Tag Archives: risk management

Perspective on the Pandemic

On March 2, the California Future of Work Commission released its final report. It includes the key findings and its recommendation for a new social compact for work and workers in California by 2030. When the commission began its work in 2019, the focus was on technological disruption of traditional employment. But, as the report notes, “The pandemic has amplified and accelerated existing trends and challenges, bringing many aspects of the future of work forward.” 

The report is must reading for all in the workers’ compensation community — even if the words “workers’ compensation” do not appear in it.

In its broadest sense, the report calls for specific steps to create a comprehensive, secure environment for workers. This environment includes material and physical security both at work and in society in general. As such, in the report’s 15 recommendations there are familiar themes of wage adequacy and, acknowledging the intervening COVID-19 pandemic, the need for a safe workplace. For example:

“Essential and front-line workers face both economic vulnerabilities and health and safety risks, and are disproportionately female and workers of color.”

“Front-line workers and workers who must be physically present to work must have support to enable them to stay home when sick, have access to appropriate protective equipment, and be ensured safe and sanitary workplaces.”

These, and the other recommendations in the report, are a catalogue of issues that have been confronting policymakers in city halls, state capitals and Washington, D.C., for the past decade. California is at the forefront of this debate, from local jurisdictions adopting hazard pay ordinances and challenging the “gig” economy, to the OSHA Standards Board implementing their COVID-19 Prevention Emergency Temporary Standard, to the many new employment-related state laws, including Assembly Bill 5 adopting the “ABC Test” for worker classification disputes. Much of what the commission identifies as a new social contract would seem to be resting on an existing – and expanding – foundation made in California.

We remain in the midst of the pandemic. While states and the federal government have eased many  restrictions on activities due to vaccinations and corresponding decreasing infection rates, the laws, regulations and executive orders emerging from this crisis create public policy issues extending well beyond reopening. One of the many challenges facing America in general, and California in particular, is defining what “normal” is to become. 

The infusion of massive amounts of public funds into businesses and to individuals makes a return to the status quo ante COVID virtually impossible. State and federal budgets contain trillions of dollars of expenditures to support economic recovery. It is unrealistic to expect individuals in low-paying essential critical infrastructure jobs to continue to participate fully in a “recovered” economy after losing supplemental paid sick leave and, in some cases, higher wages associated with working in a hazardous vocation. 

For employers and employees, the exigent circumstances that caused the creation of supplemental paid sick leave and hazard pay for essential workers should not be looked at in isolation. This is part of a bigger picture that began years ago with efforts to make a $15-per-hour minimum wage the law in all states and for the federal government and implicates the still highly unsettled world of worker classification. Yes, the long reach of the Dynamex decision extends to the post-COVID future of work. So, too, does the equally unsettled world of co-employment. And not just in California.

Whether Congress will pass the Protecting the Right to Organize (PRO) Act is certainly in doubt, at least as long as the filibuster exists in the Senate. But the president has said he will sign it if it gets to his desk. Among its many provisions is bringing the “ABC Test” of Dynamex to the entire country. 

What does this have to do with assessing the workers’ compensation long-term public policy effects of COVID-19? Quite a lot, actually. 

Policymakers cannot meet the objectives of the commission’s report, or the PRO Act, or any of  hundreds of other laws, regulations and ordinances if they reduce the discussion of workers’ compensation to a debate over what is presumed to be a work-related injury. Policymakers must identify how to integrate workers’ compensation programs into an overall commitment to worker security implicit in the commission’s work and similar endeavors across the country. While currently focused on COVID, this effort must extend well beyond the pandemic.

See also: Pandemic Reshapes Personal Lines Plans

Consider this excerpt from the pre-pandemic directive of the Obama administration, the Presidential Policy Directive — Critical Infrastructure Security and Resilience (PPD-21), released Feb. 12, 2013:

“Critical infrastructure must be secure and able to withstand and rapidly recover from all hazards. Achieving this will require integration with the national preparedness system across prevention, protection, mitigation, response and recovery.…The term ‘all hazards’ means a threat or an incident, natural or manmade, that warrants action to protect life, property, the environment and public health or safety, and to minimize disruptions of government, social or economic activities. It includes natural disasters, cyber incidents, industrial accidents, pandemics, acts of terrorism, sabotage and destructive criminal activity targeting critical infrastructure.”

