Loss control: the tools of risk management
By Alex Dahm05 August 2008
Comprehensive procedures and up-to-date paperwork are the foundations for effective risk management. IC spoke to insurers and operators in the US and UK about their experiences and plans.
“The reality is that every day on every jobsite you are one incident away from a fatality or a million dollar loss,” says Bill Smith, president, claims and risk management, at insurance specialist NBIS. “It’s critically important to constantly look at exposure and try to keep your losses to a minimum by having in place policies, procedures and protocols to mitigate your risk, including the right contract terms and conditions.
You need to assure that your company has qualified people and trained operators that are dispatched to the jobsite with the right crane and the right equipment to prevent failure. It’s all a part of building a good company and keeping it profitable. The toughest part is doing all this the right way while making a profit. The easiest part is to only think about the profit. I have always been taught in life that, in almost all cases, the tough decision is usually the right decision and the easy way out is usually the wrong decision. Remember, to protect the bottom line it requires spending money up front and it’s very hard to quantify what you’ve prevented.”
Jeff McGeary, executive vice president, sales, Allied Insurance Brokers, says that every company, no mater what size, should have a designated safety officer, whether it is the owner of a small company or a designated officer for a large company.
“Any company with more than two employees should still have a monthly safety meeting, a tool box meeting,” says McGeary. “I think that the most important part of an insurance plan is customer involvement. Everyone should have some sort of formalised written safety procedure and, hopefully, the insurance partner can help the company with that. We assist with this routinely.”
Smith adds that while it is also important to have comprehensive fleet and general safety manuals, they have to become part of a company’s culture.
“If you have a programme on paper but then have to admit you don’t follow the polices and procedures you established, you just shot yourself.”
More and more large companies are establishing formal risk management departments with designated safety officers, risk managers and other personnel solely dedicated to lowering risk in every area of the company. While establishing such a high level programme can be expensive, it can also save money when an accident does happen.
“I am seeing more of a formal risk management within the crane companies we insure,” says McGeary. “These companies can see the benefit of co-ordinating risk management programmes. Eventually, a decrease in claims turns into a decrease in insurance cost. More and more larger jobs are requiring that these programmes are in place.”
A solid contract is also a necessity. McGeary uses the example of a contractor who designates where the crane should be set up, unaware that there is a pipe underneath the crane. There is no time to test the soil or the ground bearing pressure. During the work, the pipe collapses and the crane tips over. The crane owner is not responsible for the accident. With a proper contract, the contractor is responsible in this scenario.
Also, in the contract, McGeary says there should be wording regarding the weight of an item being lifted.
“The crane owner may be told the item weighs 15,000 pounds [6,803 kg] but it actually may weigh 30,000 pounds [13,608 kg],” he says. “The contractor will typically choose the crane that is the least expensive but it could be the wrong crane is chosen if the weight is not accurate.”
McGeary also says claims can be reduced if the insured can produce the necessary paperwork. “Having all the proper documentation is very important; your checklists, your safety meetings, your inspection reports.”
Ellen Connor, senior account executive at crane and transport insurer Neace Lukens Insurance, says a company can lessen risk by ensuring that all employees fully understand their equipment and the operating rules. “Proper initial training along with frequent continuing education goes a long way in reducing accidents, promoting confidence in the work place and ultimately reducing the overall insurance costs.”
Connor adds that a well maintained fleet will reduce accidents and maintenance costs in the long run, along with site assessments before each job.
Connor adds that a knowledgeable insurance agent, who is associated with the relevant insurance companies, is also a must. “Monitoring claims and claims costs with your agent on a quarterly basis would serve not only to keep you informed of any negative trends but could also identify areas in need of special attention or specific loss control measures.”
In the US, the softening marketplace is bringing insurance companies into the industry that have no previous knowledge of cranes and transport, adds Connor.
Smith says rates and coverage are important issues, but it should also be clear how well an insurer can deal with a claim.
“Will the company be able to negotiate a settlement for less or will the company settle quickly for much more out of fear? More experienced companies may be more willing to take a claim to court because the company knows the business and can prove liability. Some insurance companies are afraid of a jury. A company with experience knows the business and where to take their shots.”
Contract wording, with regular reviews of it, is also important, according to Connor, “Not giving away your rights by contract and not agreeing to take on additional liability by contract is another very important step in reducing overall claims settlements and ultimately lowering insurance costs,” she says.
Smith says that the insured should stay in close contact with the insurer and hold a formal annual review.
In addition, Smith says that companies that believe in and embrace operator certification and are committed to a safety culture will get a break on their insurance. “Before we insure you, we are going to determine if you have all the right elements in place. If so, it will assist our underwriters in determining risk.” he says. “There may be a company that has been lucky and hasn’t had many or any claims but still rolls the dice when it comes to doing the things that need to be done.
McGeary puts it simply: “If you are doing everything in your power to reduce accidents, your insurance costs will be lower.”