Reducing Your Total Cost of Risk
A Seminar on Opportunities, and Solutions for
Proactive Risk Management
Chad Harvey, Director of Risk Management
Succeed Management Solutions, LLC
(503) 582-0190
chad.harvey@succeedms.com
www.succeedms.com
Succeed Management Solutions, LLC
•
Started in 1996 as CIH/CSP-based risk
management consulting company
•
Built web-based Risk Management
Center to service clients with risk
mitigation tools
•
58,000 clients worldwide
Succeed Management Solutions, LLC
Curt Shaw- President/CEO
•
Curt Shaw is the CEO and founder and has over 35 years of experience in key
management positions with fortune 500 organizations and insurers, and founded
the Succeed team as a successful consulting business.
•
Curt is a retired Board Certified Industrial Hygienist and Safety Professional of 30
years, and an Environmental Engineer with an industry-wide reputation as an
expert on risk mitigation.
•
In the course of his career, Curt developed a national reputation among insurers
and employers for turning around organizations with poor loss records and
substantially reducing their insurance and loss-related expenses.
•
As part of their consulting business, Succeed started developing software tools to
increase their efficiency and depth of services. These tools were brought together
into the Risk Management Center, a holistic Enterprise Risk Management System.
Succeed Management Solutions, LLC
Chad Harvey – Director of Risk Management
•
Chad is a veteran risk management and safety professional, with over 20 years of
experience in industry, insurance, and consulting.
•
Has designed and implemented risk management and loss control departments for
companies, developing field consulting staffs, and consulting with large
corporations.
•
Chad has experience in many industries, and is an expert in worker’s compensation
and consulting in multi-line insurance as well.
•
Chad earned his Bachelor of Science degree in Occupational Safety & Health from
Montana Tech of the University of Montana, with an Engineering and Industrial
Hygiene focus.
Risk Management Center Access
Reducing Your Total Cost of Risk
Course Topics:
Part 1- Basic elements of TCOR… Elevate its importance
Part 2- Reducing your TCOR using the Risk Management Center (RMC)
What is Total Cost of Risk (TCOR)
Cumulative Cost of:
1.
2.
3.
Insurance premiums… all lines
Retained losses… costs not covered in insurance policies; e.g.,
deductibles, plus
Administrative and risk management costs
Total Cost of Risk As Market Firms: RIMS
 Businesses paid about five percent more in 2012 than they did
in 2011 to cover the total cost of risk
 That compares to a rise of only 1.7 percent in 2011, according to
the 2013 Risk & Insurance Management Society (RIMS)
Benchmark Survey
http://www.insurancejournal.com/news/national/2013/07/15/298393.htm
Reducing Your Total Cost of Risk
Understanding the Total Cost of Risk is essential to reduce exposures, save
time & money
Can you answer the following questions?
•
•
•
•
What is your organization’s Total Cost of Risk?
What are the significant cost drivers?
What direction is it headed?
Is there a Risk Management Plan in place
focused on driving down your TCOR?
Why Reduce Your Total Cost of Risk
•
Corporate Ethics and Reputation
•
Increased Employee Retention
•
Increased Employee Involvement
•
Increased Productivity
•
Increased Quality
•
Financial
– Minimize exposures = less direct and indirect costs
Risk Management Strategies
Direct Costs
Reactive
Strategy
Profit
• Usually insured
• Medical expenses/ indemnity
Indirect Costs
• Usually
uninsured/unrecoverable
• Wage costs to worker and
others due to time loss, work
stoppage, product loss,
replacements, property
damage, or administrative
costs
Profit
CODB
Penalties
CODB
Penalties
Uninsured Costs
Insured Costs
Uninsured Costs
Other Costs
• Morale
• Reputation
Break even point
Proactive
Strategy
Insured
Costs
The average cost of a disabling injury in America is $54,000
http://www.nsc.org/news_resources/injury_and_death_statistics/Pages/EstimatingtheCostsofUnintentionalInjuries.aspx
Total Cost of Risk (TCOR) Elements
1. Insurance costs… all lines
2. Retained losses… costs not covered in insurance policies; e.g.,
deductibles, plus
3. Administrative and risk management costs
 It’s dynamic and different by industry, operation, exposures,
region, markets, and point of time (such as market conditions for
insurance rates)
1- Cost of Insurance
•
Premium paid for Property, General Liability, Workers’ Compensation, Auto,
EO/PL, etc.