For large businesses – including insurers – this process of prevention, protection, mitigation, response and recovery is the basis for enterprise risk management. For small businesses and entrepreneurs, developing a risk awareness and response program is more difficult. As COVID-19 has shown, when there is a threat to critical infrastructure, the risk to employees is not limited to the workplace. The commission report underscores that the scope of risk to workers during the pandemic is also more than to health, as employees in businesses, such as hospitality or restaurants, can attest given the high level of unemployment caused by stay-home orders and travel restrictions.

As we move forward, there needs to be a comprehensive effort to integrate the public and private institutional response to the next event placing critical infrastructure at risk. That effort involves all who will be expected to contribute to the resiliency and recovery of not only our essential critical infrastructure, but of the essential workers without whom no recovery can happen.

3 Keys to Building a Safety Culture

Mitigating risk requires strategic planning. However, if you form a strategy, then print it on paper, toss that binder on a shelf and forget about it, that totally defeats the purpose.

With safety, in particular, we need more than just a neglected document. We need a culture that employees live and breathe. Whether that safety culture is driven by technology or policy, it should be woven into the very fabric of company operations. 

Let’s apply this to the supply chain. 

The basic intention is to move goods and services around the globe as smoothly as possible. In this industry, where so many variables are constantly changing and goods are exchanging hands, operating within a safety culture creates an environment that is less likely to have a disruption or delay. Oftentimes, when companies investigate incidents, they find that proper protocols may have been in place but were not followed. 

A proper safety culture is first and foremost about ensuring employees’ safety and well-being, but there are other benefits as well. A strong safety culture can actually save your company money if it avoids incidents and delays. Let’s dive into how exactly a company can foster a culture of safety.

Communication leads to efficiency 

A hold up at any point along the chain has a domino effect of disruptive consequences for all ensuing steps. Safety shortcuts that seem like a time saver in the moment can end up doing the exact opposite. It’s important to make efficiency a priority over speed and to support that goal through clear communication. 

Consider a manufacturing plant where a worker is required to shut off a machine, lock it and deploy the safety shield before leaving that station, even if the person is taking a break that’s shorter than the time it takes to ensure those safety measures. There’s a risk if those three things don’t happen. 

The potential consequences are a serious injury, or worse, and representatives from Occupational Safety and Health Administration (OSHA) coming to investigate the operation. That creates a bottleneck early in the supply chain process and delays future steps. 

Adopting a safety culture starts at the top. Management needs to make priorities visible so employees adjust their frame of mind accordingly. If it is perceived that the priority is to push the limit of speed at the manufacturing plant, it’s no surprise that an employee wouldn’t shut off a machine, lock it and ensure the safety shield is deployed before taking a quick bathroom break. The potential consequences of speed would actually hinder efficiency in this case.

Having signs within the plant that clearly identify a safe working environment as the top priority can help assure employees that expediency is not tied to their paycheck. This clear communication allows them to be more diligent about their work, more productive and willing to go the extra mile because there is mutual loyalty. Using safety as an incentive, perhaps offering a reward for accomplishing milestones of incident-free work, can help drive home its importance. 

See also: 4 Keys to Online Safety Training

Technology can help realize insurance savings

An unsafe working environment can come with exorbitant insurance costs that will hurt profit margins. If that occurs, it’s usually followed by a downward spiral. Lower profit margins lead to cutting corners, which leads to more accidents and more insurance claims. Stopping that vicious cycle before it gets out of control is the best strategy. 

Because those costs can be so high, forward-thinking companies are willing to invest in risk-management tools that provide a more active approach. 

For example, a trucking company could install a system on each cab that tracks speed and braking habits, accounts for speed limits and weather conditions and provides data to the company. The company needs to follow through on the data, coaching any driver who isn’t safe on the road and offering tools to develop safer behavior.

