Omni Risk Mgmt E‑Newsletter
March, 2007 Volume 6, Number 1
In This Issue · Commercial Lines · Personal Lines · Surety Bonds · Life & Health · Construction News Insurance Industry Links www.ambest.com Lines Of Business Bonds Property Work Comp Commercial Auto General Liability Umbrella Inland Marine Ocean Marine Personal Auto Homeowners Flood Insurance Group Personal Lines Pension Plans Payroll Deduct Plans Health Insurance Disability Insurance Boiler & Machinery Professional Liability Executives Rob Mastrantonio, Pres. Rob@omni-risk.com Frank Strcich, VP Frank@omni-risk.com Glenn Glubiak, VP Surety Glenn@omni-risk.com Commercial Lines Tara Pattona Tara@omni-risk.com Christine Schuller Chris@omni-risk.com Adam Stone Adam@omni-risk.com Gina Di Paoloa Gina@omni-risk.com Tom Weigand Tom@omni-risk.com Teressa Richardson Teressa@omni-risk.com Personal Lines Patricia Micari Pat@omni-risk.com Joe Schepis Joe@omni-risk.com Mechelle Diaz Mechelled@omni-risk.com Surety Jennifer Spadaro Jen@omni-risk.com Penny Rocco penny@omni-risk.com Life & Health Joe Schepis Joe@omni-risk.com Claims Debbie Oggeri Debbie@omni-risk.com Accounting Maria Salvo Maria@omni-risk.com Administration Natalie Perry Natalie@omni-risk.com Candace Strasser Candace@omni-risk.com	Please visit us at our new website www.omni-risk.com Commercial Lines TAKE THE MYSTERY OUT OF PREMIUM AUDITS Premium audits continue to be a source of misunderstanding and consternation for many businesses, especially those that are involved in the construction industry and in construction-related trades. Premium audits are a means of obtaining information to determine the actual payrolls, sales, or other variable information that is used to calculate initial insurance premiums. Premium audits are a standard industry practice and insurance companies have the contractual right to audit policies they write. Insurance policies subject to premium audits include workers compensation and general liability. To help avoid audit mistakes that can lead to higher insurance premiums, here are some suggestions: Before the Audit: (1) Make a thoughtful decision about who from your company will be best able to work with the auditor. (2) Review prior years' audit billing statements and auditor's work sheets. (3) Gather pertinent accounting records, such as payroll journals, sales journals, cash disbursement journals, general ledgers, social security reports, and state unemployment tax returns. (4) Review payroll documents to make sure that the records include breakdowns of wage types by employee, department and class code. (5) If subcontractors or independent contractors are used, make sure to have on file certificates of insurance documenting that they have their own workers compensation and general liability insurance. When the Auditor Arrives: (1) Request that the audit take place on-premises so that all pertinent records are readily available. (2) Ask questions during the audit to clarify areas you do not understand. (3) Before the auditor leaves, ask for a hard copy of their specific findings. After the Audit: When the audit billing statement is received, review it carefully and compare it to the original policy. Note all changes and discuss any questionable areas with the auditor before agreeing to pay additional amounts due. Personal Lines PURCHASING A PERSONAL UMBRELLA POLICY IS A WISE DECISION One of the most important insurance policies you can buy is the personal umbrella policy, but many people are unaware they need one. This policy provides high limits of liability to protect you against a catastrophic liability loss. For example, a major car accident may injure numerous people or cause head injuries or death that will result in liability far in excess of the limits typically purchased in a personal auto policy. An umbrella policy sits on top of the auto and homeowners policies to provide higher limits of protection. In addition to providing higher limits, this policy normally pays for some losses not covered by the underlying policy, such as legitimate allegations concerning libel or slander. Personal umbrella policies are growing in popularity. In the past, only wealthy individuals and families purchased this coverage. Today, middle-income families also may procure this policy for protection in our society's increasingly litigious climate. As the tendency to sue for damages rises and awards granted by the courts grow, the personal umbrella policy is increasingly seen as an insurance necessity rather than a luxury. It is especially attractive because of its relatively low cost. In particular, you should consider purchasing a personal umbrella policy if you have certain characteristics or engage in certain activities, including the following. * Your total assets are greater than your underlying liability limits. * You are financially responsible for the actions of a young, inexperienced driver. * You live in an exclusive and affluent neighborhood. * You have a high profile career or high income. * You frequently host guests on your property. * Your residence includes a swimming pool. * You own waterfront property, a farm, or a ranch. * You own watercraft, aircraft, or off-road vehicles. * You own numerous rental properties. * You engage in extensive international travel for pleasure. Surety Bonds BONDING BASICS FOR GROWING CONTRACTORS Contractors that pursue public works project or privately funded projects that require surety bonding can maximize their surety credit by employing the following; Employ a construction oriented CPA firm that is well known and respected by the surety industry. Employ surety, insurance and legal representation that specializes in serving contractors and the construction related industries. Get involved in trade associations with a membership base of contractors that fit your profile. Life & Health Universal healthcare's dirty little secrets Patients in countries that provide government insurance often experience hurdles to care such as extremely long waitlists. By Michael Tanner and Michael Cannon, MICHAEL TANNER is director of health and welfare studies and MICHAEL CANNON is director of health policy studies at the Cato Institute. April 5, 2007 AS THEY TACK left and right state by state, the Democratic presidential contenders can't agree on much. But one cause they all support — along with Republicans such as former Massachusetts Gov. Mitt Romney and California's own Gov. Arnold Schwarzenegger — is universal health coverage. And all of them are wrong. What these politicians and many other Americans fail to understand is that there's a big difference between universal coverage and actual access to medical care. Simply saying that people have health insurance is meaningless. Many countries provide universal insurance but deny critical procedures to patients who need them. Britain's Department of Health reported in 2006 that at any given time, nearly 900,000 Britons are waiting for admission to National Health Service hospitals, and shortages force the cancellation of more than 50,000 operations each year. In Sweden, the wait for heart surgery can be as long as 25 weeks, and the average wait for hip replacement surgery is more than a year. Many of these individuals suffer chronic pain, and judging by the numbers, some will probably die awaiting treatment. In a 2005 ruling of the Canadian Supreme Court, Chief Justice Beverly McLachlin wrote that "access to a waiting list is not access to healthcare." Supporters of universal coverage fear that people without health insurance will be denied the healthcare they need. Of course, all Americans already have access to at least emergency care. Hospitals are legally obligated to provide care regardless of ability to pay, and although physicians do not face the same legal requirements, we do not hear of many who are willing to deny treatment because a patient lacks insurance. You may think it is self-evident that the uninsured may forgo preventive care or receive a lower quality of care. And yet, in reviewing all the academic literature on the subject, Helen Levy of the University of Michigan's Economic Research Initiative on the Uninsured, and David Meltzer of the University of Chicago, were unable to establish a "causal relationship" between health insurance and better health. Believe it or not, there is "no evidence," Levy and Meltzer wrote, that expanding insurance coverage is a cost-effective way to promote health. Similarly, a study published in the New England Journal of Medicine last year found that, although far too many Americans were not receiving the appropriate standard of care, "health insurance status was largely unrelated to the quality of care." Another common concern is that the young and healthy will go without insurance, leaving a risk pool of older and sicker people. This results in higher insurance premiums for those who are insured. But that's only true if the law forbids insurers from charging their customers according to the cost of covering them. If companies can charge more to cover people who are likely to need more care — smokers, the elderly, etc. — then it won't make any difference who does or doesn't buy insurance. Finally, some suggest that when people without health insurance receive treatment, the cost of their care is passed along to the rest of us. This is undeniably true. Yet, it is a manageable problem. According to Jack Hadley and John Holahan of the left-leaning Urban Institute, uncompensated care for the uninsured amounts to less than 3% of total healthcare spending — a real cost, no doubt, but hardly a crisis. Everyone agrees that far too many Americans lack health insurance. But covering the uninsured comes about as a byproduct of getting other things right. The real danger is that our national obsession with universal coverage will lead us to neglect reforms — such as enacting a standard health insurance deduction, expanding health savings accounts and deregulating insurance markets — that could truly expand coverage, improve quality and make care more affordable As H. L. Mencken said: "For every problem, there is a solution that is simple, elegant, and wrong." Universal healthcare is a textbook case. Construction News The Injury-Free Construction Site and the Foreman: An Underutilized Resource in the Safety Process March 2007 The ultimate goal of the safety function is to assist in creating a safe work environment for the organization's employees. by Peter G. Furst Liberty Mutual Group Traditionally, this means complying with the organization's safety program. Generally all safety programs have the same fundamental elements. These elements reflect the accepted safety practices as well as the national safety standards. A further refinement or improvement in this area might be the inclusion of specific elements in the program that address unique needs of the organization. These additional elements may include a substance abuse program, a fleet program, a modified duty program, a wellness program, lifestyle interventions, incentives, etc., to name a few. The Importance of Planning One more reason for poor safety outcomes can be attributed to management's failure to plan the work with safety in mind. And more importantly, when push comes to shove, production trumps safety and safety needs. Construction jobs are dynamic, and ever-changing. Planning is a necessary management tool and is a key factor in contracting used to marshal and control resources: men, material, and equipment. Safety is a managed process, just like any other in the construction business. One would not dream of running the job without a plan; safety management should also be