olympus insurance - risk insights
DESCRIPTION
Olympus Insurance - Quarterly PublicationTRANSCRIPT
VOLUME 6, ISSUE 4OCTOBER 2013
RISK INSIGHTS
Loss Trends
The current loss trends of the industry
have been favorable, which has resulted
in a sustained period of overall stability
in the cost and availability of coverages.
Most insurance programs have been re-
newing with only moderate adjustments
in cost, in the 5% range, and many have
not seen major cost adjustments for
many years.
The workers compensation area contin-
ues to have the most significant loss
trends, but even this area has started to
improve, with the rate increases that
have been evident in recent years and
greater underwriting discipline. The im-
provement has been moderate, and still
unprofitable, with an industry combined
ratio dropping from 115% in 2010 and
2011, to 109 % in 2012.
One of the leading risk trends occurring
in the area of cyber liability is the in-
creasing settlement value of large claims.
Many organizations have begun to rec-
ognize that even with effective IT controls
and services,
significant risk
arises from
cyber liability.
This includes
both the first
1 INSURANCE MARKET OVERVIEW
US Economy
Fortunately the US economy has started
to improve in general, which has started
to bring relief to local governments and
utility organizations. Communities are
seeing increases in permit and approval
activities, commensurate with the type of
activity prior to the financial distress of
2008.
This is an opportune time to review risk
management procedures in key areas,
particularly with major capital projects
and the related insurance requirements,
as well as the overall procedures in-
volved with hiring and human relations.
The insurance market also continues to
be very stable. In the current year, ex-
traordinary catastrophes have not been
evident. Since the hurricane season does
not officially end until the end of Novem-
ber, there is always the possibility of one
or more storms arising of the magnitude
of Hurricane Sandy last year. This
proved to be one of the most costly wind
events, due to the proximity to urban are-
as along the eastern sea board.
B. DARRELL CHILD
OLYMPUS INSURANCE AGENCY
INSIDE THIS ISSUE
INSURANCE MARKET OVERVIEW
AVOIDING VEHICLE BACKING
INCIDENTS
INSURING MAJOR
INFRASTRUCTURE
TWELVE STEPS TO A
SAFER JOB SITE
CHANGING AN ORGANIZATION’SCULTURE TO ENHANCE SAFETY
FALL RISK CONFERENCE
COLORADO PRIMA
WESTERN RIMS CONFERENCE
CONTRIBUTORS
B. DARRELL CHILDOLYMPUS INSURANCE AGENCY
RODGER COCHRANOLYMPUS INSURANCE AGENCY
A. TAYLOR CHILDOLYMPUS INSURANCE AGENCY
BRIAN D. CHILDOLYMPUS INSURANCE AGENCY
R. BRUCE WRIGHTSYNEBAR SOLUTIONS
party costs of managing a data breach event, but also the
potential for third party liability from such events.
The use of vehicles continues to have significant risk, due
to the nature and extent of injuries that may arise from
serious auto accidents. One provider in our regional ar-
ea has paid several large automobile liability claims,
some exceeding $5 million.
The good news is that the organizations with an active
safety culture, who practice sound safety practices, will
have a more stable organizational cost of risk, lower
overall cost of risk trans-
fer through insurance,
and less adverse impact
on their organizations. In
the present era effective
safety practice is not a
luxury, but a necessity.
The ability of organizations to respond to major risk is-
sues continues to be a major component in the planning
for the future and the assurance of their long term viabil-
ity.
Capacity
The insurance industry continues to be well capitalized,
with many insurance companies demonstrating sustained
return on capital and adequate to superior combined
ratio operating results. Overall, the combined ratio for
the insurance industry has been running in the mid 90’s
throughout this year. Even with significant loss events in
2011 and 2012 the combined ratio only increased from
102% to 106%.
This essentially means that without significant erosion of
capital, the insurance industry has been remarkably sta-
ble for many years.
One of the leading conferences for global reinsurers oc-
curs in Monte Carlo in early September. The most recent
conference featured the chairman of Lloyds. He cau-
tioned the insurance industry about over capacity in rein-
surance, which is being created through Catastrophe or
CAT bonds. If an individual entity or an insurance com-
pany desires to lay off a portion of their risk they may do
so through the issuance of CAT bonds. These bonds pay
generous returns to investors, provided no large cata-
strophic event arises. However, if an event arises the
principal is forfeited by the investors, and the proceeds
are then available to fund the major costs of the disaster.
