Effective risk management begins at the top.  The ownership and management  establishes the expectations and holds people accountable to meet those expectations.  A commercial auto loss control and safety program is no different, and begins with a safety policy.

  This policy should clearly state the companies commitment to safe driving, be signed by everyone in management, and a copy provided to each employee upon hire.  In addition, this policy should be reviewed periodically with those driving in connection with their employment.

Additional topics that should be addressed in the policy include the company's views on the use of seat belts, the use of alcohol, illegal drugs and prescription drugs, fatigue, use of cell phones, defensive driving, weather, permitted use of vehicles, maintenance and inspections,  schedules, accident reporting, properly securing loads, route planning, security, and emergency equipment. 

Maintaining files on each driver is important from the point of hire, to annual updates.  Files should include copies of driving records, drivers licenses, physicals (if required), safety trainings attended, any accident investigations and a signed copy of the safety policy.

40,000 Americans perish in auto accidents every year, and hundreds of thousands more are injured.  Preventable accidents and claims cost business owners millions of dollars a year, lost time, and loss of resources.  Not every accident is preventable, but many are with proper training, defensive driving, safe operations, qualified drivers, and a company concerned and committed to managing their auto risk exposures.

1. An organization's risk management program must be tailored to its overall objectives and should change when those objectives change.
2. If you are in a "safe" business (relatively immune from depression, bankruptcy, or shifts in products markets), your risk management program can be more "risky" and less costly.
3. Don't risk more than you can afford to lose.
4. Don't risk a lot for a little.
5. Consider the odds of an occurrence.
6. Have clearly defined objectives that are consistent with corporate objectives.
7. The risk management department as a user of services should award business on the basis of ability to perform.
8. For any significant loss exposure, neither loss control nor loss financing alone is enough; control and financing must be combined in the right proportion.
9. Review financial statements to help identify and measure risks.
10. Use flow charts to identify sole source suppliers or other contingent business interruption exposures.
11. To more fully identify and assess risks, you must visit the plants and relate to operational people.
12. A reliable data base is essential to estimate probability and severity.
13. Accurate and timely risk information reduces risk, in and of itself.
14. The risk manager should be involved in the purchase or design of any new operation to assure that there are no built-in risk management problems.
15. Be certain environmental risks are evaluated in mergers, acquisitions, and joint ventures.

When is the last time you audited your human resource systems and controls?

One of the greatest threats a business owner faces comes from human resource related issues with their management and employees.  From discrimination and sexual harassment claims, to claims of unfair termination, wage and hour or benefit issues, it's critical a business owner reviews their human resources on a regular basis to insure compliance with federal and state laws, as well as protecting the business from potential costly litigation.

Business owners should conduct an audit of their human resources at least once a year.  As part of this audit, we recommend 14 areas for a business to focus on when conducting the audit, including (1) recruiting & interview procedures, (2) interviewing & selection process, (3) employment application review, (4) reference checks, (5) job offers, (6) new employee orientation checklist, (7) policies and procedures for new employees, (8) compliance with state laws, (9) compliance with federal laws, (10) business non-harassment policies & procedures, (11) wage and hour issues, (12) employee records, (13) employee relations, and (14) employee benefits.

Within each of those 14 areas are 3-15 specific areas to check off, and we'd be happy to provide our current clients with a copy of the human resource audit template if it you call our office and/or submit the request, and work with you to complete this audit.  In addition, we have access to dozens of forms and templates available by request, including employment applications, employee evaluations, new hire forms and checklists, state required posters, and more.

Effective claims management can help mitigate the long term impact and ultimately the affect workers compensation claims will have on a companies premiums down the road.  Aise from that, claims management can have an indirect affect on a number of areas beyond the balance sheet (ie. workers morale, reputation, etc).  Having a back to work program is an essential tool in getting injured workers back to work and minimizing the financial impact of workers compensation claims.

When combined with quality safety programs, training programs, proper accident notification systems, proper safety equipment and procedures, and established relationships with medical providers, back to work programs can save a business owner tens of thousands of dollars a year.

What is an Experience Modification Rating?