Companies also might install devices within cargo shipments that monitor the goods being shipped and immediately alert local law enforcement if the truck or cargo is somehow stolen.

Gathering data, and then using it to change behaviors that foster a safer environment, is a powerful tool. Lowering the frequency of incidents generates data that provides leverage when negotiating insurance terms and conditions. Underwriters can see that the data is acted upon and that those actions yield safer results. Companies that can prove this have an advantage, which can result in lower insurance premiums.

Engaged employees keep business going

A safety culture won’t work unless employees buy in and see a benefit beyond the company’s bottom line. Through training efforts, management can make sure that employees see the value and are engaged with the safety culture. 

Any incident is a disruption to business, and some are more quantifiable than others, but employees can help mitigate most of them. Even if an incident results in an insurance payment, and therefore doesn’t have a huge financial impact, there could be other costly ramifications. Perhaps a vendor becomes aware of an incident and chooses to stop doing business with you based on how you operate. 

While it may not always get recognition, erring on the side of safety keeps business running smoothly. It’s difficult to quantify the benefit for a grocery store that ensures non-slip flooring and has well-trained employees that are quick to clean up a spill, limiting slip-and-fall accidents and potential insurance claims. Some societal benefits may go unnoticed, but they are important valuable. If employees didn’t notice the spill in aisle five, or were too slow to clean it up, and a customer were to slip, fall and sue, the cost of liability plus the reputational harm may be enough to threaten the store’s ability to remain open. 

See also: 5 Safety Keys for COVID-Era Building

Being hit in the financial pocket, whether from legal costs or a damaged reputation, always gets an owner’s attention and usually results in a greater emphasis on safety culture. Ensuring that employees are focusing on safety before an incident happens can avoid loss of revenue and reputational hits.

If you truly make safety a part of your culture, that will flow through the organization and throughout the supply chain. Partnering with companies that value a safety culture will help ensure the supply chain operates more efficiently and with less disruption.

Time to Rethink the Approach to Risk?

After a long stretch of global and local crises recorded under a relentless social media spotlight, the world is focused on risk in a different way now than it was even a few years ago. Businesses are building their risk management capability by investing in cyber security, flexible working capabilities and risk data and analytics. More firms are hiring risk managers and exploring insurance options that include risk and crisis management. And as our new Risk & Resilience study reveals, they are thinking about insurance differently, too.

The pandemic and ensuing lockdowns appear not only to have shifted business structures and operating models but also to have transformed business leaders’ views and expectations of insurance.

Insurance has always been considered a necessity, but our Risk & Resilience data, which is based on interviews with more than 1,000 C-suite executives in the U.S. and U.K. across 10 different industries, reveals that businesses are now expecting more from their brokers and partners. 

Let’s take a look at some of the biggest frustrations around buying insurance for businesses as revealed in this report, and how the insurance industry can use these findings to reshape our approach to risk.

A question of trust: Almost half (48%) of those surveyed said their trust in insurance has increased since the start of the pandemic, but only 54% believe that insurance is meeting their businesses’ challenges very well.

Trust in insurance appears to have increased since the start of the pandemic, but what business leaders want from it has extended beyond pure financial protection. Balance sheet strength, a solid reputation and a swift and smooth claims handling process seem to now be expected as a baseline. Today, business leaders are demanding more. They want insurers and brokers to demonstrate better understanding of their operations and the risks they face.

Insurance buyers are looking to us to add genuine value to their business through the provision of regular risk insights, risk management tools, services and flexible coverage tailored to their sector and business size.

Delivering on these expectations in today’s complex, connected global risk environment means the insurance industry needs to take stock. A challenge for the industry is how we better apply data and claims insights to help clients future-proof their businesses against emerging known and unknown risks such as cyber, supply chain and environmental, social and governance (ESG) concerns.

See also: Pressure to Innovate Shifts Priorities

Closing the knowledge gap: A quarter of business leaders struggle to understand what cover they need, and 19% find it hard to get insurance tailored for their sector or specialist business.

