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Reduce Premiums? Reduce Risk & Loss Control Strategies

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Business owners know an injury to an employee or severe property damage destroys productivity; so all losses should be avoided or reduced.

So why do insurance loss control representatives' visits and the ensuing safety recommendations bother business owners so frequently? Is it the nuisance that any disruptive visitor might be? Is it the money to implement loss control strategies?

Insurance companies understand that the frequency of claims, that is the number of claims, predicts risk levels much more accurately than does the severity of claims.

Insurance company recommendations tend to reduce the frequency of claims. In the long run, reduced frequency leads to better experience and greater discounts. Selfishly, you should implement loss control recommendations that lead to lower costs.

For small business, as defined by one that cannot afford an in-house full time safety officer, the insurance company loss control representative acts in that capacity to review the overall loss control picture. Use this service to your advantage.

The insurance company wants to reduce risk as much as you do. Of course, the company is less concerned about the budget to do so when you're fulfilling their recommendations.

So, what can you do about costly compliance measures? Ask the loss control representative for help. These professionals are in the field all the time and see many solutions to the same problems. They will have some cost effective ideas.

What other proactive measures can a business owner implement? First, a loss control survey, sometimes called a risk management survey, outlines every process, job, piece of equipment, or operation with regards to safety.

Once your safety concerns are identified, you can manage the risks in two ways: loss control measures or strategies. A loss control measure reduces the frequency of claims. A strategy eliminates or reduces risk.

Loss measures include installing equipment safety devices, controlling environmental conditions, and supplying proper protective gear. Right now would be a good time to solicit feedback from the insurance loss control representative. They have valuable experience in this area.

Manufacturers and contractors are familiar with equipment safety devices, such as guards on saw blades or operator cages. Ergonomics has become a popular form of loss control that ties into safety devices. Differing control knobs, placement of controls and sight lines improve operator efficiency and eliminate unsafe habits.

Environmental controls, for example ventilation and lighting, reduce worker fatigue, unhealthy air quality, and poor visibility. Injuries decrease in frequency as a result.

Proper protective gear may seem a bit old school, but safety is the test of time. Goggles, gloves, hard hats, protective clothing, and even proper work clothing can help to reduce claims.

Installing guards and providing equipment protection is half the battle. Safety must be taught to the employees at all levels for an effective loss reduction program. New and old measures should be embraced by management and implemented correctly.

Insurance loss control departments are a good source for safety lesson plans, posters, or even direct employee meetings to teach and discuss safety issues.

Loss control strategies eliminate or reduce risks. Prevention, avoidance, transfer, and separation are examples of viable strategies.

Prevention strategies anticipate future problems. A business may carefully screen driver applicants with background checks, records, and road testing to preclude poor operators from damaging valuable vehicles or injuring third parties.

Avoidance eliminates existing or potential risks. The business screens drivers unsuccessfully; and therefore decides to eliminate its fleet and use common carriers. The business has avoided all risks associated with operating vehicles, but not those associated with shipping products.

Separation segregates risk. The business decides to build a second manufacturing site rather than place both lines in the same building. The risk of both lines being destroyed at the same time is greatly prevented because the exposures are separated.

This strategy may allow one site to shut down for difficult maintenance while the second site continues filling orders. Better maintenance is a safety measure granted by the separation strategy.

Transfer strategies include: contractual transfers, subcontracting work, and buying insurance. Transferring is usually a legal risk reducing strategy.

Purchasing insurance is a strategy to fund claims. The business may not technically be reducing losses, but it is keeping those losses - premiums - at a tolerable level. This strategy brings us back to listening to the insurance company recommendations.

If you proactively manage the input rather than withhold feedback to the safety representative, in the long run, you will focus on the important issues, eliminate the intolerable risks, and attain affordable insurance premiums. 


Click here to return to Amity Insurance E-Newsletter January 16, 2012.