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Submitted by Steve Compton, CompSource Oklahoma
Defining the Measurement Problem
I saved a policyholder employee’s life today, not a big thing really as I saved three last week and prevented untold physical injuries during the same time. In fact, as a direct result of my professional efforts, I saved millions in potential losses last year as well! Therefore, I am a great safety engineer!
The tongue-in-cheek opening above demonstrates the difficulty in accurately measuring the effectiveness of a good safety program. If it didn’t happen, how can you prove it could not have happened? The risk potential did not change, as the policyholders did not stop their operations or make any significant changes in their practices and procedures, yet they did not experience any serious losses during those times.
Attempting to quantify losses that were effectively prevented is like trying to grab the wind. You can reach out and grab it, but you cannot show it to anyone. This is the flip side of today’s approach to measuring accident prevention. Historically, the effectiveness of a loss prevention program is measured by the number of accidents and/or injuries (and in some enlightened organizations, the close-call situations that do not result in an actual loss) and their associated costs. These numbers are then compared to previous time frames (policy year, calendar year, etc.). If these numbers increase, then something is going wrong. If they go down, then obviously something is going right. If they don’t change, we want to know why not! Unfortunately, by this approach we are focusing on the consequences of employee actions/situations as opposed to the actions/conditions that cause or contribute to them!
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A policyholder’s loss experience may not genuinely reflect their actions, or in some cases their inactions, in terms of accident prevention. In the extreme, we have policyholders that, but for sheer luck, would have significant losses.
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The concern over the use of this approach is that the consequences do not always reflect the accident’s injury- producing potential. For example, an employee falls from a 20-foot ladder and breaks both legs. In a similar scenario, a fatality occurs because an employee falls from the same 20-foot ladder, this time landing on debris and other materials left in the area due to poor housekeeping. How do we accurately predict future losses when the circumstances that led to the previous losses are completely random? The conditions causing and/or contributing to the losses must remain static in order to expect any reliability and, as such, do not and will not exist.
The Dynamic Nature of Factors Contributing to Accidents
A policyholder’s loss experience may not genuinely reflect their actions, or in some cases their inactions, in terms of accident prevention. In the extreme, we have policyholders that, but for sheer luck, would have significant losses. In contrast, other policyholders who proactively practice loss prevention still suffer claims due to actions outside of their control.
In today’s workplace, it appears that a growing percentage of the work-site injury claims are not related so much to the actual work being performed, or necessarily the work environment. It is often the employee’s actions, conscious or otherwise, that places them in harm’s way. How many claims have you seen that dealt with a policyholder employee’s inability to safely walk down a smooth, unbroken concrete walkway? Are you not amazed by the number of claims where the furniture or fixed objects evidently rise up and strike an employee, resulting in a compensation claim?
Those of us in the loss prevention field are not proposing that the insurance industry abandon the system that has served it well for years, but there needs to be more appreciation as to the causes and contributing factors to today’s loss experience and an understanding of the role and effectiveness of the loss prevention staff’s ability to effect and reflect positive change for the policyholder.
Looking Beyond the Past Practices
In the insurance industry, we focus on the LOSS EXPERIENCE. We look at the incidents that have occurred in the past, along with their associated costs, which we then use to determine future rates in which to address what may occur in the future. Through this process, we are measuring the negative consequences, the injuries that were a direct result of the actions (conscious or unconscious) of the injured party. Is it possible that instead of measuring consequences that we measure the actions of a policyholder that result in positive consequences, the “non-injuries?”
