Insurance loss control, risk engineering, or risk consulting are all synonymous with risk management techniques that aim to reduce the possibility and severity of losses before they occur. Loss control is an important tool to assist insurance underwriters in understanding the risks associated with the operations, programs, policies, procedures, and culture of the policyholder. The process ideally should take place prior to binding coverage; however it can be conducted at any point during the policy period and/or during the renewal.
Loss Control Coverage Lines
Loss control can be conducted on any insurance product line – most commonly including:
Property – Evaluation of physical assets insured by a policy – including valuation of assets; identification of operational and maintenance procedures, fire suppression systems and other life safety programs; evaluation of potential claims scenarios, including natural disasters; and likely replacement costs.
General Liability (GL)– Evaluation of safety and security/access procedures with the goal of understanding risks to third-party exposures at the insured location and/or off-site operations (excluding pollution liability). Third parties could include: temporary workers, site visitors (vendors, subcontractors, clients, inspectors, delivery drivers), company employees working remotely at a customer location, and adjacent property/ business owners. GL coverage would include claims for property damage or bodily injury to any of the parties.
Environmental – Evaluation of environmental/pollution risks associated with the insured’s operations. This could include hazardous chemicals and waste on site and storage/controls in place for those materials; environmental permits in place and compliance with those permits; proximity to environmentally-sensitive receptors (i.e., surface waters, natural areas, residential dwellings, schools, hospitals, etc.); historic usage of the site and the potential for related legacy environmental issues; and a review of the insured’s environmental programs and stewardship.
Fleet/Auto– Evaluation of commercial fleet and auto operations by the insured, including driver hiring and training practices; fleet maintenance practices; fleet monitoring and safety programs; review of claims and Department of Transportation records and use of fleet vehicles (work only vs. personal usage).
Products Liability – Product risks can be divided into two categories: Product Liability and Product Pollution risks. For product liability risks, a loss control assessment will focus on the products themselves, their usage in the marketplace, potential for misuse, customer base, the raw materials and manufacturing processes involved, and the overall quality controls in place to ensure the products do not pose a risk to customers or the general public. A product pollution risk assessment will center on the raw materials, intermediate products, and the finished goods to evaluate the potential of the products to contaminate a customer’s product or cause a pollution condition for end users.
Workers’ Compensation – Assessment of worker training programs, personal protective equipment that is required, accident/incident investigation procedures, worker health and safety programs, back-to work programs, occupational disease, and claims evaluation for frequent and repetitive incidents.
Generally, loss control can be divided into subcategories that involve:
- Risk Identification– assessment of current risks for the insured and their potential impact for the insurer.
- Risk Mitigation– identification of practices to reduce risk for both the insurer and the insured.
- Implementation – use of plans, practices, training, and other tools, identified in the Risk Mitigation phase, to reduce the overall risk for both the insured and insurer.
- Follow Up – assessment of the Implementation phase, revision to plans and programs, revision to any formal recommendations, and compliance/reevaluation of overall risks – addressed in the initial review.
Methods of Conducting Loss Control
Loss control can be conducted in a variety of ways. The insurance carrier may establish key risk factors – important to their policy – to be addressed under each coverage line, sometimes involving particular focus on one or more risks. Once those risk factors are identified, the loss control data collection can be conducted by one of the following methods:
Desktop Review– A review of available information (i.e., internet, publicly available sources, and submission documents). A desktop review can be performed for any of the above-referenced lines of coverage with the understanding that limited information on the insured’s actual operations may not be available.
Telephone Survey– Involves providing a general list of topics prior to the call and engaging in a conversation with the insured to ask direct questions about the operations for all the coverages being offered. Phone surveys may involve multiple representatives from the insured to address specific areas of risks and coverage. Further, documents related to the questions can be reviewed (prior to or after the survey) to provide additional detail of the overall risk mitigation programs.
Site Visits– Site visits can include a desktop review and provide similar detail as the phone survey, however it provides a higher degree of risk assessment. While a formal site inspection can be more time-consuming, it allows the insurance carrier or their representative to see firsthand the insured operations, review the plans and procedures in place, and physically identify potential risks to the policies that might not otherwise be apparent from a desktop review or phone survey.
An effective and comprehensive loss control report, regardless of the survey method, assists underwriters and managers in understanding the risks posed by the insured’s operations and rating the account. It can also identify potential areas for exclusions of coverages, and/or deductibles/self-insurance to minimize the potential claims that might arise from unknown or perceived risks, associated with the insured.
HETI Loss Control Services
HETI has experienced professionals, across multiple lines of insurance, to assist insureds and insurers alike with their loss control requirements and help reduce costs – in many different market sectors including chemical, construction, manufacturing, mining, agriculture, retail, real estate, waste management, oil and gas, and transportation.
HETI is also available to assist with loss control program review, engineering guideline development, market sector risk assessment, and other loss control services to help our clients reduce the possibility and severity of losses before they occur.
In the future, HETI Horizons will feature loss control topics specific to a particular insurance coverage or industry sector.
For further information on HETI’s loss control and risk consulting services, please contact us.
John Howard, RG, CPG Theresa Butziger, LPG Anthony Vinci