A complex industry requires a customized risk management plan

Businesses in the chemicals, coatings, adhesives, lubricants and the polymers industry require more specialized coverage than that afforded in a standard package policy. They also need experts who can help them manage their risks and dig a little deeper because the product liability, propensity for bodily injury and property damage, the environmental concerns and the transportation risks are critical.

“An insurance policy isn’t a replacement for a solid risk management program. We work closely with our clients to develop loss control, contingency and emergency response plans prior to a loss happening,” says Jessica Kerrigan, Client Executive at Hylant.

“When there is a chemical spill or release, time is not your friend. You need to handle it immediately with a team of professionals behind you who know exactly what to do,” says Michael Baumgartner, Client Executive at Hylant. “Responsiveness is a huge factor in mitigating the environmental impact.”

Smart Business spoke with Kerrigan and Baumgartner about how chemical companies can build a customized risk management program.

How might an insurance broker who acts like an extension of the internal risk management help a chemical company?

The current changes in the property insurance marketplace are causing issues across all industries, especially the chemical and related industries. For a company to distinguish itself with underwriters, the property submission needs to be significantly more detailed and the risk management program should be robust and clearly articulated to the underwriting community. 

For one company with seven locations across the U.S., that meant getting its broker’s loss control team together to visit each facility and generate a risk profile report that described areas of strength and opportunities for improvement.

The company addressed weaknesses or, if the change wasn’t in the capital budget, put together a strategy to do so in the future. The intimate knowledge gained and the commitment of resources turned the property renewal into a competitive advantage from a pricing perspective.

In this market environment, this kind of proactive approach must be executed to achieve optimal pricing and coverage terms, but it’s even more important for the chemical industry, which is far more customized and under tremendous pricing and coverage pressure from an insurance and risk management perspective.

Beyond property, what other risks are especially important for these businesses?

As far as trends go, insurance rates also are rising in the umbrella market as well as continual increases in automobile liability. Again, that’s why it’s critical to have a proactive risk management culture.

Cyber is a risk that may not seem inherent to chemical companies, but no business is immune. Computer systems are used in the majority of the manufacturing process — from filling tanks to heating or cooling chemicals — and those are vulnerable to attack. With cyber risk, as soon as a company builds a 10-foot wall, the cybercriminals will build an 11-foot ladder.

Environment risk requires expertise and brokers with experience. There can be ambiguity in general liability policies, so insurance buyers and risk managers need to make sure they meet regularly with their broker and explore all risks to ensure their exposures are covered as expected. In the chemical industry, it’s also important to closely examine the operational aspects.

For example, at the end of a two-hour session with a prospective client, going through the raw products and how the products were being used, a CFO and broker discovered more than 10 percent of the company’s products weren’t covered because the current insurance carrier had an exclusion for those chemical makeups.

When it comes to insurance and risk management, don’t fall into the trap of thinking, if it’s not broken, don’t fix it. It may be time to get a second opinion with a policy audit to ensure your company hasn’t become complacent.

Businesses need an insurance broker who thinks creatively about how to mitigate risk — visiting locations, helping design a custom loss control and prevention program with emergency response procedures and ensuring the company has a tailored insurance solution with the broadest coverage at the most competitive price.

Insights Business Insurance is brought to you by Hylant

How narrow networks can help contain health care costs

The only way to fund health care for the betterment of the employer and employee is to get creative. Narrow networks are one way to do that.

This approach is gaining popularity, as area hospital systems offer reduced charges when health plans steer members to them. Because the charges are dramatically reduced, the claims that are paid out are dramatically reduced and the premiums are dramatically reduced.

“Typically, companies have to shift more of the premium and risk to the employee by increasing contributions out of their paychecks, raising deductibles, co-payments and out-of-pocket maximums. A narrow network approach that reduces the cost by 25 percent — rather than increasing it by, say, 8 percent — enables a company to offer better insurance. It has better coverage with lower deductions, lower out-of-pocket, lower co-pays and lower premiums,” says Michele Hanzak, senior account manager at Zito Insurance Agency Inc.

Smart Business spoke with Hanzak about the rise of narrow networks.

How are narrow networks different than preferred provider organizations (PPOs)?

Over time, PPO networks started including everybody and the discount arrangements weren’t as deep. The move back to narrow networks comes at a time when health care cost increases are felt by both employers and employees. This means people are more willing to change their patterns of care.

