I had a surprising discussion the other day with the COO of a fairly large grocery company about risk, safety, and insurance issues. His company has sizable exposures in the areas of property, liability, and workers’ compensation, and he has policies with several insurance carriers totaling over 7 figures in premiums.
Misconceptions from bad to worse
What was surprising about the discussion was how well versed he was in the costs of his policies, and the claims and administration related to those claims, but what a limited idea he had about the concept and function of loss control related to his policies. What’s even worse about this situation is that a sizable portion of the commercial insurance community shares the same mistaken idea. What is the mistaken idea?
The idea in question
The mistaken idea in question was that “Loss Control” meant “Inspections.” And by inspections, it meant some sort of non-participatory process where an inspector would briefly visit a location, collect some information, make some observations and perhaps take some measurements, and then be gone. Some group of recommendations might appear a month or two later with a little bit of written explanation and not much more.
I asked the CEO if that’s what his idea of loss control was, and he paused and said that was pretty much it from his experience. His stores are nicely organized and maintained, and very well-run overall. He recieves very few recommendations overall.
Engagement determines impact
The issue here is that even though inspections are often an integral part of loss control, and certainly the most visible part for most smaller accounts, inspections are more of an oversight tool (making sure that the insured company isn’t doing anything that will put them at too great of a risk for losses beyond what their business type would indicate) than an improvement tool (helping attain better performance.) The challenge is engaging with business and property owners and operators to help them improve their performance and better their condition.
So what is it really?
If loss control (or risk control as it is also called)isn’t just inspections, what is it then? Here’s a start. Loss control requires two dimensions: The first dimension is the active engagement of insured entities to understand the hazards that they are exposed to, the controls currently in place, the loss experience they have had over time, and their approach to managing and guiding safety. The Second dimension is working together with those insured entities to improve their performance in a collaborative way. That second dimension is often absent.
The biggest challenge toward that goal is that every organization is different and needs help in different ways. Some companies have well-developed safety management and only need targeted collaboration on certain key issues; others don’t have a clue of where to start and need more help than may be included with the service level set for their policies. Inspections will always be a part of the picture, and perhaps the most visible one in many cases, but loss control professionals and leaders need to remember and convey the bigger picture.