– For Workers Compensation, depending on States, directly effected by
your Experience Modification Factor; NCCI Rates; Underwriting Load
Factors (influenced heavily by your approach to risk mitigation*)
•
Taxes and Insurance Fees
•
Types of Policies (Group Plans, Captives,
Scheduled Rating, Retrospective, Deductible,
Guaranteed Cost)
•
Re-Insurance, or bonding
•
Self-Insured
*Your risk mitigation performance impacts what you pay
1- Cost of Insurance
• Experience mod or E-Mod is based on a 3 years of loss data (earliest 3 of the
last 4 years)
• You are compared to others in similar industry sectors (expected losses)
• 1.00 is average
• Above 1.00 is a debit modifier and you pay more than manual. Below is a
credit modifier and you pay less than manual
How we establish premium rates
We determine premiums using a number of factors, including your total
payroll, type of work your employees do and your workplace injury record
 Your risk mitigation performance impacts what you pay
1- Cost of Insurance
 Your performance impacts what you pay
2- Retained (Uninsured) Losses
Cost of losses not paid by insurance or other outside
sources
•
Deductibles and Self-insured retentions
(SIR)
https://www.google.com/#q=self+insured+retention+versus+deductible+insurance
•
Conscious non-insured exposures
•
Direct claims management
•
Unplanned losses, such as from a claim
denial
3- Administrative & Hidden Costs
Examples:
• Risk management services
• Process costs to mitigate loss source (such as ventilation or safeguarding
system)
• RTW management
• Consulting/training
• Lost production time
• Business interruption
• Claims expenses that may not be included in the insurance policy:
– Internal or Third Party claims administration
– Public Adjuster or Claim Consultant
• Legal
• Risk Management Information System… Tools such as the RMC
• Program & Policy Administration
• Compliance & Regulatory fines or fees (FDA, Environmental, OSHA, etc.)
• Travel… training, audits, etc.
 Studies show that indirect
costs are 4-10 times direct
costs!
RMC…Reducing Your Total Cost of Risk

Through this proactive process of identifying and addressing risks,
your organization can…
 Better position your firm in the market
 Protect employees & customers, and enable greater profits
 Meet regulatory requirements
 Save time and money
Risk Management as Profit Center
Statistics about the eLearning
•
The U.S. and Europe utilize 70% of the world’s eLearning
•
77% of American Corporations use online learning
•
72% of companies surveyed report that eLearning keeps them on top of their
industry changes
•
Corporations save 50-70% when they replace instructor-based training with
eLearning
•
eLearning classes are generally 25-60% shorter in duration than traditional
classes
•
23% of employees leave their jobs because the position lacks opportunity for
development and training.
•
Online education is proven to increase knowledge retention by 25-60%.
http://elearningindustry.com/important-statistics-about-the-elearning-market-for-2013-infographic
Risk Management as Profit Center
Example:
If you have $50,000 in losses, you need $1,667,000 in sales to pay the costs of (3% profit margin)
Profit Margin
Yearly Excess
Costs
1%
2%
3%
4%
5%
$1,000
100,000
50,000
33,000
25,000
20,000
5,000
500,000
250,000
167,000
125,000
100,000
10,000
1,000,000
500,000
333,000
250,000
200,000
25,000
2,500,000
1,250,000
833,000
625,000
500,000
50,000
5,000,000
2,500,000
1,667,000
1,250,000
1,000,000
100,000
10,000,000
5,000,000
3,333,000
2,500,000
2,000,000
150,000
15,000,000
7,500,000
5,000,000
3,750,000
3,000,000
200,000
20,000,000
10,000,000
6,666,000
5,000,000
4,000,000
Sales Required To Cover Losses
Formula:
Sales Required To Cover Losses = Yearly Costs
Profit Margin
Risk Management As Profit Center
Real Client Example:
•
With a MOD of 1.18 you are paying ~$220,000/year
extra based ONLY on your MOD
•
@ 5% Profit margin your group needs to produce
~$4.4 MILLION in product JUST TO PAY FOR YOUR
EXCESS PREMIUM
•
PLUS, indirect costs, load issues, etc.
