Beyond Insurance: Loss
by Peter Schlactus, CIC, AAI [ Back To Table of Contents ]
Insurance cannot eliminate
the disruptions caused by losses. It can neither prevent bad press nor salvage a
Insurance cannot recover a package, stitch together a bleeding victim, or restore a permanently disabled worker to productivity.
So why do we bother?
Insurance is by far the
most efficient way for your business to guarantee adequate financial
compensation to your customers,
the public and yourself following a loss. The key is the last phrase: following a loss.
Few would argue that
businesses benefit most by not having the loss in the first place or, failing
that, by minimizing the
seriousness of the loss. This is the goal of this series: the prevention and minimization of losses.
In this uncertain,
uncontrollable world, to speak of "controlling" losses might seem a
bit unrealistic, but an overwhelming
number of studies show that Loss Control Strategies do work. Companies have drastically cut down losses following the
implementation of well-designed safety programs. We have spoken to many industry leaders who credit their unblemished
loss record to having taken Loss Control seriously from the beginning. You can do the same.
Over the past decade, the
insurance industry has come to recognize the valuable role that these strategies
play by increasing
safety-related discounts and making resources available to help you launch or improve your Loss Control pro\-gram. If you are
unhappy with your insurance rates, get involved in Loss Control and reap the benefits in cost-control!
Over the next few issues,
this column will present Loss Control Strategies that can form the basis of a
comprehensive and prof-
essional Loss Control Program. This installment will examine your options, identify keys to success, and describe a simple,
ready-to-use method of getting started.
Future editions will
examine different areas of loss control in more detail. In addition, I will
tailor future installments based upon
reader feedback, so please contact me with your comments and questions.
Managing Risks: the Options
As you consider whether or
not to devote more attention and resources to Loss Control Strategies, it is
important to know what
your options are. Briefly, businesses have four approaches to managing risks: avoid, accept, transfer and control.
To avoid risk, you
simply do not operate in a way that leaves you exposed to the risks you are
avoiding. Take fleets, for instance.
If you don't relish the risks of maintaining a fleet of vehicles, you may avoid fleet-related risk by using only owner-operators. Of
course, this choice brings with it other risks.
Avoidance is fine for
specific hazardous risks but, short of getting out of the business altogether,
you cannot hope to avoid
Accepting risk is
the fatalistic approach. "If it happens, I can handle it," you say.
Larger deductibles are one example of accepting
risk. I also know some courier firms that have decided to "self-insure" their cargo. They accept the risk because they believe they
carry few items of value and have adequate cash flow or reserves to reimburse customers. Of course, one never knows what a parcel
contains ... until it's gone!
It's becoming harder to
justify accepting much risk, even with cargo, which tends to be more variable
and valuable. Increasingly,
customers demand evidence of insurance as a condition of doing business. The modern courier company has invested in expensive
computer and telecommunications equipment. Society remains as litigious as ever and formerly rare types of litigation have become
almost commonplace, such as sexual harassment and discrimination suits.
Transferring risk is
a classic approach, although insurance policies are not the only way. Leases,
contracts, delivery tickets and
service agreements also transfer responsibility for loss. After examining all the alternatives, however, we must acknowledge that
unless we take active steps to control our operation and its associated risks, we remain wholly at the mercy of cruel fate.
The Three C's are the Keys
The secrets to effective
Loss Control are simple: Commit, Customize, and Create a Calendar. The devil, of
course, is in the details,
but as we shall discover, Loss Control demands neither advanced degrees nor workaholics. You can do it!
It's easy to pay lip
service to this principle and move on, but unless your personnel see concrete
evidence of commitment from
the top, your efforts will likely be in vain. KBS has developed the following criteria for judging management commitment, which
we call The Five P's:
· Does top management participate? · Are strategies published in writing? · Do you provide adequate resources?
responsibility for Loss Control Strategies is okay. It is, indeed, inevitable
in all but the smallest companies.
But top management and owners should remain visible -- at least periodically -- to all participants. Attend a safety meeting.
Give out the safety award. Put your signature on letters that address safety. Do not disappear. Participate and be present.
As for your lieutenants,
make sure to meet with them periodically to discuss the status of implementation
and share ideas for further
improvements. If you expect them to continue to give Loss Control their attention, then show them that you still care and that concern
for safety was not a passing fad.
One of the best ways to
institutionalize something is to write it down. Expressing your commitment
through publications such as a
mission statement, safety program or newsletter is almost a prerequisite for being taken seriously. Written commitment is a necessary
condition but not sufficient by itself.
Your Loss Control
Strategies will require resources and you must provide them. Personnel,
time and money are scarce commodities that
must be wrenched free and reallocated. A starved Loss Control program will never take root and flourish; it will stagnate and breed cynicism.
"Just say no" to hollow slogans.