As investors seek better returns, these bonds have be-
come an attractive option, at least until major cata-
strophic events occur. The concern of the Lloyds chair-
man, John Nelson, is that the investors in CAT bonds are
not well seasoned in understanding insurance risk, and if
major losses occur, a flight of capital from the insurance
industry may follow. This could cause a very rapid
change to hard market conditions. In his words,
“everyone likes high returns, especially in financial mar-
kets where such low returns are evident; however, many
do not fully understand the long term risks of insurance.
Insurance underwriters are well conditioned to under-
stand the long term nature of risks and will accept the
unfavorable results that arise when a natural catastrophe
occurs, but financial investors often take a short term view
in their search for return on capital.”
The best course is to continue to work with well-seasoned
underwriters that are in a strong capital position to ab-
sorb the occasional major catastrophic losses that may
arise.
RISK INSIGHTS
2
1 INSURANCE MARKET OVERVIEW (CONT.)
"Sometimes when we review particular utilities’ loss runs
there are no backing incidents to be found, not even
when we look several years back. What explains this?"
It seems as though many utilities struggle when it come to
the prevention of vehicle backing accidents, especially but
not exclusively with respect to their larger vehicles, such
as service buckets, crew buckets, and digger/derricks.
During our claims reviews I all too often see numerous
cases (Sometimes even dozens in large utilities!) of back-
ing losses among the paid fleet claims. Year after year,
these claims are at or near the top of the list when loss
frequencies are calculated, usually vying with yard ruts for
the number one spot. There is quite a long and varied list
of objects such as mailboxes, bollards, posts, parked
cars, and even the corners of buildings, that apparently
leap out invisibly behind backing trucks.
While most backing losses are relatively minor in cost, the
potential exists for major incidents if circumstances con-
spire against a driver. I still remember the story one of
our clients told me about an event that occurred to one of
their lineman who, while driving a digger truck, stopped
at an intersection, spotted a semi coming from his right
on the cross road, preparing to turn onto the road the
digger truck was on. Seeing that the semi’s driver needed
some extra room, and being a polite and courteous driv-
er, he reversed to back away from the corner. While do-
ing so, he backed over and crushed the entire front 1/3
of the small Toyota that had pulled up behind him at the
stop sign! Oops. The resulting injuries were minor, but
when everything was finally wrapped up it still came to
quite an expensive total cost.
RISK INSIGHTS
3
2 VEHICLE BACKING INCIDENTS: HOW DO SOME UTILITIES SEEM TO AVOID THEM?
The really frustrating thing about backing losses, to us, to
our carriers, and presumably to you, is that virtually every
backing loss can be prevented if drivers follow proper
procedures. This brings up an interesting puzzle, namely,
that while most utilities seem to have their share of these
events, sometimes when we review particular utilities’ loss
runs there are no backing incidents to be found, not even
when we look several years back. What explains this dif-
ference?
This is the part of the article where you are likely to be
waiting for me to reveal the “magic bullet,” to explain the
simple, cheap, and easy procedure/device that those ac-
cident-free companies use that stops all backing acci-
dents. Spoiler alert – you may be disappointed. It’s sim-
ple, it’s cheap, but it will require hard work!
Of course, there are a few widely touted ideas that you
have undoubtedly heard about. The “Plan & Park Defen-
sively” rule, which suggests a driver park so that he need-
n’t back up to leave. The “Walk Around” rule, which re-
quires a driver to circle his perked vehicle before getting
in. The “Set-out Cone” variation, which requires a driver
to place a traffic cone behind (or in front and behind) the
vehicle, and retrieve it (them) before driving off. The
“Spotter” rule, which, as the name implies, requires any
vehicle with a passenger to have that person get out and
act as a guide whenever a vehicle is in reverse. The
“Beeper Reverse Light” that sounds a warning when back-
ing, though few mailboxes seem to get the message and
move out of the way. Many of our clients use or have
used one, two, even all of these approaches. Some have
had success; many have purchased lots of replacement
cones and/or disciplined lots of drivers. The latest idea is
backup cameras, which in fact may offer some actual
benefits, for a cost.
