Reducing Your Total Cost of Risk

Reducing Your Total Cost of Risk A Seminar on Opportunities, and Solutions for Proactive Risk Management Christine Parini, M.S.Ed./VP Sales Succeed Management Solutions, LLC Direct: (503) 867-4151 christine.parini@succeedms.com www.succeedms.com Succeed Management Solutions, LLC Started in 1996 as CIH/CSP-based risk management consulting company Built web-based Risk Management Center to service clients with risk mitigation tools 58,000 clients worldwide

Reducing Your Total Cost of Risk Course Topics: Part 1- Basic elements of TCOR Elevate its importance Part 2- Reducing your TCOR using the Risk Management Center (RMC) Cumulative Cost of: What is Total Cost of Risk (TCOR) 1. Insurance premiums all lines 2. Retained losses costs not covered in insurance policies; e.g., deductibles, plus 3. Administrative and risk management costs Total Cost of Risk for Businesses Rose 2% in 2013: RIMS July 29, 2014 - The average total cost of risk (TCOR) for businesses rose two percent from $10.70 per $1,000 of revenue in 2012 to $10.90 per $1,000 About five percent more in 2012 About 1.7 percent in 2011 Source: Risk & Insurance Management Society (RIMS) Benchmark Survey

Reducing Your Total Cost of Risk Understanding the Total Cost of Risk is essential to reduce exposures, save time & money Can you answer the following questions? What is your organization s Total Cost of Risk? What are the significant cost drivers? What direction is it headed? Is there a Risk Management Plan in place focused on driving down your TCOR? Why Reduce Your Total Cost of Risk Corporate Ethics and Reputation Increased Employee Retention Increased Employee Involvement Increased Productivity Increased Quality Financial Minimize exposures = less direct and indirect costs

Risk Management Strategies Direct Costs Usually insured Reactive Strategy Profit Medical expenses/ indemnity Indirect Costs Usually uninsured/unrecoverable Profit CODB Break even point CODB Wage costs to worker and others due to time loss, work stoppage, product loss, replacements, property damage, or administrative costs Other Costs Morale Reputation Penalties Uninsured Costs Insured Costs Penalties Uninsured Costs Insured Costs Proactive Strategy The average cost of a disabling injury in America is $54,000 http://www.nsc.org/news_resources/injury_and_death_statistics/pages/estimatingthecostsofunintentionalinjuries.aspx Total Cost of Risk (TCOR) Elements 1. Insurance costs all lines 2. Retained losses costs not covered in insurance policies; e.g., deductibles, plus 3. Administrative and risk management costs It s dynamic and different by industry, operation, exposures, region, markets, and point of time (such as market conditions for insurance rates)

1- Cost of Insurance Premium paid for Property, General Liability, Workers Compensation, Auto, EO/PL, etc. For Workers Compensation, depending on States, directly effected by your Experience Modification Factor; NCCI Rates; Underwriting Load Factors (influenced heavily by your approach to risk mitigation*) Taxes and Insurance Fees Types of Policies (Group Plans, Captives, Scheduled Rating, Retrospective, Deductible, Guaranteed Cost) Re-Insurance, or bonding Self-Insured *Your risk mitigation performance impacts what you pay 1- Cost of Insurance Experience mod or E-Mod is based on a 3 years of loss data (earliest 3 of the last 4 years) You are compared to others in similar industry sectors (expected losses) 1.00 is average Above 1.00 is a debit modifier and you pay more than manual. Below is a credit modifier and you pay less than manual How we establish premium rates We determine premiums using a number of factors, including your total payroll, type of work your employees do and your workplace injury record Your risk mitigation performance impacts what you pay

1- Cost of Insurance Your performance impacts what you pay Cost of losses not paid by insurance or other outside sources Deductibles and Self-insured retentions (SIR) https://www.google.com/#q=self+insured+retention+versus+deductible+insurance 2- Retained (Uninsured) Losses Conscious non-insured exposures Direct claims management Unplanned losses, such as from a claim denial

3- Administrative & Hidden Costs Examples: Risk management services Process costs to mitigate loss source (such as ventilation or safeguarding system) RTW management Consulting/training Lost production time Business interruption Claims expenses that may not be included in the insurance policy: Internal or Third Party claims administration Public Adjuster or Claim Consultant Legal Risk Management Information System Tools such as the RMC Program & Policy Administration Compliance & Regulatory fines or fees (FDA, Environmental, OSHA, etc.) Travel training, audits, etc. Studies show that indirect costs are 4-10 times direct costs!