Our findings also show there are elements of researching and obtaining commercial insurance that are perceived as difficult and where there is a need for better clarity and customer education. These include knowing the premium limits a business needs insurance for, comparing quotes and understanding how a policy would respond to real-life scenarios, as the controversy around interpretation of some business interruption coverage in the face of a pandemic has shown. 

However, the most important part of buying insurance is knowing the types of risk their business needs to be covered for, which was cited by over a fifth (21%) of respondents. Buyers’ number one ask of their insurers is a deep, specialized understanding of the specific risks they face – and points to the existence of a knowledge gap that they are looking to specialist insurance partners to fill. 

Business leaders see the primary value of insurance in terms of financial support provided by a trusted partner. However, there is a tension between clients wanting and seeing the value of a long-term partnership with their insurance provider, but also thinking the insurance industry is too focused on the short term, with a tendency to dip in and out of certain classes of risk and change terms and conditions as market conditions dictate. 

While the relationship between insurer and insured has often been predominantly transactional, it needs to evolve more quickly into one that is more strategic, based on partnering to develop effective risk management solutions. For this to happen, the insurance industry needs to bridge the connectivity gap with clients by better demonstrating knowledge and insights around the risks they face. 

Creating a better connection: 44% don’t think their insurers understand their business.

Building a better connection with clients and increasing the perceived value of insurance will require the insurance industry to improve its understanding of how buyers approach risk. Our findings indicate that buyers appear more inclined to insure when they think risk is real and present. 

As an industry, we need to consider how we connect better with clients around the risks that matter, not just today but in the medium to long term, to raise awareness and help them to prepare their business to be resilient against the changing risk landscape. This needs to be done through the lens of sector specialization, increasing understanding of the value of insurance overall as both a risk mitigation and a risk management tool. 

To build better connectivity, our research suggests that the insurance industry should reconsider the relationship among brokers, insurers and clients, as solving today’s complex, increasingly connected risks likely requires other skilled experts to be involved, too. As well as offering risk mitigation expertise, coverage and insight, insurers can be a conduit to those other expert partners and service providers with the depth of knowledge and experience required to manage the multifaceted issues created by many of today’s risks. 

To achieve a genuine partnership with clients, and to deliver the service that businesses indicate they want, will require regular, productive interaction. The challenge for insurers and brokers is to encourage busy clients to invest time – and determine what a more productive relationship will involve and deliver. As the insurance industry engages more with clients, effective communication and the ability to develop relationships and to share deep technical understanding and also to talk about broader business issues will be paramount. 

See also: Building Telematics Can Mitigate Risk

The results of our research show that the insurance industry is at a point of inflection, and that it is time for a service rethink. 

Our findings show that there is a big opportunity for the insurance industry to support businesses by harnessing data, tools and insights to provide more specialist, tailored and flexible coverage that meets sector needs and provides greater risk and crisis management support and insight. The industry is already making moves in this direction, for example looking at ways to deploy AI and use parametric triggers. Use of these types of innovation is likely to increase. 

Moving forward, we have a greater role to play, principally in designing and enforcing protocols and standards to help organizations improve their resilience against a broad range of risks and helping them to be more operationally resilient while operating in a high-risk and uncharted environment.

A Better Way to Manage COIs

Some topics are sure-fire conversation-killers at cocktail parties—your juice cleanse, recent dental procedures and your bottle cap collection, for example. Document management systems may fall into that category.  While industry professionals may find shop talk engrossing, the eyes of the average person almost certainly will glaze over after only a few minutes of imaging and versioning chatter.

Efficiently managing documents may not be sexy, but it is vitally important to organizations. Knowledge workers often feel overwhelmed by the amount of information they must process daily: CIOInsight reported that 83% of professionals believe that today’s “accelerated pace and connectivity of business” require them to produce, share, manage and distribute more documents than before. Inadequate systems and overwhelmed employees result in process inefficiencies, suboptimal decision-making and heightened business risks. 

