Presented by Larry Gallagher Director Corporate Loss Control. October 21, 2010

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1 Inspection & Loss Control Considerations Presented by Larry Gallagher Director Corporate Loss Control Grinnell Mutual Reinsurance Company October 21, 2010

2 INSPECTION A survey to obtain information on the property p and operations of the policyholder and to gain insights into the probability of loss based on safety controls present at the time of your visit.

3 Why Set Up An Inspection Program Know your book of business Type of Operations Crop only Livestock farm and crop Other Type of Structures On/off premise operations Quality of your book of business Mix of your business farm vs. residential

4 Purpose of Inspection Program Proper Risk Selection Risk identification reduction improvement Proper Valuation of Proper Valuation of Buildings/Equipment

5 Essential Elements of an Inspection Program Underwriting Guidelines on what IS or IS NOT acceptable Establish procedure to handle risks that DO NOT meet Underwriting Guidelines Establish procedure for follow-up (Reinspection) Trained/Knowledgeable personnel Method of notifying policyholder of program Establish how success of program will be measured

6 Risk Surveyor/Inspector Wears Many Hats Reporter Technical Consultant Salesman GREAT Listener

7 Implementing Inspection Program Establish authority and responsibility of inspector Establish inspection program procedures Inform farm mutual personnel, agents & policyholders of program implementation

8 Implementing Inspection Program Hire Inspector Train Inspector Other

9 Inspector Training State Insurance Association Reinsurance Carrier Local Technical Schools or Adult Education Classes NAMIC Agricultural Risk Inspection School

10 NAMIC 3601 Vincennes Road Indianapolis, IN (317)

11 Agricultural Risk Inspection School Typical agenda for school includes: The Inspection Process Basic Electricity LP Gas Installations Solid Fuel (Heating Devices) Farm Liabilities Farm Machinery Safety ACV for Farm Buildings Students Will Inspect a Farm July 2011 Location to be announced

12 Inspection Procedure 1. Contact Insured Schedule appointment 2. Inspector Introduction 3. Inspection Purpose Use of inspection disclaimer

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14 Inspection Procedure Contact t Insured Inspector Introduction Inspection Purpose (Continued) Use of Inspection Disclaimer Inspect Property Discuss Hazardous Conditions with Insured Complete Inspection Forms Forward Inspection Report to Underwriter Follow-Up with Insured

15 Risk Survey Behavior Remember.. policyholders are our customers Treat them as you would want to be treated Be polite, dress professionally, compliment them on their operation

16 Risk Survey Behavior Don t smoke, chew tobacco, etc. during visit Conduct home inspection first then livestock buildings R i f i l t ll ti Remain professional at all times, don t allow them to make you angry

17 What to Look at During Inspection Process Scope of Operation Identify Structurally Unsound Buildings Identify Physical Hazards Evaluate Building Condition and Establish Building Insurance Value

18 Items to Consider When Insuring a Building Structural Design Common Hazards (electrical system, heating, housekeeping, careless smoking) Exposure (distance from other buildings) Building Insulation Materials Management s Commitment to Safety Others

19 GMRC s Hazard Grading of Inspections Risks are to be graded d on the conditions i that are present while the inspector is there. They are not to be graded on how the risk will be if hazards are corrected. Risks are graded in the Inspection Reports using a letter grading system. This system includes evaluating the risk based on coverages written.

20 GMRC s Hazard Grading of Inspections A Excellent Risk. No uncontrolled hazardous conditions which are likely to cause injury or property damage

21 GMRC s Hazard Grading of Inspections B Acceptable Risk. This risk has a few light to moderate non-causative hazards with nonstandard safety controls (fire extinguishers need serviced, lightning surge arrestor should be installed, etc.). Hazards are present that have potential for causing non-disabling injury or nondisruptive property damage.

22 GMRC s Hazard Grading of Inspections C Acceptable if corrected. This risk has hazards with nonstandard safety controls associated with it but is acceptable for coverage in its present condition if hazardous conditions are controlled or eliminated in a reasonable amount of time. The uncontrolled hazards have the potential of causing serious injury or property damage.

23 GMRC s Hazard Grading of Inspections D Rejected. The risk is unacceptable in its present condition due to the hazards associated with the risk. Recommend cancellation or non-renewal until hazardous conditions are corrected.

24 Structural Design Is the building/structure adequately designed to withstand the snow load and wind load for the geographical area? Have modifications been made to the building/structure since it was constructed? What is the current condition of the building/structure?

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28 Electrical System Appropriate Attachment of Electrical l Service Entrance Wires to the Building and Entrance into the Building Ground Electrical Service Entrance Panel Proper Fusing (Fuses/Breakers) For Copper Wire Wire Size Fuse/Breaker Size No amp No amp No amp

29 Electrical System (Continued) Wiring i Type* and Condition Electrical Boxes Type* and Condition Grounding of Electrical Equipment - 3 Wire System *If in a Livestock or Poultry building or an area damp, corrosive or dusty, the building/area should be wired in accordance with Article 547 of the National Electric Code.

