Risk Management ProgramPresented by: Jeff Reese, ALCM, AU – Liberty Mutual Risk Control ServicesOur risk control service is advisory only. We assume no responsibility for management or control of customer safety activities nor implementation of recommended corrective measures. The illustrations, instructions and principles contained in the material are general in scope and, to the best of our knowledge, current at the time of publication. No attempt has been made to interpret any referenced codes, standards, or regulations. Please refer to the appropriate code-, standard-, or regulation-making authority for interpretation or clarification. Only your policy or contract can give actual terms, conditions and exclusions.

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Objectives

Definitions /

Concepts

RM - Identificat

ion

RM - Analysis

RM – Treatmen

t

RM – Monitor Results

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Definition of Risk

Uncertainty in regard to the positive or negative outcome of potential future events.

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Types of Risk

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Objectives

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Definition of Risk Management

Uncertainty in regard to the positive or negative outcome of potential future events.

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Risk Manager – Should have a good understanding of Insurance Coverage

PropertyLiabilityAutoWork Comp

FloodCrimeBuilders RiskBusiness IncomeInland MarineEmployment PracticesEmployers LiabilityLiquor LiabilityErrors and OmissionsPollutionGarage Keepers / FiduciaryUmbrellaKey EmployeeBusiness Continuation

Commercial Package Policy

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Insurance Basics

Insurance companies add “rate multipliers” to pure loss rates based on:

– Exposures & Controls (Subjective)• Hiring Practices, Management Commitment, Safety Program,

Cooperation, Equipment Maintenance, Employee Training, Experience, Turnover, Type of Projects, etc.

– The employer’s historical record of claims and safety performance (Objective)

• Loss Ratio, Frequency Ratio, Experience Modification, Etc.• OSHA Violations, FMCSA SMS, Claims Records, etc.

– Loss Ratio = Paid Losses / Premium– Frequency Ratio = # Claims / (Premium/1000)

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Experience Modification – Work Comp Performance measure with direct impact.

– NCCI

– Based on employee classifications and not business classifications

– Statistical loss rate per $100 of payroll– Measures your expected losses for that year as a

baseline average.– Primary vs. Excess – Frequency to Severity– Uses the oldest 3 of the past 4 years– Medical Only – deduct 70%– Reserves Included

Code Payroll EL EPL

0.780.67 0.74 0.78 0.8 0.8

0.91.01 1.04

0

0.2

0.4

0.6

0.8

1

1.2

Exp

. Mod

.

2005 2006 2007 2008 2009 2010 2011 2012 2013

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The Experience Modification NCCI Experience Rating Plan Booklet

https://www.ncci.com/documents/abc_Exp_Rating.pdf

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Days Off Grace Period for Work Comp

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OSHA - Incident Ratewww.bls.gov/iif/osheval.htm

OSHA Violations and Fineshttp://www.osha.gov/pls/imis/establishment.html

FMCSA CSA – SMS Resultshttp://csa.fmcsa.dot.gov/default.aspx

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But isn’t that why we have insurance?

Indirect Costs

• Injured Employee Time Off• Other Employees’ Time• Supervisor’s Time• Training A Replacement Worker• Quality and Quantity of New Employee’

Work• Efficiencies• Morale• Overtime Pay• Equipment Repair / Replace/ Devalued• Shut Down of Assembly Line• Rental Expenses• Clean Up• Overhead Continues• Product Damage• Raw Material Damage• Bad Press / Goodwill• Compromised Deadlines• Lawsuits & Court Time• Fines & Deductibles• Dropped by Carrier

4.5

1.61.2

1.1

0

1

2

3

4

5

0 to 3 to 5 to 10+

Indirect Cost Multiplier

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Resources / References Comparative Negligence

– MT follows the 51% rule

which is Modified

Comparative Fault – If the

plaintiff is 50% or less at fault they

recover based on that %. If they are

51% or more at fault then they don’t recover

anything. So if they

are 10% at fault they

recover 90%

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Punitive Damages InsurabilityEx. Employers Liability

Not allowed

Insurable

Allowed, but not insurable

Insurability is questionable

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Sources of Some Key Consensus Standards• Among the more commonly used standards include-

– ANSI (American National Standards Institute)• Ex. OSHA references ANSI Z87.1 for eye and face protection• Ex. Safety Yellow ANSI Z535.1 “most visually detectable”

– NFPA (National Fire Protection Association)– ASTM (American Society for Testing and Materials)– ASME (American Society of Mechanical Engineers)– ISO (International Organization of Standards)– IEEE (Institute of Electrical & Electronics Engineers)– UL (Underwriters Laboratory)– SAE (Society of Automotive Engineers)

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