After having many, many conversations about backing
incidents and prevention programs with utility safety offic-
ers across the country I have come to the conclusion that
the secret to preventing them is not found in any of these
techniques. I certainly would not tell anyone to stop using
them, especially if they believe that they are helpful. But, I
think the real explanation for why some of our clients
don’t have these incidents while many others do, lies in
R. BRUCE WRIGHT
SYNEBAR SOLUTIONS
RISK INSIGHTS
4
the differences in company cultures. While nearly every-
one says that they recognize the importance of “culture”
in reinforcing the safety message, not everyone follows
the same path when in comes to creating it. Here’s what I
see.
Those utilities whose senior staffers “get it” with regard to
this issue take to heart the need to model, reinforce, and
praise the behaviors they want their workers to use.
“How’s that,” you ask? It’s quite simple really. If the GM,
the Ops. Manager, and the rest of the leadership group,
all “walk around” their vehicles, or set out and retrieve
their cones, or use spotters themselves, and do so every
time they get to their vehicles, then the line workers seem
to do so too. If you are now shaking your head saying to
yourself, “But those rules only apply to the CDL trucks, not
to the pick-ups and SUVs our managers drive,” then I
think you may have just figured out one of the problems!
If we impose rules on workers that add to their perceived
workload or hassle factor, while exempting ourselves, is it
any wonder that we would get less than full compliance?
2 VEHICLE BACKING INCIDENTS (CONT.)
That the workers would feel dumped on? Wouldn’t you?
It’s just human nature!
In addition, at utilities that seem not to incur backing loss-
es, the leaders go out of their way to observe drivers,
making an effort to catch them in the act of doing things
right, so that they can congratulate and thank them for
doing so. (And they quietly correct anyone who forgets.)
This is how a safety culture is created, not by board poli-
cy, not by complex procedures, and certainly not by un-
paid days off, but rather by showing, reinforcing, and
rewarding the desired behaviors.
Okay, I know, it “says easy, does hard.” But it can be
done, it has been done, and it is being done right now by
some of the utilities I visit. (The ones with few or no vehi-
cle backing incidents!)
Copyright © 2013 by Synebar Solutions, Inc.
All Rights Reserved.
Reprinted with permission.
3 THE COSTS AND BENEFITS OF INSURING MAJOR INFRASTRUCTURE
At the recent American Water Works Association confer-
ence held at Sun Valley, Idaho a presentation was made
by our firm on the cost benefit of insuring major infra-
structure.
The dynamics of risk are changing with both the type of
events that could result in damage to our facilities, as well
as the legal liability that may result from the existence or
operation of our facilities.
Assessing the Risks of Major Infrastructure
Traditional property insurance programs typically include
coverage for buildings, contents and related structures.
The scope of the coverage may include the property perils
associated with fire, collapse, water discharge or other
related natural or human events which may cause dam-
age to buildings.
Most property insurance programs require special treat-
ment for losses that may arise from earth movement or
flood.
In the review of property risks, consideration should also
be given to major infrastructure items, according to the
following criteria:
Concentration of Value. At times infrastructure is vast
and spread out over great distance, which means
that a localized loss event would not damage a sig-
nificant portion. Examples would include water lines,
power distribution grids or road networks. However,
at times elements of infrastructure and centralized
and very valuable. These elements should be consid-
ered for either insurance or self-insurance reserve
funding.
A. TAYLOR CHILD, CLCSOLYMPUS INSURANCE AGENCY
RISK INSIGHTS
5
3 THE COSTS AND BENEFITS OF INSURING MAJOR INFRASTRUCTURE (CONT.)
Redundancy in systems. Many distribution systems
have inherit redundancy, which would allow for the
continuation of services, in the event of a major loss.
However, there are also times when the loss of key
elements could prove to be very costly to replace or
may require expediting or other special costs.
Capital Reserve Funding. Most systems have reserve
funding to replace lost elements or aging infrastruc-
ture. However, a major catastrophic event may
eclipse the normal reserve funding available to re-
place damaged area. Funding available from FEMA
or other sources may be delayed, provide only partial
contribution, or may not be available for a recurring
event when such funds have been utilized in the past.
Economic Viability. A loss of major infrastructure
may impact the economic viability of the organization
or may disrupt essential revenues or earnings of the
organization. Effective planning for the loss of in-
come and extra expenses that may be incurred is an
essential part of insurance design.