Narrow networks today are also increasingly coupled with population health management, which is integrated into the contracting. The federal government is encouraging health systems to move away from the fee-for-service model, and the more nimble hospitals are taking that out to the commercial population.

Yes, narrow networks limit the number of doctors and hospitals. But a narrow network approach, coupled with population health management, results in more quality time spent between the doctor and patient.

When a company introduces a plan like this, is it normal to face resistance at first?

There’s always pushback initially. That’s why the education process is critical with employees and their family members. If people pay less for better outcomes and have a better relationship with their doctor, the results speak for themselves, even if that means switching doctors.

For example, family health plan coverage might cost $2,000 a month, with $1,000 of that coming out of an employee’s paycheck. A narrow network, which lowers the plan costs by 25 percent, means that employee now pays $750 a month — effectively a $250 a month raise. Plus, the out-of-pocket maximums and claims may be lower.

What other methods can be employed with narrow networks to contain costs?

Stop-loss carriers, or reinsurance companies, have come down market so their product portfolio can be tailored for smaller employers. This opens up the health care data technology platforms of third-party administrators (TPAs). A dashboard can be created to describe the exact cost and outcome for specific procedures, based on each doctor or health care provider. TPAs also typically have the best narrow network approach and contractual arrangements.

If self-funding seems risky, a level-funded approach adds additional layers of protection. Gathering a bunch of small level-funded employers together and plugging them into a captive arrangement adds even more protection. Usually, with captives, companies pay for four years and generate enough savings and cash flow that the fifth year becomes fully funded already.

Is a nontraditional approach more work?

Not really — there’s more information gathering upfront, but everybody uses data collection tools anyway. The plans do need to be monitored; it’s not something you can plug in after you’ve shopped the market and be done. By tracking patterns, you can see how to educate your employees, which can help save money throughout the plan year.

The most difficult piece, however, is the initial education component. That’s why it’s critical to find the right broker, someone who truly understands this and how it can benefit you. Only then can they help you design something that’s going to work best for you and your health plan population.

Insights Business Insurance is brought to you by Zito Insurance Agency Inc.

How to shift and mitigate international risk in a time of change

The United States has a reputation for being litigious, which impacts business insurance because as claim costs go up, premium rates follow. Now, other parts of the world are starting to catch up.

“It’s not a rapid shift, but businesses with international operations need to recognize that it’s not just the U.S. that sues people,” says Todd Bennice, senior vice president of Risk Management at Hylant.

Rising nationalism also creates antagonism and adds to the litigious environment.

Smart Business spoke with Bennice about global risk trends and mitigation techniques.

How should businesses reduce their international risks?

Because of changes in political, economic and legal climates overseas, people are looking to shift risk, including through insurance. Areas of increasing concern are international credit, political and cargo risk. 

If you’re a U.S. company with overseas operations, your firm faces credit risk. This stems from a concern that some customers may not meet their payment obligations. Trade credit insurance is a way to further mitigate your risk, as well as potentially open up further borrowing capacity with your bank. For example, a company with this exposure fragmented all over the world recently consolidated its program in order to spread risk and drive down cost. These same environments may also have unstable political, economic and/or religious climates, so it may be prudent to consider political risk coverage to address some of these risks. 

Finally, with the increased risk in the Persian Gulf and other areas, it’s critical to ensure that your ocean cargo exposures are known and your insurance program is well constructed. 

Also, in many countries, local brokers are required to place coverage. That’s why it’s critical to have a U.S. coordinating insurance broker with international expertise.

If your company has locations overseas, utilize a risk review to ensure your risk appetite is applied consistently. Cultural differences drive acceptances of risk. In most foreign countries, insurance policies have low deductibles and little risk taking. An analysis of each country and the way you purchase insurance can eliminate coverage overlap, and a global risk management program can help drive down costs.

If you don’t have brick-and-mortar locations, you may still export, import or travel overseas. Consider buying an international package policy, sometimes called an exporter’s package policy. It can provide modest amounts of property and liability insurance, such as protecting sales samples. This also addresses local automobile coverage and the application of workers’ compensation benefits if an employee is injured while working overseas.

What’s important to consider when entering a new market?

Companies already look at the business risks. ‘Do we want to do business here? Does the economic and political climate enable us to make money?’ But don’t forget to consider the situation from a risk management and insurance perspective. 