Poor
RMP/
High
MOD
equals
High
Costs
$
Summarizing Your Total Cost of Risk
Cost of Risk ($)
Claims Administration
Per $1,000 Budget
$104,715
$2.15
Risk Mgt. Budget
91,494
1.88
Premiums
65,617
1.35
GL Self-Insurance
73,742
1.51
PL Self-Insurance
141,035
2.89
WC Self-Insurance
216,736
4.45
$693,340
$14.22
Grand Total
Trend these data year to year
Part 2 – Reducing your TCOR
Reducing Your Total Cost of Risk
Steps:
1.
Develop your TCOR
2.
Identify Major Loss Sources for all lines of coverage (RMC)
3.
Perform a Risk Assessment/ Gap Analysis/Opportunity Assessment…
review tasks and exposures, and needed controls (RMC)
4.
Prepare the “Plan of Attack”… the Risk Management Plan
Who Does What by When
Steps:
5.
Reducing Your Total Cost of Risk
Deploy the Risk Management Plan
• Prioritize needs
• Identify actions to minimize the exposures
– Policies (procedures) & respective trainings needed
– Implement a BBS process to reduce at risk behaviors
• Set measurable goals and track performance
• Audit & communicate results
– Adjust priorities & actions
Risk Assessments
Perform for all lines of coverage… work as team with Risk Management
• Develop specific assessment to line of coverage
• Evaluate probability & severity
Consider:
• Regulatory requirements
• Supplier failure
• Employee dishonesty
• Natural disaster
• Terrorism
• Decreased demand
• Financial and insurance market conditions
• Serious pandemic
• Organization's reputation… e.g., Food Safety issue, regulatory issue
• Controls in place or needed
• Administrative policies/procedures in place or needed
• Training in place or needed
• Etc.
Risk Assessment Example
Risk Assessment Example
Risk Assessment Example
Risk Assessment Example
Risk Assessment Example
Risk Assessment Example
Risk Assessment Example
Risk Management Plan
Major Loss Sources
Risk Management Plan
Risk Management Plan (RMP)- based on the Risk Assessment and Loss
Trend Analysis, the RMP summarizes actions prepared to foresee risks,
estimate impacts, and define controls and responses to issues.
• Needs continual review, oversight, updating and audit
• Contains an analysis of exposures and risks, their probability and
severity, and control approaches
• Includes a risk control strategy:
– Avoidance: Don’t do the activity
– Loss Prevention and Control: prevent loss – engineer hazard; use
safety glasses
– Risk Financing: Obtain insurance or self-insure to finance losses
that occur
– Risk Transfer: Transfer financial responsibility for risk to contractor
and secure indemnification, hold harmless
Risk Management Center Access
A Proactive Approach
Use of
RMC
Organizational
Savings
Skilled
Risk
Mgr.
$
$
$
Risk Management Center Benefits
Reduce Costs/TCOR
Save Time
Enhance Resources Dramatically
Mitigates Risk Factors/Strengthens Compliance
Compliance, Time, & Money!
