THURSDAY, AUGUST 1, 2013
Blog By: Garry Watts, CPCU, CRM
In my practice there are two approaches to controlling risk for a business owner. The first is what is called the human approach. The human approach believes that people cause accidents by their behaviors and the decisions they make. The 2nd approach is the engineering approach. The engineering approach believes that things and energy cause accidents; so machinery needs to have proper guards in place and environments need to be safe.
Both approaches are correct as it applies to business. But by themselves, both fall short to address the enterprise risk for most businesses. Organizations like OSHA have traditionally camped on the engineering approach. And whether you agree or not, businesses are safer today as a result.
I believe that people by their behaviors and their decisions, can either cause losses or they can prevent those losses. However, it does not happen just by chance. A proactive approach through training, review, inspection, and discipline helps people keep safety “top of mind” and ultimately produce a safe environment.
Our agency has worked with businesses that feel they are a victim, and if it weren't for that one big loss, their premiums would be less. We work with other businesses that have not had a loss in 3 years. What is the difference? I believe it is the approach that management takes as it addresses risk issues. One business feels there is nothing they can do about controlling losses. The other business takes a proactive approach to education, training, inspections, and disciplining bad behavior.
The marketplace has firmed over the last 12 months. Prices have gone up 5-10%, and some markets are restricting coverage. If the marketplace gets to a truly hard market, prices will go up further, and coverage will be hard to place in some industries. The key to controlling your future is controlling losses. Is it worth the effort? I say yes! At the very least you will be in the bottom-side of the band of pricing that is offered by the insurance company. This will help you remain competitive in your marketplace. You will be providing a safe environment for your employees. Productivity and efficiency will be maximized.
Talk to your risk advisor, agent, broker, and work with them to put together a proactive strategy that helps you manage risk and thereby increase your profits. It is worth the effort!