Certificates of insurance (COIs) present a particularly vexing document management challenge for risk management professionals. Tracking COIs—documents that confirm that adequate amounts of the right kinds of insurance from satisfactory insurers are in place—is essential to ensure that organizations are protected against losses resulting from contractors, vendors, tenants and others. But the sheer volume of COIs to be cataloged and reviewed, and the time and resources required to analyze and respond to them properly, can be overwhelming. Document management tools and processes are essential to effective COI administration.

Document management is mundane – but don’t fall asleep at the wheel

Document management enables organizations to effectively capture, distribute, track, store and retrieve electronic documents, ensuring that everyone in an organization has access to reliable, up-to-date information when and where it is needed. 

Risk and insurance management has always been a document-intensive process, and diligently handling the information has long been an essential skill for every risk management organization. Over the lifecycle of a typical commercial insurance relationship, hundreds, or even thousands, of documents are generated by internal stakeholders, the broker, the insurer and service providers such as claims administrators. For companies that rely significantly on contractors, vendors or tenants, managing certificates of insurance can be a full-time role. It certainly won’t be the “chest-beating” part of the business, but not giving it the appropriate attention can lead to disastrous consequences, including failed risk transfer, leaving undeserving companies (and their insurers) with a claim.

See also: Documents: The Future Is Automated

Companies now have an array of options for improving their document management practices. Off-the-shelf and customized document management software solutions can help tame the blooming, buzzing document jungle in which many risk managers find themselves. They make creating, sharing, storing, retrieving, securing and reviewing documents easier. They also can enhance productivity, reduce the risk of document misuse, augment data security and improve compliance with regulatory requirements.  

Managing certificates of insurance

Organizations routinely transfer certain types of risk through contracts with vendors, contractors, tenants and others. COIs—which capture all the essential details of an insurance policy in an easy-to-read, standardized format—assure an organization that its vendors, contractors or tenants can meet their liability obligations under these various contracts. 

For many organizations, COIs are the largest category of documents managed by a risk management department. Big companies—especially large contractors—may track tens of thousands of COIs, insurance forms and often complete policies. Making sure that insurance coverage is adequate, appropriate, current and from acceptable insurance carriers is complex and time-intensive. Industry experts estimate that one full-time person is required to track every 1,500 COIs properly. In many cases, risk management departments cannot afford the staffing to do the job adequately.

Properly managing COIs requires more than simply verifying the existence of insurance policies. Ensuring that the policies provide adequate coverage that complies with contractual terms requires specialists in insurance policy wording who can determine whether insurance coverage is appropriate for the risks assumed by a vendor, contractor or tenant. Maintaining this level of expertise in-house may be beyond the means and budget of many risk management departments. An outsourced solution is often the most cost-effective way to ensure that COIs are properly managed.

Achieving superior document management

The typical risk management department has enormous responsibilities and limited resources. Efficiency is essential, but so is accuracy—mistakes can have damaging and far-reaching consequences. Effective document management can help to simplify routine activities, accelerate processes and ensure that all stakeholders have access to up-to-date, accurate information as it is needed. Risk managers often struggle to justify new expenditures in the competition for budget allocations, but an effective document management system should be seen as a long-term cost-reduction exercise with the potential to lower the overall cost of risk.

Effectively administering COIs and related insurance documentation is one of the most substantial benefits of a disciplined approach to document management in a risk management department—but also one of the biggest challenges. Some organizations manage thousands of COIs, and a single mistake can cost millions of dollars. COIs demand constant attention from contracts and insurance coverage experts. Risk management departments should consider outsourcing this function to specialists who can cost-effectively provide both process efficiency and domain expertise.

See also: Pressure to Innovate Shifts Priorities

If history is a guide, the needs of risk management departments will only increase as risk managers are called on to do more without a corresponding increase in budget or resources. They cannot squander precious time by chasing after documents or questioning whether they are working with the most up-to-date information. They also cannot afford to make avoidable mistakes caused by inadequate, incomplete or out-of-date information. Document management may not make for sparking conversation at a cocktail party, but it can make all the difference in the world in improving the efficiency, effectiveness and accuracy of risk management processes.