Risk Management as Profit Center Example: If you have $50,000 in losses, you need $1,667,000 in sales to pay the costs of (3% profit margin) Profit Margin Yearly Excess Costs 1% 2% 3% 4% 5% $1,000 100,000 50,000 33,000 25,000 20,000 5,000 500,000 250,000 167,000 125,000 100,000 10,000 1,000,000 500,000 333,000 250,000 200,000 25,000 2,500,000 1,250,000 833,000 625,000 500,000 50,000 5,000,000 2,500,000 1,667,000 1,250,000 1,000,000 100,000 10,000,000 5,000,000 3,333,000 2,500,000 2,000,000 150,000 15,000,000 7,500,000 5,000,000 3,750,000 3,000,000 200,000 20,000,000 10,000,000 6,666,000 5,000,000 4,000,000 Sales Required To Cover Losses Formula: Sales Required To Cover Losses = Yearly Costs Profit Margin Risk Management As Profit Center Real Client Example: With a MOD of 1.18 you are paying ~$220,000/year extra based ONLY on your MOD @ 5% Profit margin your group needs to produce ~$4.4 MILLION in product JUST TO PAY FOR YOUR EXCESS PREMIUM Poor RMP/ High MOD equals High Costs PLUS, indirect costs, load issues, etc. $

Summarizing Your Total Cost of Risk Cost of Risk ($) Per $1,000 Budget Claims Administration $104,715 $2.15 Risk Mgt. Budget 91,494 1.88 Premiums 65,617 1.35 GL Self-Insurance 73,742 1.51 PL Self-Insurance 141,035 2.89 WC Self-Insurance 216,736 4.45 Grand Total $693,340 $14.22 Trend these data year to year

Part 2 Reducing your TCOR Steps: Reducing Your Total Cost of Risk 1. Develop your TCOR 2. Identify Major Loss Sources for all lines of coverage (RMC) 3. Perform a Risk Assessment/ Gap Analysis/Opportunity Assessment review tasks and exposures, and needed controls (RMC) 4. Prepare the Plan of Attack the Risk Management Plan Who Does What by When

Steps: Reducing Your Total Cost of Risk 5. Deploy the Risk Management Plan Prioritize needs Identify actions to minimize the exposures Policies (procedures) & respective trainings needed Implement a BBS process to reduce at risk behaviors Set measurable goals and track performance Audit & communicate results Adjust priorities & actions Risk Assessments Perform for all lines of coverage work as team with Risk Management Develop specific assessment to line of coverage Evaluate probability & severity Consider: Regulatory requirements Supplier failure Employee dishonesty Natural disaster Terrorism Decreased demand Financial and insurance market conditions Serious pandemic Organization's reputation e.g., Food Safety issue, regulatory issue Controls in place or needed Administrative policies/procedures in place or needed Training in place or needed Etc.

Risk Assessment Example Risk Assessment Example

Risk Assessment Example Risk Assessment Example

Risk Assessment Example Risk Assessment Example

Risk Assessment Example Risk Management Plan Major Loss Sources

Risk Management Plan Risk Management Plan (RMP)- based on the Risk Assessment and Loss Trend Analysis, the RMP summarizes actions prepared to foresee risks, estimate impacts, and define controls and responses to issues. Needs continual review, oversight, updating and audit Contains an analysis of exposures and risks, their probability and severity, and control approaches Includes a risk control strategy: Avoidance: Don t do the activity Loss Prevention and Control: prevent loss engineer hazard; use safety glasses Risk Financing: Obtain insurance or self-insure to finance losses that occur Risk Transfer: Transfer financial responsibility for risk to contractor and secure indemnification, hold harmless

$ $ $ Risk Management Center Benefits Reduce Costs/TCOR Save Time Enhance Resources Dramatically Mitigates Risk Factors/Strengthens Compliance Compliance, Time, & Money! Video Testimonials If an OSHA inspector walks through my door, I know that I have good documentation of what we re doing in terms of providing adequate training. The Risk Management Center allows me to sleep a lot better at night. And it allows us to separate and define ourselves a bit differently from others in our industry Harry Franzheim President New Era Staffing & HR Solutions