Video Testimonials
“If an OSHA inspector walks through my door, I know that I have good documentation
of what we’re doing in terms of providing adequate training. The Risk Management
Center allows me to sleep a lot better at night. And it allows us to separate and define
ourselves a bit differently from others in our industry”
Harry Franzheim
President
New Era Staffing & HR Solutions
Video Testimonials
“Because of the risk management platform, our
organization now has the tools to become a lot
safer in the industry. To be able to track and
trend the data is paramount to mitigating a lot
of incidents and accidents out on the job sites”
“The reason that this platform has been so
successful for us is the ability to tailor it to our
needs. Succeed has been able to work with us
to create our OWN platform that covers our
needs and our customer’s needs as well”
Jasen Yardley
Jennifer Massey
Corporate Health & Safety Director
Assistant Corporate Safety Director
Magnus Pacific
Harder Mechanical Contractors
Risk Management Library
PowerPoint
Trainings
Custom
Online
Trainings
Polices and
Procedures
My
Content
Online
Trainings
Posters
Training
Shorts
Succeed HR Solutions™
A Comprehensive HR Resource Package for Your Business
•
•
Award-winning Online HR Library: Attorney-developed content to help you stay
compliant with federal and state labor laws and regulations including COBRA,
HIPAA, FMLA, USERRA, ADA, and Health Care Reform
– sample forms and policies
– employment law resources
– HR productivity tools
– training videos
– News alerts & health reform updates
Immediate access to practical resources to professionally address your Human
Resource needs
Succeed University™ for Employers
 Relevant risk management issues
o Globally Harmonized System (GHS)
o Injury and Illness Prevention Programs (IIPPs)
o Sexual Harassment prevention
 All classes are free
Free Risk Management Courses - Full Schedule
A comprehensive risk management platform!
Allows you to:
 Eliminate redundancy
 Share information
 Be proactive about safety!
- Click an app above for a video -
 Trends losses
 Manages the incident reporting
process
 Analyzes losses and
organizational incidents
Risk Management Center Benefits
OSHA & claims reports off one system
Allows a proactive, mitigation approach
Loss trending & analysis… near misses and claims
Your data; not affected by carrier switch
Triggering events
Claims lag time reduction
Risk Management Center Benefits
6
5
4
3
1
2
 SIMPLE
 Step-by-step wizard
 Example of the Incident Track wizard
 Tracks Near Miss, Recordables, or Claims
 You can click to receive the
incident reports immediately
 Sophisticated graphing system
 Includes templates
 Customizable
 In-depth graphing & tracking
 Date(s), time
 Accident cause
 Injury nature
 Body part
 Can print & distribute to multiple sites
 Enables targeted proactive training
response
Tools for Mitigation
Incident Track™
• Track and trend incidents and near misses
• Generate OSHA Logs
BBS Track™
• Build JHA’s (includes library of JHA’s)
• Run Safety Observations
Training Track™
• Assign Required Trainings
• Track and automate employee training
Training Track:
 Maintain employee records
 Document and manage all your
training efforts
 Generate compliance reports
OSHA Penalties
•
•
•
•
Serious violations:
Willful violation:
Repeat violation:
Failure to abate:
$7,000 per violation
$70,000 per violation
$70,000 per violation
$7,000 per violation per day
 Schedule training
 Employees receive automatic notification
 Employees notified when trainings due




Auto notifications
Assign Online Trainings
Trainings at their convenience!
Run reports on who has or has
not completed the training
 Generate reports
 By employee, location, department,
 Run reports for management/
Environmental/QA/HR Sort by:
 Training date
 Position
 Employee
 Department
 Organization
 Employee Portal
 Training then automatically tracked




Employees take the interactive trainings any
time, anywhere
Custom Online Trainings are available
Push training where needed
Build efficiencies… Save a ton of money!
 Certificate of completion recorded
and printable
 Behavior-Based safety application
drives down losses
 Identify and address hazards
Risk Management Center Benefits
Claims Costs
$50,000.00
$40,000.00
$30,000.00
$20,000.00
$10,000.00
$0.00
MEDICAL $
INDEMNITY $
Risk Management Center Benefits
MOD Impact... Where You Could Be
1.5
1.25
1
0.75
0.5
0.25
0
1.30
Current
Lowest Possible
Using the Job Hazard Analysis (JHA)
What is a Job Hazard Analysis
(JHA)?
•
JHAs help establish and properly
document safety issues and
procedures.
