cost Of Your Insurance Program, Part 2

Liability exposures can exist anywhere in a business. So a comprehensive loss management program would include a process to identify and manage risks to the company and the public. Risk control can help the client identify and focus on the hidden, if not obvious, exposures that cause liability-related losses.|

Dirk Duchscherer

June 25, 2011

This is the second article in a five-part series on understanding the total cost of your insurance program. Preceding and subsequent articles in this series can be found here: Part 1, Part 3, Part 4, Part 5. Now that we know that "how a customer is treated" and "how they feel about it" may well easily compete with the product or service itself, let's move on to our next parameter — procedures. What we mean by procedures is what we do and how we go about it. As an example, let's look at things Risk Control can do regarding the area of General Liability and Property services. Liability exposures can exist anywhere in a business. So a comprehensive loss management program would include a process to identify and manage risks to the company and the public. Risk control can help the client identify and focus on the hidden, if not obvious, exposures that cause liability-related losses. General Liability Risk Control services of this nature might include but are not limited to the following:

Completed Operations Exposure Evaluations
Contractual Risk Transfer Program Evaluations
Construction General Liability Exposure Evaluations, including work zone safety, utility damage disruption prevention, water and fire damage prevention, dust control and construction defects prevention
Emergency Plan and Disaster Recovery Evaluations
Life Safety Evaluation based on the NFPA 101 Guidelines for Fire Life Safety Codes
Premises Liability Exposure Evaluations, including slip and fall prevention and negligent security
Products Liability Program Evaluations
Quality Control Program Evaluations
Workplace Violence Prevention Program Evaluations

Property Risk Control provides a full range of property conservation and loss prevention services to eliminate or minimize the frequency and extent of property losses. Risk Control can conduct on-site assessments of facilities to evaluate company exposure to loss from fire, windstorm, flood and earthquake and other covered perils. Specialists can also test and evaluate sprinkler systems, special extinguishing systems and water supplies. This can extend to a review of the human element programs that exist to assure they are up to date and functioning properly. Risk Control can analyze business interruption potential to identify potential bottlenecks, critical equipment, and interdependencies that might impact daily operations and revenue streams. When a new facility is added or an upgrade to existing facilities is to take place, Risk Control can develop protection specifications, as well as review building and fire protection plans so that the facility will be adequately arranged and protected upon completion. All of these efforts focus on helping the company maintain operations and avoid costly interruptions that can hurt the bottom line. Other areas of expertise include but are not limited to: Commercial Automobile/Fleet; Ergonomics, Industrial Hygiene, Workers' Compensation, Boiler and Machinery, Inland Marine in addition to industry specialties (e.g. petrochemical, construction, healthcare and chemical, etc.). There are a myriad of services that can be provided in and amongst all the coverages the insurance companies provide. Some insurance companies' risk control operations can be categorized into the type of services they specialize in, while others may try to be all things to everyone. Traditional categories include: training, technical, and industry specialists. This last category includes both carriers that cater to niche markets specializing in particular types of risks (e.g. not for profits, schools, heavy industry, municipalities — to name a few) or could just be large insurance companies that have the resources to help large companies deal with the complexities of, for example, project management and construction management or the risk analytics of projects that are unique or very high risk. This subject would not be complete without mentioning the insurance of special types of projects and high risk operations which involves risk sharing and self insurance. We also might call this “creative risk financing”. Insurance is in fact "risk financing" so the creative element only has the limitations of what an insured or client and an insurance element or vehicle respectively are willing to risk. Risk Control plays a big role in this equation because both large and high risks involve a sizable chunk of change if not managed creatively and, with a good balance of Risk Control, can beat the odds and save a lot of premium. Well-managed risks of this type can yield sizable savings. The final area that will be covered on the subject of carrier risk control is how work is coordinated. To this end, service levels are normally determined by a combination of premium size and hazard of risk/operations relative to coverage. Services are often time-controlled by underwriting since they are the managers of the account, but this authority will sometimes be transferred to a service team, with underwriting involvement. This is an interdisciplinary team made up of claims, audit, underwriting, loss control and they are charged with identifying the customer's service needs and developing an account strategy to meet those needs, ensuring that value is being provided to the customer and to the company. The underwriter or service team is responsible for clearly accounting for the cost of the services provided and assuring the costs to deliver the necessary level of service is included in the premium or taken into consideration in some fashion. Risk control services can be very diverse, varying considerably from company to company and were discussed above in some detail. In addition to the items above, services traditionally include: site surveys; risk assessment & risk analysis audits, specific safety audits, training based on line(s) of coverage, technical training, management/supervisor training; job site visits, legal/jurisdictional inspections of boilers and pressure vessels, safety materials such as pamphlets, brochures, video/reference libraries, web site access, etc.). They can also vary from high touch services which are service intensive to low touch which are economical to deliver. Related Articles The Total Cost Of Your Insurance Program, Part 1 The Total Cost Of Your Insurance Program, Part 3 The Total Cost Of Your Insurance Program, Part 4 The Total Cost Of Your Insurance Program, Part 5 Authors Dirk Duchsherer collaborated with Jim Newberry (CHST, Bsc Safety Management) in writing this article. Jim is the AVP and Risk Control Manager for Island Insurance Company, LLC in Honolulu, Hawaii.