January 21, 2015
How Risk Management Drives up Profits
by Jeff Pettegrew and Diane Meyers
The first in a series of interviews on the challenges and opportunities facing risk managers focuses on YRC.
Diane Meyers, director of corporate insurance for YRC Worldwide, manages the insurance and associated risks of one of the most hazard-prone industries in the world – trucking. YRC is the largest long-haul trucking company in U.S., operating in all 50 states and Canada. It has 14,500 tractors and 46,500 trailers and ships 70% of all transported cargo throughout the U.S. each year. YRC’s origins trace back to 1924 to the Akron, Ohio-based company Yellow Cab Transit before the independent trucking companies of Yellow, Roadway, Reimer and others were combined in 2009 into the YRC banner.
I asked Diane about her biggest challenges in managing the risks associated with the YRC fleet, including 32,000-plus employees (a number that has grown in busy times to more than 50,000) and 400 physical locations. She said her top three hot buttons are: collateral, collateral and collateral.
For anyone familiar with high-deductible or self-insured workers’ comp programs, insurers and state governments rely on a company’s posted collateral (aka security deposit) as the financial backstop should the company go bankrupt or default in its obligations. Companies with high-risk jobs can experience workers’ comp costs that can easily be 400% to 500% greater than white collar jobs. Posted collateral needs to cover the costs expected to be associated with the life of each claim and can be a huge drain for any company, including YRC.
Diane, who reports to the treasurer, says YRC negotiates collateral requirements with one excess workers’ comp insurer for its high-deductible program in 24 states. Collateral is typically posted using LOCs (letters of credit) or surety bonds. YRC’s self-insured program in the remaining 26 states means meeting the collateral demands of their 26 separate governing entities.
Meeting with the YRC’s carrier’s actuary along with her own actuary every three months, Diane also has to deal with each state at least annually. “Working with multiple sets of actuaries is a whole other challenge, since I have to educate them on the realities of our own workers’ comp program and its achievements, like return-to-work,” she says. “Besides that, in working with actuaries, I have to speak their language and understand how they work their crystal ball.”
Diane added: “These are monies that are tied up for decades to come that cannot otherwise be used for our company’s operations. I have to find ways to save the company from the ever-changing collateralization demands through ongoing, complex negotiations with insurers and regulators. Safety and loss control programs have to demonstrate traction and real savings to our workers’ comp and liability exposures.” Diane noted that safety is so important that each YRC operating division has its own safety department.
As with most large companies, YRC is self-insured for most of its liability risks. To assist Diane with vehicle and general liability claims, YRC uses its own, as well as outsourced, legal counsel to manage risks up to its retention level. There are also a myriad of state and federal rules and regulations regarding long-haul trucking that require strict adherence and attention to changes.
When asked about her unique challenges at YRC, Diane said, “I have to understand the legal demands and expectations of all 50 states, Canada, and D.C.”
She also faces the complexity of working with a corporation that has grown through acquisitions of older companies. To find key claim-related data, she says, “I have had to go through various insurance policies and records of the companies we acquired going back as far as the ’60s!”
With the ever-changing demands for long-haul transportation by various industries, YRC experiences significant fluctuations in its workforce. There have been times when the workforce has expanded more than 50%, and, during recessions, there have been significant reductions. A swing either way can create huge risk management challenges, especially when there are continuing workers’ comp claims to deal with. This is made even tougher because most of YRC’s employees are in the Teamsters union, and some issues could require collective bargaining or at least close communication and cooperation between labor and management.