Run Away From Old Technology!

In this series, we are focusing on ways in which a Risk Manager can add value to the bottom line of his or her organization using RMAP(1) technology.  These avenues of added value include: lower cost, asset protection, revenue enhancement and competitive advantage through better management of tactical and strategic Risk.  

Lower Cost:  Risk Manager’s typically have influence in three cost categories.  

1) Pre-Loss, 2) Point of Loss and 3) Post Loss.   Today’s BLOG will focus on a pre-loss item… Allocation.

Some years ago I heard a wise risk manager say “accident prevention is not a risk management problem but rather, a management problem.”  He was absolutely correct.  But how does the local manager know what to do?  And what are his or her incentives to do the right things.  An RMAP(1) can be used to produce loss allocation models that match up with desired behavior.  Perhaps a penalty per loss day will drive more aggressive return to work.  A carrot or stick around report lag would encourage early reporting.  Benchmarking frequency per unit of exposure between peers  with an allocation credit thrown in for the winner might drive a healthy intra-organizational competition and more prevention activity.  In addition, proactive dashboards delivered to the field can assist in keeping score on their efforts.  Getting local management engaged in the correct prevention behavior often produces 10%-30% savings in WC and Liability.

(1) RMAP = Risk Management Automation Platform (this is not an official term… I just made it up)

In this series, we are focusing on ways in which a Risk Manager can add value to the bottom line of his or her organization using RMAP technology.  These avenues of added value include: lower cost, asset protection, revenue enhancement and competitive advantage through better management of tactical and strategic Risk.

LOWER COST: Risk Manager’s typically have influence in three claim related cost categories.  1) Pre-Loss, 2)Point of Loss and 3)Post Loss.

Today’s BLOG will focus on a pre-loss item… Loss Prevention.

Loss Prevention – There are four points of leakage that the RMAP(1) has a huge impact on.  The first leakage point is pre-loss (sometimes referred to as “prevention”).  Without an RMAP(1), the Risk or Safety Manager is left to manage by anecdote, by common sense or on flawed statistics.  For example, when speaking with someone in grocery safety, one often hears that the number one accident issue is cuts in the deli and butcher shop.  It is true that these accidents are by far the most frequent, yet, when further analysis is done with a complete set of data, hand and finger cuts are not a cost driver and do not result in significant lost time.  Carpel tunnel claims are the most expensive, but they are not frequent and they are difficult to prevent.

With an RMAP(1) fully loaded with financial, exposure and demographic data, one is able to “peel back the onion” and discover the root cause of losses and discover which “preventable” losses are actually driving the cost.  And with a good system, one is able to group various losses in buckets that make the analysis more meaningful.

One very large big box retailer went through this process.  Even though their frequency was trending down, their severity was trending up.  Once they were able to consolidate all of their data and analyze it, they discovered that their safety efforts were targeting incidents that, while a nuisance, were not driving severity.

They discovered that the driver of both severity and lost time was Torso Strains, Stock Pickers, In the Distribution Centers.  With some basic ergonomic adjustments and Safe Lifting Training, the Retailer was able to reduce WC losses by 13% in the first year (a savings of $30 million)  By the way, it was the RMAP(1) that was able to model the precise savings.

⁽¹⁾ RMAP = Risk Management Automation Platform (this is not an official term… I just made it up)