When natural disasters arise crucial infrastructure is dis-
rupted, and may be costly to replace to a state where ser-
vices can be restored. Consideration should be given in
each of these areas, as insurance or reserve funding is set
to protect the long term viability of an organization.
Our firm specializes in providing guidance and solutions
in this crucial area. A number of specialty underwriters
provide affordable insurance risk transfer options, provid-
ing the necessary restoration to crucial infrastructure and
maintaining economic viability of the impacted organiza-
tion.
4 TWELVE STEPS TO A SAFER JOB SITE
Since many entities are considering or moving forward
with large capital projects, this is an excellent time to re-
mind ourselves of the importance of safety in the overall
planning for these projects. A leading construction insur-
er, ACE, has developed twelve key steps to ensure a safer
job site.
1. Start at the top. Safety starts with senior manage-
ment, who emphasize the importance of safety first
to protect the individual employees, then contractors
and to the public.
2. Safety Committee. This committee needs to actively
discuss and review safety procedures, equipment,
and safety performance.
3. Share Responsibility. Everyone needs to be held
accountable for safety. Without accountability em-
ployees may cut corners to save time or money.
4. Plan Safety in the Project. Before work starts on the
project, a specific safety plan should be developed
and executed, including scope of work, and desig-
nated responsibilities.
5. Prequalify Contractors and Sub-Contractors. There
are a variety of measures that can be set as qualifi-
cations, including acceptable NCCI experience mod-
ification rate and OSHA safety violations. These
should be incorporated into the qualifications of
contractors and sub-contractors.
6. Train. All employees and workers need specific
training on the process, the personal safety equip-
ment and the safety protocols that must be followed.
BRIAN D. CHILD, CIC, CLCSOLYMPUS INSURANCE AGENCY
RISK INSIGHTS
6
4 TWELVE STEPS TO A SAFER JOB SITE (CONT.)
7. Focus on Fall Management. One of the leading
causes of injuries or deaths is job site falls. About
35 percent of fatal construction accidents occur due
to falls from height.
8. Combat Substance Abuse. Employees need to be
trained to recognize the risks that are evident from
chemical impairment, as well as the hazards that
may come to other employees if a co-worker is im-
paired. They need to realize that a co-work that
may lose his job from impairment is in a far better
situation that if he loses his life or costs the life of a
coworker. All employees need to understand rules
regarding zero tolerance of any worker that may be
on the site in an impaired condition.
9. Evaluate Each Project Phase for Safety. The safety
planning of trenching or digging is far different than
the safety planning for high rise construction risks,
especially associated with scaffolds or ladders. The
planning for each phase of construction should ad-
dress the unique risks evident of that phase.
10. Review Accidents and Near Misses. Actual claim
events or near misses are an excellent source of in-
formation to use to assess changes which may be
necessary in procedures, personnel or training.
11. Use Experts in Safety Planning. Safety is a very spe-
cialized field. The organization should rely upon
those with experience and understanding of worksite
safety, OSHA and other safety standards and best
practices.
12. Set a Goal of Zero Injuries. This becomes the core
value of the project, and if an accident arises it is the
exception, not a normal or expected byproduct of a
construction project.
Major safety viola-
tions must all be
dealt with quickly
and firmly, so that
all understand this
is a high priority in
the organization.
RODGER COCHRAN
OLYMPUS INSURANCE AGENCY
5 CHANGING AN ORGANIZATION’S CULTURE TO ENHANCE SAFETY
Throughout my years in the risk management field, I’ve
worked in many different industries, and organizations.
Some were more successful than others in their overall
safety efforts. Organizations with successful safety pro-
grams generally were able to incorporate the importance
of safety into their culture.
An example of the Walt Disney Company comes to mind.
Every employee shares a common set of four values.
These are Safety, Courtesy, Innovation, and Integrity. The
first value is that safety to the employee, as well as the
public is the core value that drives all other values of their
organization. They know that an unsafe condition is not
acceptable to the employees or to the public that visit
their facilities or participate in their media productions.
They also know that the reputation of their company rests
first of the employees and the public having a safe and
pleasant experience.