Are you at risk for nationalization of your product? Can you simply add the new exposure to an existing global program (and do you want to)? What are the insurance requirements in the country? Have you factored these into your cost-benefit analysis? Are you required to work with a local broker, and how much premium must be placed and left in the local country? These are all examples of risk characteristics, which present unique challenges in a new market.

How about tariffs? How are they affecting Northeast Ohio companies?

The impact of tariffs varies across the business climate. Some companies are facing significant negative impact, while others have benefitted. What’s important to know is how tariffs impact your company, making sure that these projections are incorporated into your insurance and risk management. If a business is slowing down or speeding up, policy limits may need to be adjusted.

Tariffs are changing rapidly, so companies need a flexible insurance program that ebbs and flows with business decisions. That’s why you should communicate with your risk management and insurance adviser more than just a few times a year. If you have more frequent conversations with him or her, just like you would with your lawyer or accountant, you may find unexpected solutions together.

Insights Business Insurance is brought to you by Hylant

How to recognize, value and reduce your total cost of risk

While the term “total cost of risk” (TCOR) has become more common, not every business owner understands what components make up the TCOR and how to address these exposures, says Nate Bell, CIC, commercial insurance specialist at Zito Insurance Agency.

Basically, TCOR is the cost of the items that your business is responsible for, including insurance premiums, deductibles, uninsured losses and indirect expenses.

“While most business owners know what they pay in insurance premiums and deductibles, they need to understand all potential exposures, whether they’ve insured against those exposures or not,” Bell says. “A business should identify potential policy gaps and decide, ‘Do I buy an insurance policy or put in controls, such as risk transfer or a specific loss control procedure to mitigate that exposure?’”

Smart Business spoke with Bell about how to reduce risk in your organization.

How should employers identify their TCOR?

Start by asking questions to understand your areas of exposure, what’s already in place to cover your risks and the potential gaps that need to be addressed.

When doing an analysis, it’s important to remember exposures are both qualitative and quantitative. You want to understand your risk tolerance. Are you comfortable self-insuring with a large deductible, or do you want to buy insurance that will respond first dollar? Do you have claims frequently? Are incidents typically severe? 

The kind of controls and tools you have in place to minimize losses, your management team and staff, and the company’s claim history are all variables in determining opportunities to approach critical areas driving TCOR.

The loss history is important. For example, commercial automotive insurance premiums are rising drastically, but frequent, smaller claims can impact premiums more than one large claim. If your company has a frequency issue, you may be better off increasing your deductible and self-insure as much as you’re comfortable with, along with investing in telematics or other risk management tools to help reduce the frequency of claims.

What are some tips for designing a plan to eliminate, transfer or insure risks?

Your risk manager and/or insurance agent can help you:

  • Develop a continuity plan. A big exposure is business interruption coverage. Do you have enough coverage or a plan in place to minimize the expenses and get the business back up and running as quickly as possible when there’s a loss? 
  • Review and update policies and procedures, such as driver recruiting and cell phone policies for commercial vehicles. Another example is a return-to-work policy, one of the best ways to control workers’ compensation costs.
  • Have a solid employee handbook that’s up to date, reviewed by your attorney and signed off on by the employees is also critical. It not only helps minimize your exposure for liability claims of harassment, discrimination or wrongful termination, it can include training and policies that help decrease injury risk.
  • Transfer risk by having subcontractors include you as an additional insured on their policy for work they’re performing on your behalf. This is a key way to protect yourself without additional costs. 

How can organizations without internal risk managers better manage these costs?

Most small and mid-sized companies don’t have a dedicated person with expertise in risk management. One option is to hire a third-party company with the expertise to assist in the development of policies and procedures to help create a safe organization and establish controls to limit risk.

But don’t forget to utilize your insurance agent and your insurance company. Many agents provide loss control material on an ongoing basis, and most insurance companies have a strong Loss Control department that will provide training and risk management tools free of charge.

Every facet of an organization impacts a company’s TCOR. While reduction of TCOR typically starts with the CEO and management team, taking advantage of training and involving all staff members in utilization of resources can be key in reducing costs throughout the year.

Insights Business Insurance is brought to you by Zito Insurance Agency, Inc.

How to sharpen your networking skills to add business value

Risk and opportunity are two sides of the same coin, and business leaders shouldn’t focus on one over the other. They work together. Those who thrive in today’s business climate find ways to take advantage of possibilities for organizational innovation and competitive advantages, while mitigating the surrounding risk.

One tool that can help you manage risk and seize opportunities is building a strong and diverse network. 

