Riding the Insurance Wave

In businesses that self-insure or that opt for high deductibles, Thomas says, the attention paid to risk management tends to remain fairly constant regardless of what rates are doing. But a company that once took, say, a $100,000 deductible on workers’ compensation insurance may recently have found that it could get zero-deductible coverage for roughly the same price. A perfectly good business move—but not if it leads to an attitude that claims don’t matter.

The time to get a handle on risk management is now, not after the market hardens, sources say. Underwriters are not impressed by safety-training programs that began last week or by building-sprinkler systems that finally got some maintenance and testing after an 18-month gap. They set rates based on a company’s historic claims record, with special attention paid to the past three years or so, and by evidence that risk management has been an ongoing concern.

Risk management is, of course, a term that covers a lot of ground. Different types of businesses face different hazards. Carriers and agents say that a good first step is simply to analyze what those hazards are. Worker safety, for instance, is a concern everywhere—not only in machine shops and on construction sites. For a car dealer, hail is a major threat. For an aircraft-parts maker, product liability is huge. In office settings, ergonomic issues loom large in the prevention of carpal tunnel syndrome and other complaints that lead to workers’ comp claims.

Once threats are identified and understood, Howe says that risk management essentially boils down under two headings: prevention and investigation or follow-up. Steps a company can take to prevent problems include things like attaching guardrails to machines, safety training, checking the driving records of people who will operate company vehicles, and ensuring that sprinkler systems are adequate and operating.

Under the heading “investigation and follow-up,” Howe says, risk management requires investigating incidents that harmed people or property to uncover the root cause, and then taking corrective action. It also involves following up with injured employees to get them off the workers’ comp roll and back to work as soon as possible, perhaps in other jobs that their injuries allow them to do.

Doing it Right

What does a first-rate risk-management program look like? RJF Agencies cites HOM Furniture as an insurance carrier’s dream client.

The Coon Rapids–based furniture chain regards risk management as a cost-control measure that is “part of normal, day-to-day practice,” according to HOM accounting director Laurie Johnston. “We try to keep all of our costs in line, including insurance. We just happen to be benefiting from lower rates [in the current market].”

As a matter of policy, the company thoroughly investigates every incident that leads to an insurance claim under its workers’ comp, property, or liability coverage, Johnston says. When a customer in one HOM store tripped over an uneven spot in a showroom floor where carpeting met ceramic tile, the problem was fixed in every store with the same carpet-tile boundary. When another customer fell while cutting through some landscaping in a parking lot, the landscaping plan was altered not only in that store but also in the design of all new stores under construction or on the drawing boards.