treated with the same respect and diligence. Planning is a critical element of the estimate, as an estimate cannot be completed without a plan. Therefore, to set the stage for an injury-free work environment, the estimate needs to address this important element in its assessments of time, productivity, and pricing structure. The next step is for operations to devise a tactical plan, and field operations to ensure that the safety plan is carried out as part of the building process. For the planning to be effective, the organization needs to broaden the traditional approach to safety, which involves looking at hazards and exposures. To truly achieve safe work, it needs to address risk. Risk management consists of the logical process of identifying and analyzing loss exposures, examining alternative techniques for dealing with these loss exposures, selecting the most promising technique(s), as well as implementing and monitoring the results to see if, in fact, the loss exposure has been dealt with most effectively. A comprehensive risk management process not only looks at hazards and exposures to the worker, but at all the risks that reside in field operations, in the tactical work plan, in the means and methods employed to get the job done, as well as the processes and procedures for executing the work. So an integrated risk sensitive information operational planning process, when applied to the project delivery plan, will take a holistic approach to construction. This kind of outside the box thinking will not only look to the worker for safe performance, and the physical conditions in which the worker works, but to everything under the control of management. The integration of risk management into the strategic as well as tactical planning will effectively address the loss sources and allow the contacting firm to approach the creation of an injury-fee work environment in a systematic, objective way, while making the best decisions given available The Importance of Execution Going back to the traditional safety approach, there is another area that contributes to underperformance in safety, and that is in the area of execution. Line management fails to adhere to the requirements of the safety program. It allows workers to take shortcuts in the name of productivity. Line managers may "look the other way" when "productive" workers do not follow good safe work practices. All this may seem like it's benefiting the organization, but in the long run, the negative results are much more detrimental and insidious in nature. To create an injury-free work environment, operations must "own" safety and safe work practices, and ensure that workers diligently follow the required safety work practices. The key position with the greatest impact in creating an injury-free work environment in construction field operations is the person having direct oversight of the work crews. That usually is the foreman. It is the foreman who is with the crew most of the time and has the greatest opportunity to observe the workers' behavior, and has the authority to direct the work and make necessary changes. It is this person who should be held responsible to ensure that only safe work practices will be allowed on the worksite, that proper planning and risk assessment has been conducted, and that a safe work environment can and will be attained. The Importance of the Foreman's Role Building on this obvious conclusion, the next question is, is the foreman capable of taking on this task. The foreman obviously will have to become fairly familiar with the content of the safety program to be held accountable for the safe work practices of the workers under his or her supervision. Before the foreman is given the responsibility of managing the workers' safe behavior, let's assess the foreman's capability to take this on. There are three levels of expertise/experience in both the workforce and management. The workforce stratification starts at the bottom with the unskilled worker (helper), the semi-skilled worker (apprentice), and the skilled worker (journeyman). Management starts with the line manager (supervisor/foreman), the middle manager (superintendent/project manager), and senior management (executives). Within each group, advancement in the ranks is a progression from the bottom to the top. The lowest level manager (foreman) in construction traditionally came from "the trades" or the workforce. One becomes a supervisor (foreman) by being exceptionally good in doing one's job as a "tradesman." The tradesman must be a good technician, know the skills of the trade, be self-directed, productive, show initiative, and be a problem solver, to name a few. The requisite skill set for a supervisor are these same technical skills, as they must oversee other possibly less experienced tradesmen, but they also need additional skills. A few important new skills required to be a successful supervisor are planning, organizing, controlling, risk assessment, administration, and human relations. These skills are not typically learned while practicing one's trade. The Importance of Management Training Newly promoted supervisors in construction are usually not given any management training. It is expected that they somehow can do this intuitively. Only a small percentage, however, have the innate ability to seamlessly make the transition. Most struggle to some extent, and some fail. No one would dream of tossing their kids into a lake and ask them to swim across without training, protection, and supervision, yet in industry, we routinely do this to our employees! If we assume that almost all of our workers are reasonably rational individuals, then the question is: Why do they sometimes act in such unpredictable ways? A simple response to that is that people and their personalities and behaviors are a