“For example, if you have a cyberattack or your system is hacked, you want to already have those vendor relationships built for how you’re going to handle the situation. And that’s where networking really helps,” says Kim Riley, president of Hylant’s Cleveland office, who moved to the area three years ago, after 20 years in Nashville.

“When I moved to this city, I had to figure out how to build a business, how to grow the business in a new city that I had never been in,” she says. “Networking and encouraging my team to network is what I did.”

Smart Business spoke to Riley about how to build a network to help grow your business.

Why is it important for employers to build a network? How does this relate to growth?

By networking with other organizations, you and your team can:

  •   Find new opportunities to invest in.
  •   Build deeper relationships with your current client base, helping them find opportunities for growth.
  •   Learn about acquisition opportunities, whether that’s a similar business or a new line of business.
  •   Build trust with other vendors that you may need to solve a business issue later.
  •   Forge strong connections with centers of influence who can provide introductions or open doors.
  •   Attract new talent, which has grown more important as workforces tightens. It helps put your brand out there and spreads the word to potential employees.

What are some networking best practices?

It takes more than one person. Build a culture around it, so everyone in your organization is out there, has their eyes open and is bringing connections back. As you collect business cards or meet people along the way, you’ve got to decide which are the best opportunities for you. If you work with a team of people, you can collectively determine which opportunities best fit with each team member to maximize the effectiveness of everyone’s efforts.

To keep your relationships from going cold, you’ll need to come up with a system for how you’re going to keep them engaged. That’s difficult, but you can use social media — LinkedIn, Facebook, Twitter, etc. — to stay in touch regarding birthdays, work anniversaries or promotions. 

It’s not something where you typically carve out an hour and network. It’s more of a mindset: ‘Who can I connect to my network today? How can I connect those dots? If I’m trying to talk to a company about an issue and I need a vendor who can help me, who in my network can help me have that conversation?’ One idea is to try to eat breakfast or lunch with people you don’t know, as often as you can. It will help you build your network, give back to others and build relationships along the way.

It’s also important to build rapport and trust before you put your hand out. Rather than meet someone and expect them to help you, first help them. Go into the conversation thinking, ‘What can I do to help them and their business?’ For example, try to connect anyone you meet with at least two others in your network, while spreading those introductions across your network.

Where do business leaders go wrong when building a network?

A lot of people only want to network with decision-makers, which puts pressure where everyone is bombarding the CEO or CFO. Some networking articles say you need at least three to five relationships within a company that know you and know who your firm is, before they’ll make a decision to change a vendor relationship. You can’t have just one relationship within the company.

You also don’t want to just have relationships with your peers. When you’re networking, value every person you meet. If someone isn’t a decision-maker yet, as they start moving up in the organization or spin off and create their own company, they’re going to remember that you took time with them and helped them along in their journey.

Insights Business Insurance is brought to you by Hylant

An ounce of safety management may be worth a pound of litigation

A workplace incident is any injury or illness that occurs at work for which the employee seeks medical treatment. With such a broad definition, it’s no wonder there were 114,000 reported incidents in Ohio in 2016, according to the Ohio Bureau of Workers’ Compensation.

However, there’s a bigger concern. While that 114,000 was down 9 percent from the year prior, the average claim cost increased dramatically. So, the lower frequency is coming at the cost of higher severity, says Chas Lowe, commercial insurance specialist at Zito Insurance Agency Inc.

“That’s why companies need strong safety programs that can help identify the root cause of a workplace injury. It’s only after you boil it down that you can determine measures to either prevent or severely reduce the likelihood of it happening again,” Lowe says. 

Smart Business spoke with Lowe about safety in today’s workplaces.

Why use the term ‘incident’ over ‘accident’?

Incident is a better way to describe workplace injuries because an accident is considered a random event that typically couldn’t have been prevented. However, nearly every workplace event that results in an injury is preventable, whether that be from additional training, improved onboarding processes, adhering to a safety program or avoiding the activity altogether.

Which employers are most at risk?

Although any employer can be impacted, the highest rate of reportable accidents in the U.S. occurs in the health care and social service industries, followed by transportation and manufacturing.

No matter what industry a company operates in, unsafe actions and behaviors lead to an overwhelming majority of workers’ compensation claims — a staggering 96 percent.

How can employers minimize incidents?

All employers, regardless of size or industry, should implement a safety program with continual training and systematic processes to identify factors that may lead, or have led, to an incident or injury. Another key is ensuring temporary employees are subject to the same training as permanent employees.