In every organization there are times when safety can be
compromised in the interest of efficiency. Personal pro-
tective equipment takes time to check, and to fit property,
and if it is not remembered, then it can be a hassle to go
back and secure the correct equipment. Yet it only takes
one time, when the personal protective equipment is not
used, which can result in injury from an accident.
Many organizations have the attitude that all losses are
preventable, or at least losses that result from our opera-
tions or control. A more realistic approach is to make it
the goal to learn from all loss events or near misses.
Even though we still set the goal of zero accidents, we
also realize that if they do arise that they can be powerful
learning examples for the future. This is best accom-
plished with an active safety committee that not only re-
views the losses and near misses, but also has the re-
RISK INSIGHTS
7
5 CHANGING AN ORGANIZATION’S CULTURE TO ENHANCE SAFETY (CONT.)
sponsible parties involved in the dialog as part of their
reporting.
Some organizations give safety a high profile or visibility,
so that all know it is an important part of the organiza-
tional culture, such as Disney. Visibility occurs when we
see signs that remind us, when we read our intranet with
regular safety bulletins, when safety incentive and training
awards are evident, and when people go out of their way
to recognize doing the right thing.
In the organization the staff or line workers learn best by
example. If the supervisors or management do not take
safety seriously or state that it does not apply to them,
then it will send a subtle message that the staff or line
workers that they do not need to take it seriously either. If
a supervisor is casual about personal protective equip-
ment or monitoring site safety in a construction site that
will filter down to those that will mirror that same behav-
ior.
Safety is best achieved when it is linked to other organiza-
tional values, and when the employees know that it is a
vital part of the culture of the organization. One of the
large fire agencies sent a very powerful message that cer-
tain types of “team building sports or actives”, were no
longer permitted due to personal safety concerns. Even
though team building and fitness for duty are important
organizational goals, they are not more important than
personal safety. There is nothing more important than
personal safety and safety to the public in the organiza-
tion.
The public will measure our organization in many ways,
such as responsiveness, and courtesy, but they will also
value more highly than other organizational goals the
safety that is evident in the community. When they sense
that this is an important priority, they may also want to be
part of the process by making you aware of unsafe condi-
tions as they may arise.
The culture of the organization leads to a sense of fulfill-
ment by the employees and general well-being in the
community or organization. Emphasizing safety as part
of that culture is an essential part of the long term viability
of the organization and the personal satisfaction of em-
ployees or staff.
6 FALL RISK CONFERENCE
Our Fall Risk Conference was recently held at the Library
at Academy Square in Provo. The conference was attend-
ed by risk managers and those with risk oversight in their
entities.
The first presentation was given by Wayne Parker, the
Chief Administrative Officer for Provo City. Wayne pre-
sented on the successful partnerships the City has forged
with the private sector. Most recently, the City of Provo
was able to form a partnership with Google, to bring
their fiber network service to the City. This resulted in a
multi-fold benefit for the citizens to receive high speed
internet at a nominal connection charge, and the City to
be relieved of upgrading a fiber network.
In the next presentation Michael Barker and Sargent Ja-
son Murdock with the Unified Police Department of
Greater Salt Lake defined the risks and responsibilities an
entity may face, if an active shooter event were to arise in
the community or an organization. Many have faced
these situations in recent years, which bring hardship and
distress. Fortunately, there are excellent legal protections
available, in harmony with the special relationship doc-
trine. Organizations should also include in their emer-
gency plans, the contingencies of dealing with an active
shooter event. These plans need to include a mission
focus, relevant to facilities and the organization, be sup-
portable, as well as documented and certified.
The next two presentations were on the topic of large con-
struction projects. Kevin Cowan and Brian Child re-
viewed a current construction project at the North Davis
RISK INSIGHTS
8
6 FALL RISK CONFERENCE (CONT.)
Sewer District, with the insurance and risk criteria defined.
This was followed by a case study presented by Steve
Cain, on the enclosure of the Murdock Canal and the
associated Provo River Aqueduct operations.
In the next presentation Rick Davis, City Manager of West
Jordan, presented several excellent concepts on employee
empowerment. Many organizations have faced deep
fiscal constraints which may have impacted employee
morale and productivity. He outlined five keys to em-
powering employees. These are Envisonate or create a
broader vision for the employee in the organization, In-
novate by expanding the circle of influence, Communi-
cate, Educate, and Delegate.