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Succeed University for Employers Offer fresh insight into relevant aging services issues Understand how to implement Aging Services Rx effectively Topics: Globally Harmonized System (GHS), Injury and Illness Prevention Programs (IIPPs), Driver Safety, and more All classes are free Free Risk Management Courses - Full Schedule Needed Software Training Track Incident Track Job Description Track BBS Track SDS Track COI Track

Incident Track Help minimize report times Trend losses, generate near miss and claims reports Provide focused resources to mitigate risk, reduce claims and lower litigation costs Risk Management Center Benefits OSHA & claims reports off one system Allows a proactive, mitigation approach Loss trending & analysis near misses and claims Your data; not affected by carrier switch Triggering events Claims lag time reduction

Risk Management Center Benefits 1 2 Deploy Incident Reporting Plan 3 4 6 5 Report Claims Promptly to TPA/Carrier Near Miss Reports Facilitate Return to Work Process Assign Corrective Actions Investigate and Document the Incident SIMPLE Step-by-step wizard All lines of coverage

Easy entry Enter as much detail as needed Easy entry Questions specific to the exposures your organization faces

Sophisticated graphing system Includes templates Customizable In depth graphing & tracking Date(s), time Accident cause Injury nature Body part Print & distribute to multiple sites Enables targeted proactive training response

Tools for Mitigation Incident Track Track and trend incidents and near misses Generate OSHA Logs BBS Track Build JHA s (includes library of JHA s) Run Safety Observations Training Track Assign Required Trainings Track and automate employee training Training Track Automatically notifies you of upcoming training Generates compliance reports Streamlines the training process

OSHA Penalties Serious violations: Willful violation: Repeat violation: Failure to abate: $7,000 per violation $70,000 per violation $70,000 per violation $7,000 per violation per day Custom Online Trainings focused to unique exposures Automate and assure needed training is occurring! Employees receive automatic notification Managers notified when trainings due Receive Red Flag reports

Auto notifications Assign online trainings Trainings at their convenience! Receive reports on who has or has not completed the training Comprehensive Trainings Trainings are thorough and interactive, ensuring employees understand the material Completed training is recorded in Training Track

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Employee Portal Training is automatically tracked

Certificate of completion recorded and printable Generate reports By employee, location, department, Run reports for management/ OSHA/ Environmental/ QA/ HR. Sort by: Training date Position Employee Department Organization

BBS Track Create job hazard analyses, as well as safety observations Behavior-based safety application drive down losses! Assure proper procedures are followed to mitigate loss! Risk Management Center Benefits $50,000.00 $40,000.00 $30,000.00 $20,000.00 $10,000.00 $0.00 Claims Costs MEDICAL $ INDEMNITY $

Risk Management Center Benefits MOD Impact... Where You Could Be 1.5 1.25 1 0.75 0.5 0.25 0 1.30 Current Lowest Possible Risk Mitigation Pyramid Proactive risk mitigation management addresses Essential Behaviors and Root Causes 1 Major Claim 10 Serious Claims 100 Incidents 1,000 Near Misses 10,000 Unsafe Acts and Conditions

Job Description Track Use proper hiring practices Align with ISO Standards and create job descriptions Easy-to-use wizard

SDS Track Keep all Safety Data Sheets (SDSs) in ONE place, electronically and securely Comply with Hazard Communication regulations. Its THE most frequently cited OSHA violation! Comply with the right-to-know standard Select the appropriate pictograms for each chemical

Print HMIS, and NFPA, and GHS labels! Different-sized industry-compliant labels COI Track Help minimize liabilities by tracking Certificates of Insurance (COIs) Auto track expiration dates Focus premium audits

Managing Contractors & Suppliers Why Track COIs? Reduces risks by: Assuring that the contractor/ supplier s insurance carriers assume liability by: Assuring that their carriers are adequately rated; Assuring that their policies cover anticipated exposures Why Track COIs? (continued) Insurance firms require tracking of COIs Can affect your rates Avoidance of other losses: Business interruption Loss of market share Loss of life or property Managing Contractors & Suppliers

Tracks all lines of coverage You receive emails letting you know of soon-to-expire certificates Robust reporting structure All needed data will be tracked and review against the contractual requirements

Aging Services Rx Benefits - Incident Track to identify Major Loss Sources - Assign needed polices - Assign needed trainings - Custom Onlines for time & cost savings - BBS Track for needed behaviors - COI Track to Manage Risk Transfer - SDS Track for compliance Conclusion The importance of a proactive approach Importance of Risk Management Center Tools for best practices implementation Next Steps TCOR Worksheet & RMP Development

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