of a carrier’s claims, determines what they expect the carrier’s future losses to be, and adjusts the insurance premium accordingly. (Note: While other market factors can influence insurance costs, premiums typically reflect prior losses and other operational factors.) In non-traditional or alternative risk insurance arrangements the liability aspect is usually more transparent to carriers. They have a more vested interest in the outcome of claims submitted given the potential to actually earn back some of their premium. Since increased liability leads to increased claim costs and ultimately a higher cost of doing business, it makes sense that controlling liability is important to controlling costs in the long run. So, what operational concept is inversely proportionate to liability? Safety programs and processes of course. A comprehensive and well-executed safety management program will limit a
carrier’s liability to the extent possible in any given situation. Many operators learn this the hard way as they grow the company, though small operators who understand the concept can get ahead of the game and ultimately reach a level of sophistication that comes with growth and experience. Experience tells me the larger a carrier becomes, the bigger the chance to be bitten by the liability bug and suffer its related costs, and most likely to adopt a more robust safety program. Here are the top liability producers that every operator should address and control. Subjective hiring — Make sure there is a method in hiring. Establish guidelines for the skills and behaviors a candidate must bring to the job in your company and make them stick. Lack of or inconsistent oversight — Review all employee errors, violations of company policies, regulations
or laws and unsafe driving behavior on a regular basis to determine if anyone poses unnecessary or unusual risk compared with other employees. Absence of accountability — When an employee missteps the company should inform the employee of the error and take some type of corrective action, whether counseling, training, etc. A framework for disciplinary action is generally included in an accountability system to deter similar behavior in the future. Insufficient documentation — Without documentation to prove that you routinely conduct liability-reducing measures, you will have a hard time convincing anyone interested that this is a standard practice you actually completed as scheduled. BR Matthew A. Daecher is president and CEO of Daecher Consulting Group, Inc., Camp Hills, PA.
Published on Apr 3, 2012