The experience modification rating compares workers compensation claims experience against industry standards for similar size and type operations.  The rating, which usually starts once a firm runs $ 3,000 in annual premium, is calculated by the National Council on Compensation Insurance (NCCI).  Each year, the insurance carriers report class codes, payrolls and losses for the last five years to NCCI, which in turn throws out the most recent years data (considered to “green” to include in the analysis) and uses a three year window of time to determine the current rating.

For example, a rating calculated in 2010 would include data from 2006, 2007, and 2008.  In this sense, claims can still effect an experience modification rating four years later.  Every business starts out with a 1.0 experience modification rating.  If your loss experience is 20% better then average, your rating would be 0.80, while loss experience 20% worst then average would result in a modification rating of 1.20.

A company that ran $ 66,000 in base workers compensation premiums, would incur an additional $ 13,200 in premium if they had just a 1.20 modification rating, while a company with a 0.80 modification rating would incur a $ 13,200 premium reduction.  The difference between the two companies is more than $ 26,000 in workers comp expenses, and if those companies are competing against each other, the company with the higher workers compensation expenses is also going to have higher overhead and either (1) cut profit margins and overhead and hope to be competitive or (2) lose market share.

The Affect of Claims on the Experience Modification Rating

The types of claims a company has, in terms of frequency and severity, and measures taken to control the cost of claims have a significant effect on the experience modification rating.  Claims that involve medical treatment only, and no lost time, are less severe and therefore are reduced by 70% before entered into the formula for computing the experience modification rating.  This is where effective claims management, relationships with medical providers, safety planning and training, proper accident notifications and procedures and back to work programs can limit the amount of missed time an injured employee incurs.

When it comes to lost time claims, the first $ 5,000 is counted at full value.  After $ 5,000, the dollar amounts are discounted.  This is largely done to give more weight to frequency of claims as opposed to severity, which is considered to be a better indicator of a company’s safety performance and risk management systems.

For example, one claim at $ 40,000 has less effect on your experience modification then 10 claims at $ 4,000.  Because of this variable, safety efforts should be focused on reduction of the frequency of lost time claims.

Back to Work Programs

Back to work programs offer a number of benefits to both the employer and the injured employee.  For the employer, back to work programs can reduce the likilhood of fraudulent workers comp claims, reduces the likilihood of claims stretching out over time, saves in hiring and training costs, recieves some production from injured employee, facilitates contact between the employee and the employer and improved communication lines, and may assist in a quicker recovery from the injury.  For the employee, back to work programs allow them to retain self esteem and minimize guilty feelings they may have about getting hurt, it allows them to maintain contacts with their fellow employees which can lead to quicker returns to regular duty, it helps keep an employee on a regular work schedule and may assist in returning to work quicker, and it promotes better morale among all workers.

Ultimately the time to establish a back to work program is before injuries occur.  This program should be written and formalized, and employees made aware of its procedures.

Additional Resources

Creating a Return to Work Program

Why Establish a Return to Work Program?

Return to Work Program Self Assessment Checklist

Return to Work Program Template

As global economic integration marches forward, new and emerging markets and consumers riding a waive of modern technology, has introduced foreign markets and suppliers, and thus a foreign travel element to many business owners and staff that simply didn't exist for them a decade ago, or not in the same capacity.

While high profile corporate executives have always operated on a trans-national basis, today's global entrepreneur includes smaller business owners driven by vision and innovation, sometimes restricted by local resources, supply chains and consumer bases.

Managing the risk exposures associated with foreign travel is a fluid process, with real world political and social events having a profound impact on the threats and opportunities available.

Five years ago, Americans were being kidnapped and/or killed in Iraq, Afghanistan and Saudi Arabia.  Today it's Mexico. Drug cartels, criminal gangs, pirates and terrorist organizations have all taken advantage of opportunities to further their means, at the expense of foreign travelers.

On both an individual and corporate level, when traveling in a foreign country there are a number of risk mitigation strategies that should be considered and practices.  One of those strategies is the transfer of risk to various insurance coverages.

Among the most prevelant choices, includes Kidnap & Ransom coverage.  Each policy should be reviewed to determine what is and what isn't covered, but typical K & R policy forms include coverage for kidnapping, extortion, wrongful detention,  and hijacking.

You'll also need to review your other policies, specifically the liability coverages, accident and health, and workers compensation, to determine if there are coverage gaps, endorsements needed, or shortcomings in the policy forms.