It is important that we realize and understand that the loss experience of any policyholder is the consequence of a number of conditions and contributing factors which, as mentioned previously, are not directly related to the policyholder’s operations and certainly not within their ability to control. Fortunately, today’s workplace does not present such hazardous conditions as unguarded machinery, improperly managed chemicals, and inadequate protective equipment that were prevalent up to and during the late seventies and early eighties. These conditions are not completely absent, but thanks to government regulations, the news media, and to a great degree, the insurance industry, these risks have been greatly controlled. When you look at the accident investigation results of today’s workers' compensation claims, you will find a large percentage of injuries due to the employee’s lack of awareness, failure to follow basic safety procedures and, to an increasing degree, their own physical condition causing and/or significantly contributing to the injury and its severity. Case in point, studies demonstrate a rising trend in obesity in the United States, a situation that has and will continue to have a huge impact on the severity of work-related claims in the future.
Painting the Picture
Why is all of this important? The loss prevention function of a workers' compensation insurance carrier is often looked at in terms of responsibility in reducing claims. This is not only erroneous, but also explicitly unfair, as these individuals do not have any control over those factors mentioned above that cause or contribute to these losses. However, they do have the ability to guide and assist the policyholder, some more effectively than others. The two primary functions of the loss prevention staff are to (1) “paint the picture” for the Underwriting Department as to the type and level of risk of a specific policyholder; and (2) to assist the individual policyholder in identifying and understanding those risks and, more importantly, put into place effective measures that will control these risks.
Effective risk evaluation requires a significant understanding of the operational risks associated with any policyholder’s type of business, site conditions, company culture and available worker pool before attempting to quantify what their potential losses may be in the future.
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When “painting the picture” for the underwriting staff, the loss prevention personnel are tasked with refining into simple terms and/or formats, their observations and professional opinions in such a way as to be understood by underwriting personnel who may not have a broad or technical background or who may be totally unfamiliar with the risks associated with any specific policyholder. As a result, some safety consultants may find themselves defending a policyholder report that is glowing in its representation of the policyholder’s efforts, but the Underwriter looks in exasperation at the policyholder’s loss experience. This is a classic example of the current disconnect in how we measure policyholder performance.
Effective risk evaluation requires a significant understanding of the operational risks associated with any policyholder’s type of business, site conditions, company culture and available worker pool before attempting to quantify what their potential losses may be in the future. How this is accomplished and effectively conveyed to the underwriting personnel is the greatest challenge facing the loss prevention staff. How do we develop and present enough information or “brush strokes” to fully explain to Underwriting the true nature of the policyholder’s risk exposure and the preventative actions they have put in place to control these risks?
One answer to this question is to measure the policyholder actions that can result in “Non-Injuries.” These policyholder actions would include the following:
- Management efforts to improve employee participation in the safety program
- Employee perception surveys
- Employee safety committees
- Employee hazard identification/correction programs
- Management efforts in making workplace improvements
- Investments in engineering changes
- Investments in establishing and maintaining safety policies and procedures
- Investments in employee and management safety training
- Management commitment to communication throughout the organization
- Management commitment to increasing personnel responsibility and accountability
Conclusion
The great news is that everything mentioned above can be used not only as reliable measuring tools, but each of these items are areas in which the loss prevention staff can work with the policyholder in successfully developing and/or implementing.
Putting it all together, the loss prevention staff can:
- Perform an objective analysis of the company operations, including:
- Site conditions, both facilities and equipment
- Employee/management behaviors
- Employee and management attitudes
- Policyholder injury experience to identify trends in locations, procedures, personnel and causation
- Develop a Safety Action Plan (SAP) addressing the findings of the analysis establishing responsibilities and timelines by both the policyholder and the safety consultant.
- Implement the action items defined in the plan. Adjust the schedule as necessary to adapt to changes, both internal and external to the policyholder operations. A rigid plan that fails to allow for adaptation is an easy excuse to consider the plan a failure and discontinue the effort.
- Following an established schedule, review the SAP performance and communicate with all parties the status of the efforts and, more importantly, the achievements attained.
The result of this effort, if successfully implemented, is the ability to measure the behaviors, attitudes and employee involvement that result in reduced accidents and subsequent injuries. You can then “quantify” the policyholder actions that prevent losses as opposed to measuring only the consequences and begin to “measure the immeasurable” in your risk prevention efforts.
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