•
They outline the exposures or hazards
so that controls are established.
•
They facilitate employee training that
drives safer and more efficient work
practices.
•
Organizations can utilize them to
identify existing or potential job
hazards, and determine the safest and
most efficient way to perform the job.
Developing A Successful Safety Process
Identify loss sources and needed controls
Train and assure all exposed are aware of the
hazards and needed controls
Observe and communicate
Analyze continual improvement
Risk Mitigation Pyramid
Proactive risk mitigation
management addresses
Essential Behaviors and
Root Causes
1 Major Claim
10 Serious Claims
100 Incidents
1,000 Near Misses
10,000 Unsafe Acts and Conditions
Behavior-Based Safety
Build Job
Hazard
Analyses
Identify job
hazards and
set
requirements
Generate
PowerPoint
training of
JHA
Includes a
library of prebuilt JHA’s
Perform
regular safety
observations
 Required
 Fully Customizable
 Great Tool to Drive Down Losses




Print to PDF or PPT
Create online training
Synch to Training Track
Electronic distribution & reporting
 Create PowerPoint’s that are fully customizable
from JHAs
 Graphics
 Quizzes
 Charts
 Request conversion into online training programs
Job Description Track™
 Makes Return-to-work programs easy to create
 Align with ISO Standards
Easy-to-use wizard
 Modified Job Descriptions
 Set frequency of physical demands
 Demonstrate HR compliance
 Export PDFs of the Job Descriptions
 Include a Physician’s Approval page
if needed, to help with Return-to-work program
 Scan these in and attach them to incidents as needed
Risk Management Center Benefits
 TOP OSHA Cited Item
 Keep all of your SDSs in ONE place
 Find SDS’s Online
 Need help entering and loading
your SDS’s? Ask us!
 Allow quick search by:
 Chemical name, date, location, amount
 Archive SDS’s
 Print HMIS, GHS, and NFPA labels!
SDS Service
• Let us get you compliant!
• View all your records
online anytime
COI Track is used to manage your
Certificates of Insurance for compliance
relating to:
 Expiration dates
 Coverage requirements
 Addresses Risk Transfer control approach
Managing Contractors & Suppliers
Applies to all industries:
•
•
•
•
Construction
Food industry
Real estate
Manufacturing
Applies to all contractors,
subcontractors, vendors, suppliers
Managing Contractors & Suppliers
Why Track COIs?
Reduces risks by:
•
Assuring that the contractor/ supplier’s
insurance carriers assume liability by:
− Assuring that their carriers are
adequately rated;
− Assuring that their policies cover
anticipated exposures
Managing Contractors & Suppliers
Why Track COIs? (continued)
•
Insurance firms require tracking of COIs
− Can affect your rates
•
Avoidance of other losses:
− Business interruption
− Loss of market share
− Loss of life or property
Risk Management Center Benefits
COI Track… Managing the Mess
•
Tracking, validating and managing
COIs is difficult and time consuming
•
It is critical to limiting your exposure to
financial loss and expensive litigation
Available in the RMC!
 Tracks all lines of coverage
 You receive emails letting
you know of soon-to-expire
certificates
 Robust reporting structure
 All needed data will be tracked
and review against the
contractual requirements
Support Services
More Available Services
Risk Management Center Benefits
- Incident Track to identify Major
Loss Sources
- Assign needed polices
- Assign needed trainings
- Custom Onlines for time & cost
savings
- BBS Track… for needed behaviors
- COI Track to Manage Risk Transfer
- SDS Track for compliance
Conclusion
The importance of a proactive approach
Importance of Risk Management
Center
Tools for best practices
implementation
Next Steps
• TCOR Worksheet & RMP Development
Support
•
Weekly Succeed University
•
Daily platform training
•
Client engagement support
•
Available field services
•
Custom onlines and brokerage connectivity
•
Client seminars
•
Producer trainings
•
Succeed AdvantageTM
•
Full library access… Risk Mgt. and HR
•
Analytics
•
Ask the Expert