30 Poor Condition of Electrical System Components Evidenced by: Wire conductors are not secured to building support members Electrical boxes/light fixtures not affixed to the wall or ceiling Open wire splicing i Covers off electrical boxes Corroded electrical boxes Exterior Insulation damaged exposing energized wires

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35 Heating System

36 Residential Heating Systems (LP Gas Natural Gas Fuel Oil Electric Wood) What to look for: Listed by a Recognized Testing Agency (UL AGA CSA International etc.) Clearance from Combustibles (Top Sides Bottom) (Will show clearances on name plate) Proper Fuel Line

37 Residential Heating Systems (LP Gas Natural Gas Fuel Oil Electric Wood) What to look for: Adequate Safety Control Appropriate p Venting/Chimney Type Clearance Condition of Chimney Chimney Connector Clearance) (Code that applies NFPA #211 Chimneys, Fireplaces, Vents, and Solid Fuel Burning Appliances )

38 Vent/Chimney Type Based on Type of Fuel Being Used FUEL CHIMNEY TYPE LP Gas* Class B Vent Masonry Chimney w/liner Metal All-Fuel l Chimney Natural Gas* Class B Vent Masonry Chimney w/liner Metal All-Fuel l Chimney Fuel Oil Masonry Chimney w/liner Metal All-Fuel Chimney Wood Masonry Chimney w/liner Metal All-Fuel Chimney *High efficiency furnaces may not require a conventional vent or chimney. A 2-3 inch PVC pipe may be appropriate based on Manufacturer installation information.

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43 Agricultural Heaters What to look for: Newer Units should be Listed by a Recognized Testing Agency, such as AGA or CSA International Proper Clearance from Combustibles (Top Sides Bottom) (Check Name Plate or Manufacturer s Literature) If Portable Should be Properly Supported (By Bracket, Fine Cable, or Chain) Needs Proper Fuel Supply Line Needs Gas Safety Control (All need a 100% Automatic Shut-off Device) Keep Dust to a Minimum on Unit

44 Heat Lamp Unsafe Conditions

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47 Building Materials In farm buildings, if insulated, the insulation should be installed in accordance with the manufacturer s recommendations.

48 Building Materials The majority of polystyrene and polyurethane insulations should not be left exposed. It is recommended by insulation manufacturers that they be covered by a 15-minute thermal barrier.

49 Basic Problems with Polystyrene and Polyurethane Insulations 1. Fire Once insulation is ignited from even en a small fire, materials allow for very rapid fire spread across the face of materials. For this reason, most of these insulations are required to be covered as opposed to being left exposed within a structure.

50 Basic Problems with Polystyrene y and Polyurethane Insulations 2. Toxic Gases Some give off toxic gases that could kill, if in a high enough concentration majority of lives lost in fire are due to Carbon Monoxide or Carbon Dioxide id inhalation

51 Basic Problems with Polystyrene y and Polyurethane Insulations 3. Smoke Concentration Because these insulations are a form of plastic, they give off dense black smoke and will obscure vision i making it difficult to locate exists in the event of a fire.

52 Exposed Insulation

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54 Exposure Distance Between Buildings for Fire Purposes Minimum of 50 feet Recommended for Farm Buildings

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56 Management Attitude & Commitment to Safety/Loss Control Receptive to suggestions to decrease hazards? Take pride in their property and properly maintain it or is this what you see.

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58 Open Combustible Liquid Containers

59 Fire Protection Portable Fire Extinguishers (Multi-Purpose Dry Chemical ABC) Invite Fire Department to Site Use Pond or Lagoon in Rural Areas Dry Hydrants in Rural Areas

60 Enhancing Existing Inspection Program Alter perception of what we do from a policing force to a Loss Control Consultative approach. Hector the Inspector Sam the Safety Consultant

61 Change/Improvements Start at Home In order to improve perception, start with terminology used within your office From inspector to Loss Control Specialist From inspection to Loss Control Survey Change verbal and written use of these terms When calling policyholder make reference to survey of your property for insurance purposes Documents sent to policyholder following Loss Control Survey should not include the words inspection or inspector

62 Primary Benefit Eliminating perception you are at his/her property to inspect it to find deficiencies to you are there to review/discuss safety with them, frequently eliminates the adversarial position the property owner may have from the time you set the appointment.

63 Primary Benefit Discussing why current situation is hazardous and give alternatives to improving safety controls as opposed to stating this is what our insurance company requires can help improve compliance with recommendations.

64 Customize Recommendation Document sent to Policyholder

65 Customize Recommendation Document sent to Policyholder Positive feedback received from agents/policyholders when we made this change several years ago for our commercial lines loss control customers.

66 Summary 1) Develop an inspection/loss control program to identify what you have on the books. 2) Develop the process/procedures to hire, train and implement inspection/loss control program, if such a program doesn t currently exist. 3) Enhance your existing program by changing perception of safety/loss control process.

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