A good post-incident investigation program is also important. These investigations provide insight into the root cause of the incident, help generate recommendations on how to fix what went wrong, and most importantly, include documented follow-up to ensure employees get back to work as quickly as possible, even if it’s not in the same role. Post-injury management is crucial. Outreach to injured employees keeps them engaged and may help stem additional claim costs in the form of lost pay and additional medical treatment.

Why are safety programs so important?

Regardless of the type of insurance — property and casualty, health or workers’ compensation — historical claim costs drive rates. Therefore, a safety program can help mitigate costs by reducing the number and severity of incidents and injuries. 

A strong safety program can help ensure safety is a part of the fabric of the company. While these programs are usually managed by human resources or a safety manager, to get true buy-in, employees need to see top management demonstrate their commitment to safety in every organizational decision.

How can employers get started? 

To start a safety program, contact your insurance broker, third party administrator and/or managed care organization for help. A good broker will take a hands-on approach in helping you to develop a program and give you access to resources to help tailor the program to your specific needs. 

What can employers do to make an existing program more effective?

Bring in a third party to audit the safety program. If it’s done internally, employees may shy away from pointing out the flaws because it was implemented by a superior and they don’t want to speak out of turn. A third party will give an unbiased opinion as to how effective the program currently is and where they think it could be improved.

Also, it’s important to view safety as a living-breathing process and to empower your employees and encourage management to continually think of ways your safety program could be improved.

Insights Business Insurance is brought to you by Zito Insurance Agency Inc.

How to transfer risk when pollutants may lurk under commercial land

Purchasing, leasing or selling commercial land often comes with environmental risk. This isn’t a risk you can afford to ignore because when claims do occur, they are severe.

Mary Gerding, ARM, vice president, Client Service Executive, Environmental Risk, at Hylant, says there’s risk when developing something new on a site that’s got a history. Even on farmland, unexpected discoveries of pollution can pop up.

That’s why you need to investigate prior use, both on-site and nearby. 

“A site that is downstream from a chemical plant, dry cleaner or gas station has a higher likelihood of contamination,” Gerding says.

In fact, common chlorinated solvents or degreasers can be one of the worst offenders. Other major risks include things left behind in the soil, such as a storage tank releases, buried debris and fertilizers/pesticides that can leach contaminants.

Smart Business spoke with Gerding about environment risks in real estate transactions.

How does investigating the site history mitigate these risks?

Site investigation is a must for both buyers and renters, and it’s often required by lenders. 

In a Phase I Environmental Site Assessment, consultants look for recognized environmental conditions in the prior use of the site and its surrounding properties. If the investigation suggests potential contamination, a Phase II assessment, with sampling and lab analysis, is usually next. 

What is transactional environment insurance? How does it help?

Investigating the site history is the first step to risk protection, yet absent the seller’s indemnity, you can’t be certain without insurance. Transactional environmental insurance is also known as premise pollution/environmental site liability insurance. This surplus lines insurance policy pays cleanup costs if contamination is discovered on your property or on a nearby property if your site is the source. 

With no standard policy form, coverage is customized to fit your site conditions and deal. That’s why you need an insurance expert who can focus on the site issues and policy terms and conditions. 

The use of environmental insurance has grown out of the industrial box. It can help address mold, legionella and other indoor air quality concerns, which are critical to the residential and hospitality sectors.

What exactly can be insured?

The policy can cover existing but not yet discovered conditions or new releases. Beyond paying for the cleanup costs, it provides legal defense expense and third-party protection for bodily injury and property damage claims. So, you would have coverage if, for example, a tenant becomes ill on your property, or the contaminant causes loss of use, stigma damage or natural resource damage.

Transportation liability and non-owned site liability, such as when you ship waste off-site to be landfilled, recycled or incinerated, is also insurable. These policies won’t cover the cleanup of an existing known condition before issuance of a no further action, or abatement of asbestos or lead paint, although third party claims response can often be negotiated.

As a claims made insurance policy, most people buy a five- to 10-year policy for a real estate transaction.

Why might a tenant need to be concerned?

Tenants may not think environmental risks apply, but it depends on the lease language. They may have responsibility for any environmental harm they cause. But if the prior tenant had a similar business, how do you prove which company is responsible? 

Do sellers also use this type of insurance?