One of the most disturbing trends in recent years has
been the incidence of sexual predators. Kenny Smith pre-
sented a review of the major issues associated with pro-
tecting our communities from sexual predators’. This in-
cludes not only youth programs, but other areas where
either our organizations provide service or may be as-
sessable.
The final presentation was made by Taylor Child, who
provided an overview of the large loss trends that have
been occurring and the potential impact to our organiza-
tions. In recent years a number of large settlements or
judgments have arisen, which have had a profound im-
pact on the organizations that have faced these signifi-
cant claim liabilities.
7 COLORADO PRIMA
On August 11-13, 2013 the Colorado PRIMA conference
was held at the Vail Resort in Colorado. The event was
well attended, with over 150 attendees. The opening
session was presented by Tim Gard, “Developing a Com-
ic Vision”. Risk Managers often face challenging circum-
stances, which can be handled with a sense of purpose
and good humor, to alleviate the otherwise stressful cir-
cumstances.
The conference had a variety of breakout sessions on:
“Best Practices in Risk Management”, “Where in the Dis-
aster Cycle is Your Organization”, “Solving the Accident
Riddle”, and “Mitigating Toxic Expenses”.
The closing session was presented by Michael Fann, from
Nashville Tennessee. His topic was on “Creating a Cul-
ture of Civility”. We live in an increasing complex and
stressful world. This may lead to more incivility in the
work place and in society. The presentation focused on
how to introduce greater civility through understanding
the cycle of in civility. This begins with a perception of
unfairness or negative feelings, a desire for reciprocation
or revenge, and ultimately uncivil behavior. The effect
may digress from rude comments and insensitive actions,
to verbal aggression and ultimately physical aggression.
As organizations we need to set procedures that proscribe
acceptable or civil behavior, and be willing to enforce
those policies in the interest of the organization. Failure
to do so can result in lower moral and potential liability.
“The greatest risk for your organization is in creating a
culture of indifference”
He also gave a couple of personal strategies. The first is
“don’t be afraid to let things slide, especially mistakes
and slights that you know to be unintentional”, He also
said, “don’t wait for someone to be nice to you, you can
be nice first, and don’t keep score. Also, consider giving
yourself ‘time out’ if you need to cool off before express-
ing yourself, especially when you know you may regret
the things you may say in the heat of emotion”
The presenter emphasized that in the face of incivility, we
need to practice understanding. He quoted Plato, “Be
kind…for everyone you meet is fighting a hard battle”
and another famous quote, “You must be the change you
want to see in the world”, Mahatma Gandhi.
RISK INSIGHTS
8 WESTERN RIMS CONFERENCE
On September 15-18, 2013 Risk Managers from across
the western United States gathered in Park City, Utah to
review leading risk trends. The conference featured
many noted leaders in the insurance and risk manage-
ment community, such as the President of the Lloyds Unit-
ed States, Hank Watkins. In his presentation he over-
viewed many of the leading risk trends that organizations
are facing. The second leading risk trend is in the area
of cyber liability.
Several presentations were made on the nature of cyber
risks and effective strategies in mitigating cyber risks, and
assuring well designed insurance programs to address
those risks.
The conference had several public entity breakout ses-
sions dealing with leading risk topics, such as social me-
dia, volunteers, water claim events, and cameras on po-
lice officers. The topic of active shooters and the potential
of permit carrying employees were also discussed.
Several sessions also focused on Enterprise Risk Manage-
ment (ERM), including implementation strategies and the
application of ERM for public entities or other types of
organizations.
The conference also featured several presentations deal-
ing with crises events, such as the Crisis Planning at the
US Olympics and “When you don’t want to create memo-
ries that last a lifetime” based on actual events at Sea
World.
WWW.OLYINS.COM
(877) 759-9935220 MORRIS AVE #340
PO BOX 65608SALT LAKE CITY, UT 84165
9 SPRING RISK CONFERENCE — SAVE THE DATE!
DATE: MARCH 26, 2014TIME: 8:00AM - 3:00PM
VENUE: THE GATHERING PLACE
AT GARDNER VILLAGE
1100 WEST 7800 SOUTH
WEST JORDAN, UT
Save the date for our SpringRisk Conference! Check ourwebsite, www.riskconference.netfor additional details as theybecome available.