product of their learning and life experiences. Though some of the employee's actions may seem irrational to the supervisor, they are perfectly logical to the worker. To really understand employees, the supervisor would be able to fairly accurately predict the employee's reaction to criticism, the assignment of a new task, or some change in operations or procedures. This is an important part of the supervisor's job. So, an important element in managing people is understanding the basics of motivation. People strive to satisfy a hierarchy of five basic needs (Maslow's theory), with the most elemental or compelling ones coming first. There are five basic needs. The first is the need to be, and stay, alive (biological). To satisfy this need we eat, breath, sleep, see, hear, etc. The next is the need to feel safe. We like to feel safe from accidents, pain and suffering, criminals, an uncertain future, a changing present, etc., and to this end we have laws, contracts, insurance, social security, etc. to protect us (security). The third need is the need to be social. Since the beginning of time, we have lived in social groups of one kind or another. This need is carried over to our family and work life. The fourth need is the need to feel worthy, respected, and valued (esteem). Since the other three needs are easily met in modern life, this one becomes increasingly important to the individual. And the last, being the need to do work that we like to do, and to do it well (self-actualization). The degree of the importance of these may vary in individuals, but basically they are operative at all times. The supervisor needs to understand that the lowest order need that is not satisfied is the strongest at that moment in time. And once that need is satisfied, it no longer motivates or drives the individual to persevere. So if we want our employees to exert greater effort, we then need to address the next unsatisfied employee's need. People tend to move to a lower need level if they perceive that there is a threat there, this may include such things as change in general, and specifically shutdowns, layoff, acquisitions, new supervisors, policies, procedures, initiatives, to name a few. Many people are happier at work than at home. The job may be challenging, the peers may be cooperative, and the supervisor supportive. Herzberg's theory, places the above five needs into two general categories. The organization generally provides for the first two levels of needs. The income provide for the necessary life needs and safety in providing a safe work environment. To have the social contact, be appreciated as well as enjoy one's work is more often a function of the individual's supervisor's actions and behaviors, management, and leadership style. A good supervisor can go a long way toward satisfying the individual's need by the way they manage. This can be accomplished by treating the worker with respect and dignity, by making the work meaningful, being empathic, expressing appreciation of their efforts, providing challenging assignments, and being supportive, honest, and fair. To achieve an injury-free workplace, we need the people in the organization behaving in such a manner so as to enable the achievement of the injury-free workplace goal. This applies to all levels within the organization. In construction, generally the only people whose behavior is scrutinized are the workers. The worker can control his/her behavior. But this is only one aspect of achieving an injury-free workplace. This, to some degree is addressed in some of the more progressive companies. They have instituted some form of behavioral safety. They manage worker behaviors through feedback and consequences. This can only be fully successful if all levels of management also behave appropriately and ethically. If we look at the project delivery process, it is management who controls everything on the project. Management to some extent also controls the worker though hiring practices, task assignment, oversight, training and education, recognition and incentives, etc. Management controls the time, the speed, shift duration, the place the worker works, productivity goals, crew size, equipment, tools, etc. The worker really has two choices: to work or not to work. And since the worker has to earn a living, they will generally do what management wants them to do, sometimes even if it is not safe. Another aspect of this scenario is that if a worker willfully or unintentionally engages in unsafe behavior, then it is the responsibility of the supervisor to intervene and stop it. Therefore the first-line manager (supervisor) plays a key role in ensuring that the workplace is injury free. To meet the organization's goals and objectives, management must manage performance. To mange performance, mangers need to establish objectives, create standards, and targets. Employees must clearly know the organization's expectations and must be empowered and enabled to achieve the goal. So workers and all levels of management must have clearly established expectations and must be held accountable for them. Of course, it is understood that the organization must provide the resources, the knowledge, the information, the tools, and equipment to enable the employees to be successful. The foreman is a grossly underutilized resource when it comes to managing safety effectively on the construction site. With a little education, some practical training, guidance, coaching, and support, the foreman can become a highly effective extension of management in the effort to create and injury-free work environment. To add someone to this email list, send newsletter@omni-risk.com and put in subject Line “Add to Newsletter” To be removed from this email, send newsletter@omni-risk.com and put in subject Line “Remove from Newsletter”