Sellers may choose to be proactive. If there is environmental uncertainty, they can conduct a study and share the findings for a coverage proposal. This can add to the site’s marketability, protect the price point and speed up the closing.

Sellers can collaborate with an attorney, environmental consultant and insurance broker to preplan how various technical and risk transfer tools fit together to benefit all parties — as the buyer, seller and lender can be identified in the policy as insureds.

Don’t allow your transaction to lose momentum when environmental concerns pop up without first exploring risk transfer to an insurance policy.

Insights Business is brought to you by Hylant

Workplace violence incidents are not black swan events

Sadly, violence can’t always be avoided.

You can, however, reduce the likelihood of such acts in the workplace with education, planning and processes/procedures to help proactively identify these type of risks before they escalate to violence. And then, if and when an unfortunate act occurs, do you have the resources for all of those impacted?

Smart Business spoke with Chas Lowe, commercial insurance specialist at Zito Insurance Agency, Inc., about workplace violence.

What types of workplace violence exist? 

People view these incidents as black swan events, when, in reality, they occurred more than 300 times last year, according to AlertFind, which is dedicated to helping employers reduce workplace violence.

Workplace violence is often broken into four categories. According to the Centers for Disease Control and Prevention, these are:

1. Criminal intent, such as robbery or shoplifting.

2. Customer/client. Health care settings most commonly experience this type of violence.

3. Co-workers. This can include verbal as well as physical violence.

4. Personal relationship. An example would be the significant other of an employee showing up at the place of employment.

It’s important to note that violence can occur in any industry. Unfortunately, these acts often result in collateral damage.

Which businesses are most vulnerable?

The most vulnerable are companies that deal with the public — i.e. hospitals, schools, government entities, social services — as well as places that exchange money and/or businesses that are open late. 

The current status of the business can also impact the risk for violence. For example, rumors about layoffs, outsourcing or a business closing have been shown to increase the likelihood of a violent event occurring.

How can employers protect their employees?

First, employers have a duty to implement risk management practices to deter violence and help people deal with issues before they become a crisis. Processes and procedures should prevent conflict from turning into harassment or violence. Effective lines of communication on all levels can ensure employees are comfortable approaching management or reporting violent acts. Counseling services or company training helps people know what behavior will and will not be tolerated, while also encouraging employees to accept individual differences.

Consider offering counseling services or mental health resources through a health benefits package. A well-thought-out disaster plan should also address what to do in the event of workplace violence. 

How can insurance help? What misconceptions do employers have? 

Insurance coverage for these types of unfortunate events is usually a standalone endorsement, which can be added to your policy for an additional cost.

One misconception is that workplace violence coverage is activated by legal liability or a lawsuit; however, it is actually triggered by the actual violent act. Another misconception is that workers’ compensation will cover these violent incidents. In fact, some workers’ compensation specifically excludes coverage for acts of violence or the threat of lethal force. 

What does workplace violence insurance typically cover?

Workplace violence insurance covers expenses an employer may incur, including:

  •   Medical expenses for all of those affected
  •   Hiring independent security consultants 
  •   Victim employees’ salaries and replacement employees’ salaries
  •   Loss of business income in the event of a workplace shutdown 
  •   Post-incident crisis management, including consultants and mental health specialists
  •   Rewards for information leading to an arrest

While some businesses are more vulnerable, all employers face the threat of workplace violence. Every employer needs to foster a safety culture and implement risk management designed specifically for workplace violence. Your insurance agent can help you understand your exposure and the value of this important coverage.

Insights Business Insurance is brought to you by Zito Insurance Agency Inc.

How people make the difference in your total cost of risk

The total cost of risk (TCOR) goes far beyond insurance costs and claim occurrences. Managing the TCOR requires the involvement of almost every person in an organization.

For example, according to Brad Croce, senior vice president at Hylant, there’s a strong correlation of engagement in the workplace and the frequency and severity of loss incidents across all industries, from a manufacturer’s production line, to the drivers in a fleet safety program, to the security of a company’s data from a cyberattack.

Smart Business spoke with Croce about TCOR and how employers can encourage their people to help keep risk costs low.

Have executives today become more interested in the need to address risk in their businesses?

There has been more awareness of the need to improve risk management and thus the TCOR. Since the Great Recession, company executives have increasingly focused on this from a cost containment standpoint as well as a management tool.

When a company is managed with a strong foundation for ethical behavior and compliance, it creates a corporate culture where managing risk is at the forefront for employees. 

