Crisis, catastrophe, headache and disaster—these are just a few of the terms that waste companies usually use to describe their commercial insurance renewals. According to Business Insurance Magazine, premium prices in the United States increased by 10.4 percent in the fourth quarter of 2019 and have continued to skyrocket into the first quarter of 2020. In our practice alone, we have companies calling us days before renewal stating their premiums have gone from $300,000 to over $1,000,000. Commercial auto, property and excess umbrella are the lines we are seeing which are the most challenging to obtain and to get an affordable price for.
Insurance market premiums are cyclical, and premiums have been historically soft for the past 15 years. During this period, waste companies were able to purchase cheap insurance without much oversight. This fact deterred companies from examining their operational protocols and addressing numerous underlying issues. With claims far exceeding premiums the last few years, insurance carriers are no longer willing to write “cheap” insurance. Consequently, this has created a hard market. The axiom, “The chickens have come home to roost,” accurately describes the current situation in the commercial insurance market. Because of this reality, waste companies must be prepared to do whatever it takes to help improve their safety culture, which will in turn, significantly lower premiums.
Industrywide, we must focus on strategies that will improve the claims experience. Safety has always been mentioned as being the No. 1 most important aspect of company culture; however, actions do not support this claim. Before becoming a commercial insurance agent, I was a practicing health and safety professional. I visited multiple companies in all sectors of business, met with many respected members of management, and noticed a common denominator—people. There is not a business owner on the planet who wants a poor safety record, high workers’ compensation losses, or massive increases in insurance costs; yet, the reality is that owners have the most significant impact on whether their company is safe or not and many simply don’t take proper action.
Most people believe safety is about being lucky, but that couldn’t be further from the truth. Safety has nothing to do with hoping for improvements or wishing for accident-free operations. It requires commitment from management on down to have a world-class safety program. A written safety plan is only the beginning. To truly change culture requires buy-in and action that supports the plan led and enforced by senior management and ownership.
Making safety a reality
I follow OSHA’s Voluntary Protection Program (VPP) protocol, which recognizes the top performing businesses and work sites that show excellence in occupational safety and health. The average VPP work site has a lost workday incidence rate of at least 50 percent below the industry average. There are four elements associated with these programs, but the top three are essential for improving safety culture and helping achieve lowered premiums.
Management commitment: The most important facet of the entire program is senior management’s commitment (and most importantly, actions) toward the safety and health program. Commitment starts with having high expectations towards the program and ensuring all front-line management has the same mindset as senior management. It is critical to create goals and specific measurables to ensure employees are held accountable or rewarded for following safety protocols. Until there are measurable goals for performance, all a company can do is hope results get better. It is also vital to provide results and continuous feedback on improvements throughout the year to get employee buy-in to the safety program. For business owners, revenues or sales performance are heavily analyzed and discussed. Owners should ask themselves whether they could articulate their company’s safety performance in the same manner.
Employee involvement: Senior management or safety managers should not be the only ones responsible for the safety program. Employee adoption is critical for creating a top performing safety program that pervades the entire organization. One way to champion this is to have employees perform the required safety and health training without the senior management. This creates an ownership in the safety culture and allows employees to become motivated to help improve performance. Management, obviously, needs to be a resource in developing the content, but employee ownership can generate a “safety first” mindset and encourage employees to take a proactive approach to their respective department’s safety training.
Work site analysis and training: Training programs cannot consist of the same outdated, repetitive videos that employees have seen year in and year out. To maximize training in the workplace, management must spend time examining various trends such as workers’ compensation reports, OSHA logs, DOT inspections, CAB reports and insurance loss runs. Once these trends are identified, safety and training programs must be implemented to address consistent issues. Insurance agents, loss control representatives and voluntary OSHA consultants are heavily underutilized partners that can assist in identifying problems and allow companies to work toward a solution to reduce its number of incidents. Proactive approaches must be used to help reduce adverse trends or else the same results will keep occurring.
Saving money on insurance premiums is possible in this hard market, but it must start with business owners looking in the mirror. Insurance premiums are cyclical, but taking accountability and demanding a top industry safety culture will provide numerous benefits—not to mention help companies save money on their premiums, improve employee turnover and boost morale. It is important to start today. Not only will being more proactive regarding safety help save money during the hard insurance markets, it’ll pay dividends during soft markets, as well.
Jimmy Whitehair and Stephen Halford are principals, and Will Denbo is a managing partner, at Brentwood, Tennessee-based Commercial Insurance Associates LLC.