Prompt response to
Loss Control issues reflects your commitment by demonstrating a willingness to
get involved. If you make yourself
accessible to those with feedback or problems, you will send a positive message and avoid having your Loss Control efforts march too
far down a dead-end path.
Finally, do not neglect planning
in favor of a quick launch. Like any other endeavor, if Loss Control
Strategies are worth pursuing at all,
then they are worth doing well. Initial planning and annual reviews are recommended. To avoid the opposite mistake of endless planning
and no action, try setting aside a discrete block of time to plan and do the best you can within that time.
Customize Your Strategy
Just as off-the-shelf,
canned insurance solutions do not properly protect a courier company, so too
standardized Loss Control and Safety
Programs fall well short of meeting your needs.
Programs designed for
truck drivers, school bus companies or taxis fail to address important
differences between their target audience and
yours. Operators of light vehicles -- or bicycles -- driving locally, making many stops on tight schedules, simply have different needs.
Also, what motivates one group may not do the same for another used to different pay scales and work conditions.
Indeed, differences among
courier companies themselves are staggering. Due to operational type, local
geography, market conditions and
management style, one courier firm's plan may fall flat if crudely copied by another company.
The lesson is not to scrap
models entirely, but to review them critically. Make adjustments, mix and match,
and experiment until you have
a strategy that fits your company and its unique situation.
A wise mentor once told
me, "Do not let the best be the enemy of the good." It's possible to
improve on anything. Those who insist on
perfection, however, are doomed never to take the first step. Aim high, but do remember to pull the trigger!
Just as with commitment
and planning, it is advisable to set up concrete criteria and discrete time
frames in which to customize your
strategies as best you can. Then move on.
Create a Calendar
Loss Control Strategies
encompass many different areas, some straightforward, some complex. Room must
also be made for planning
and customization. Although no single piece of the task is that difficult or demanding, it is easy to become overwhelmed. One answer to
this dilemma is to set up a Loss Control Calendar.
Unlike a plain outline, a
calendar allows you both to break up your project into manageable pieces and to
arrange them by when each
piece will be addressed. Below is an example of how your calendar might look:
Loss Control Calendar®
|Planning||Insurance Review||Hiring/Screening||Disaster Plan|
|Insurance Selection||Communication||Cargo Protection||Safety Incentives|
|Written Documents||Vacation||Premises Security||Fleet/Owner-Ops.|
Every month is devoted to a
single distinct area, ensuring focus. Each is a bite-sized chunk that can be
tackled realistically with
good hope of success. Avoid the pitfall of trying to do everything at once. This way, Loss Control can receive the sustained year-
round attention it deserves without overly taxing your resources.
Having a written schedule also
enforces discipline, as does making planning your first month's project. With
parties and action plans set up in advance, it's easier to maintain the pace of implementation during the year.
Note that three months were
purposefully set aside for non-Loss Control activities. The interaction of Loss
Control and insurance
is obvious and one should not proceed without reference to the other. Therefore, it makes sense to review your insurance program
after completing your year's Loss Control planning, with your accomplishments and future goals close at hand. Also, separate the
review from the purchasing process as few can focus objectively on both at the same time.
Finally, take a regular
vacation from Loss Control. A good time would be while final versions of new
documents are being prepared.
However important the task, we all need a break to stay fresh and focused!
Loss Control is but one method
of managing risk, but never underestimate its importance. Avoiding, accepting,
risk have their place but, if you truly desire to protect your investment, you must look beyond. The benefits -- monetary and
otherwise -- of doing so are substantial.
The keys to implementing
successful Loss Control Strategies are the Three C's: Commitment, Customization,
and the Calendar.
Proper commitment by management can be measured by using another set of concepts, the Five P's. Customization is necessary
to optimize outcomes and make sure that strategies developed for other industries or courier companies are not poorly grafted
onto your organization.
Finally, the Loss Control
Calendar, is a helpful tool for dividing and organizing your project. It allows
Loss Control Strategies
to be developed at a realistic pace, and with regard to priorities and the even distribution of resources throughout the year.
Keys To Loss Control
... and The Five P's
3.Provision of resources
As we have seen, you can indeed go "beyond insurance" to better manage your businesses risks. While a certain degree of
attention and thought is required, few readers should find the task bewildering.
Moreover, help is available.
Depending on how well they know your industry and business, your insurance agent
accountant and attorney may be of considerable assistance. Of course, there are also professional Loss Control consultants to
However you go about it, the important thing is to get started. Good luck and stay tuned for the next installment. CM
Peter Schlactus, a Certified Insurance Counselor and Accredited Advisor in Insurance, is Co-President of KBS International Corp., which provides specialized insurance programs, benefits, and risk management services to courier companies and executives nationwide. Mr. Schlactus is available to answer inquiries at 1-888-KBS-4321 or via e-mail at email@example.com.
COURIER MAGAZINE - October/December 1998 [ Back To Table of Contents ]
(c) copyright, 1999 by KBS International Corp. All Rights Reserved.