Managing Challenges of Civil Unrest

Over the last year, many communities have faced large riots and protests that destroyed public and private property and resulted in hundreds of injuries. While these events carry a certain amount of unpredictability, an organization’s planning and response to these events can minimize losses and, most importantly, keep people safe. 

The latest Out Front Ideas with Kimberly and Mark webinar included a panel discussing the risk management challenges associated with civil unrest. Our guests were:

  • Anas Al-Hamwi – senior director, occupational health and injury management, Walgreens
  • Renata Elias – senior vice president, consulting solutions, Marsh
  • Barry Scott – deputy director of finance, risk manager, city of Philadelphia
  • Thomas Simoncic – president, Property Americas, Sedgwick

Protect, Prepare and Partner

No response is effective without proper planning and preparedness measures. Employers should consider their situational readiness by identifying tools that exist within their infrastructure, particularly their partnerships. Engaging industry peers, local community leaders and municipalities creates a network of advisers to assist with early communications to all stakeholders. If there are multiple operations locations, empower your leaders at each site to make the right decisions by giving them the tools they need to execute proper procedures. 

In planning, public entities need to adapt to allow and protect First Amendment activities while also ensuring lives are protected. While the balance can be tricky, partnering with federal, state and local governments can forecast any potential issues. First responders and police units need to be in constant communication to respond to any event rapidly. Including everyone from fire units to public transit employees ensures a collaborative effort. Keeping communities informed with timely messages keeps both the public and employees safe.

Having a crisis management capability within your organization helps senior leadership respond both quickly and appropriately. Formalize your crisis management plan with reporting incidents, escalation to senior leadership, defining the criteria for an escalation, incident screening and notification and activation of the senior leadership. Once you have buy-in and collaboration, you can align and integrate with all stakeholders to ensure the process is trained and exercised for capabilities.

Property Loss 

While civil unrest is not a natural disaster, like hurricanes, these events carry similar characteristics in that they are widespread, occur over different dates and cause varying levels of damage and business interruption. Understanding what your policy covers and does not cover is critical to preparation. Reach out to your partners within your carrier and broker relationships to fully assess your needs. Understanding the definition of occurrence in a policy can determine whether multiple days of civil unrest are considered one deductible. Establishing a timeline is necessary so your partners can scale and meet your needs while finding escalation and remediation points.

While protecting property is critical to restoring business activity, protecting people and their livelihood should always be a priority. Does your business continuity plan include details directing employees where to go if a specific location cannot operate? Will your vendors or suppliers know where to make deliveries? Where will your critical processes take place? All of these items should be addressed to ensure all stakeholders are prepared for a crisis. Mobilization with partners and vendors before an occurrence can affect response time, enabling an organization to get back to business faster.

See also: Did You Use the COVID Down Time?

Prioritize Your People

As you strategize for potential events and develop a continuity plan, people should be your priority. In keeping your employees and the community safe, communication and preparedness are key. Internal communications should be aligned with your strategies to ensure a coordinated response, and making appropriate connections with media partners can assist with disseminating external communications to the community. 

Civil unrest training, developed specifically for regions, can help employers establish preparedness measures for their workers. It forms a basic knowledge of staying safe in a crisis while also keeping people informed of the business continuity plan. Communicate with federal agencies and local municipalities to make sure your protocols meet their standards. Make sure your workers have resources like an employee assistance program to address their mental health throughout a crisis. Property can always be replaced, but human lives cannot, so people should always be the starting point when developing your plan.

Lessons Learned

The last year has served as a lesson in crisis for many organizations, especially those experiencing the aftermath of civil unrest for the first time. Responding to the next event requires careful consideration of what was missing in your initial response. Perform internal debriefs and post-incident reviews to highlight any gaps and bridge the silos. And when determining risks, consider all the external factors currently, like labor shortages, logistical supply chain and inventory issues and rising inflation. These can all add to the costs associated with property repairs. Lastly, this past year has taught us that truly anything can happen, so go forward humbly and be prepared for what you do not expect.