Loss Control Strategies Reduce Business Insurance Premiums and Risk

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

Recommendations from loss control representatives can reduce the frequency of claims. In the long run, fewer claims lead to better operations and lower premium costs. So it is in the best interests of your business to implement loss control recommendations.

Insurance companies want to reduce risk as much as businesses and individual policy holders do. Of course, insurers are less concerned about the budget needed to make changes when you're fulfilling their recommendations.

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 may have cost effective ideas.

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

Once safety concerns are identified, you can manage the risks in two ways:

1. Loss control measures, which reduce the frequency of claims.
2. Loss control strategies, which eliminate or reduce risk.

Loss measures include:

• Installing equipment safety devices;
• Controlling environmental conditions; and
• Supplying proper protective gear.

Again, solicit feedback from the insurance loss control representative. He or she generally has 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. Installing different control knobs, placement of controls and sight lines may improve operator efficiency and eliminate unsafe habits.

Improving environmental controls, for example ventilation and lighting, can reduce worker fatigue, unhealthy air quality, and poor visibility. Injuries may decrease 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 reduce claims.

Installing safeguards 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

Examples of viable loss control strategies are:

• 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 strategies eliminate existing or potential risks. For example, a 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 strategies segregate risk. For example, a 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.

Proactively manage the input of information to the insurance safety representative, rather than withhold it. In the long run, you will focus on the important issues, eliminate risks, and potentially attain more affordable insurance premiums.