This foundation begins at the top of the organization, where all executives are aligned and committed, with an emphasis on risk identification, mitigation and correction. 

Not only does this result in a reducing TCOR, it also makes a workplace more attractive to prospective and current employees.

How should risk management work to keep the TCOR down?

Although each company is different, well-run organizations focus on risk identification and prevention, which include strong safety and security procedures, resulting in loss avoidance. Along with this approach, data show that the ancillary administrative costs decrease as well. 

In addition, when insurance company underwriters consider culture, management style, employee engagement, etc., in their due diligence and assessment, the resulting judgments they make when providing pricing and terms and conditions back to the insured can derive an additional financial benefit.

What are some best practices for minimizing the TCOR in your organization?

A TCOR review by the entire company management is a good starting point. It helps the company understand the full extent and cost of all risk management activities and expenses.

Another benefit of this exercise is that management has the ability to better align risk mitigation actions with the corporate strategic goals and objectives. TCOR also can be benchmarked against industry peers to accurately measure performance and identify opportunities for improvement.

Another best practice is involving employees to assess the current behavioral issues and what could be done to improve them, which then facilitates the implementation of any changes or improvements. For example, if a company has a fleet of vehicles — even if they’re not the core business — it could screen and/or survey the drivers to identify links between attitudes, beliefs and behavioral tendencies with the frequency and severity of accidents. This type of analysis could result in more enhanced driver training while also helping employees feel involved and valued.

In addition, whatever gets measured seems to be what gets done. If a safety committee is then formed, it brings together people from different levels of the organization, where the expectations around it are clearly communicated and followed up with documentation, which then holds people accountable.

Insights Business Insurance is brought to you by Hylant

Not all insureds are treated equally by carriers. Get the details right.

While it is common to have multiple entities listed as “insureds” on a commercial liability policy, all parties insured by the policy are not treated equally. Therefore, it is critical that this often-overlooked section of the policy be set up properly, says Chris Zito, president of Zito Insurance Agency, Inc.

Smart Business spoke with Zito about what employers need to know about the types of insureds and the very different ways they’re treated in a policy. 

What are the types of insureds that could be listed on your insurance policy?

Typically, there are three different types of insureds that may be included on a commercial liability policy: first named insured, additional named insured(s) and additional insured(s).

What exactly is a first named insured?

The first named insured is the entity that has ultimate control of the policy and is afforded unique rights, such as the ability to:

  •  Change coverage.
  •  Cancel the policy.
  •  Receive premium refunds.
  • Receive cancellation or non-renewal notices.
  • The first named insured also is legally responsible for:
  • Paying the policy premiums.
  • Filing claims and proof of loss.
  • Submitting to a claims interview.

Because of these unique rights and obligations, it is important that the appropriate entity is listed in this position on the policy.

How does an additional named insured differ?

Additional named insureds are entities provided the same coverage as the first named insured, but they do not have the same rights and responsibilities as the first named insured.

What does an additional insured mean and why is it important?

With additional insureds, typically this is an entity unrelated to the first or additional named insured, which has been added to the policy by endorsement in order to satisfy a contractual requirement. Examples are a landlord, lessor of equipment, a higher tier contractor on a construction project, etc.

There are a number of additional insured endorsements used depending on the situation, all of which provide different levels of protection, so it is very important that the correct form is used to meet the intended purpose. Since additional insured are often confused with a named insured, it is important that contracts containing insurance requirements be carefully reviewed — ideally by your insurance agent or broker before signing.

One consideration to be conscious of when adding an additional insured to your policy, is that you are sharing the coverage limits available under your policy with these entities. Depending on how many additional insureds are listed and the nature of the relationship, a review of your coverage limits for adequacy may be in order.

What can be the consequences of a mistake with your insureds?

The schedule of named insureds is an area of the policy commonly overlooked, which can have severe consequences. With the exception of temporary coverage afforded to newly formed or acquired entities in some cases — typically 90 days or less — the insurance carrier is only obligated to provide a defense to entities that are specifically scheduled on the policy. 

The type of organization (such as corporation, LLC, partnership or sole proprietor) is also significant because who within the entity is covered and how that company is covered by the policy is, in part, dictated by the type of business structure. It is also important that the legal name of the entity be reviewed for accuracy.

What’s your takeaway for employers?

As with any legal document ‘the devil is in the details,’ so paying proper attention to this particular detail can determine who will be writing the check to the defense attorney in the event that one of your companies is sued.

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