YOU MANAGE YOUR time, you manage your inventory, but do you manage your risk? Ed Newman, vice president of risk services in the Houston office of insurance brokerage giant Lockton Companies, has helped party rental companies reduce costly accidents. Here, he helps you:
SPECIAL EVENTS MAGAZINE: What are the special characteristics of party rental companies that put them at risk for expensive accidents?
ED NEWMAN: Work at heights resulting in falls, manual lifting resulting in strains, and injuries resulting from vehicle accidents are the top loss sources at most party rental companies. Carrier underwriters often think of a party rental company as a combination of a moving company, construction contractor and demolition contractor all rolled up into a single operation. As a result, they assume that the party rental company has the same severity potential. They also get very nervous about large fleets operating in highly congested areas with a transient work force constantly turning over. Probably the most difficult risk associated with party rental companies relates to the ever-changing work environment. Every day is a new job at a new location. As such, pre-planning for safety is critical.
Q: How can event professionals take a more comprehensive “risk management” approach to their businesses?
A: Understand the direct and indirect costs associated with accidents, and share this information with your managers and supervisors. It is conservatively estimated that a typical $15,000 strain injury has at least a 2:1 ratio ($30,000) of indirect cost, providing a $45,000 total cost to the company's bottom line. Indirect costs include such things as lost productivity, hiring and retraining replacement employees, administrative costs to file and manage a claim, and loss of reputation to your customers. How many customers want a party company to come back if their employee was injured right in front of them? None.
Q: What are some financial strategies to consider (e.g., raising deductibles, self-insuring, etc.) that business owners neglect?
A: Every risk is different, and the solutions should be tailored to the individual client. That is why the broker you select is critical. Analysis of program options such as deductibles, self-insurance, captives and so forth will lead to the best financial solution to the risk at hand. However, the loss history and the risk-hazard potential are the keys to ultimate costs. The key to effective marketing of your program is to have accurate historical information on losses and exposures, and to have a good story to tell from a management and safety perspective.
Q: What are the most common, costly mistakes that party rental companies make when it comes to incurring losses?
A: The top five safety sins: (1) Training employees at orientation, but never training or holding supervisors accountable for the same safety expectations of management; (2) Allowing supervisors and employees to take unnecessary chances, compromising safety on a project just to get the project done; (3) Ignoring accidents that happen over and over and over again; (4) Treating employees as expendable resources, when they can either make or break a company; (5) Not assuring that an injured employee receives the best possible care and attention following an accident and returns to productive status as soon as possible.
Q: How do you best impact claims that have already occurred?
A: First and foremost, you must have a strong commitment to transitional return-to-work. If employees are at home for an extended, unnecessary period of time, it is harder to get them back to productive status, and the costs keep piling up. Make sure your carrier and/or third-party administrator knows that you want the employees back as quickly as possible, and you are willing to put forth the effort to accommodate them.
For those old claims that are still open, get involved and find out why. Carriers and TPAs handle literally millions of claims each day, and if you are not encouraging prompt resolution and closure of your claims, more of their efforts may be directed to your competitor's claims that are actively “squeaky wheels.” If you don't feel comfortable engaging your carrier or TPA, ask your agent or broker to do it for you. Close those old claims and cut the reserves so to improve your prior history, and thus minimize the high-loss projection and resulting premium increase they will charge at renewal.
Ed Newman can be reached at 713/458-5276. For the complete text of this interview, visit www.specialevents.com and click on “Current Issue.”