Opinion: Boost Safety to Control Risks, Cut Losses
By Steve Silverman
Vice President
Inland Marine Insurance
Hiscox
This Opinion piece appears in the July 12 print edition of Transport Topics. Click here to subscribe today.
The recession appears to be waning, but trucking still is feeling the downturn’s effects and is keeping a watchful eye on expenses, including insurance. Going without insurance is unthinkable, of course, but some control over the costs is possible with careful monitoring and deliberate action in the areas of risk management and loss control.
Fleets that implement effective risk-management programs are more attractive to insurers, leading to more favorable pricing and coverage. This is particularly true for firms with fewer accidents per mile and fewer loss dollars when compared with firms of similar size and operation.
Although this program seems fairly obvious, there always are carriers whose management thinks they can’t afford it. That’s understandable, but also shortsighted, because cutting corners could put a firm in jeopardy if losses rise.
Instead of taking chances, carriers should determine what they can do to operate better and more safely while also controlling costs. In an effort that must start at the highest levels of company leadership, carriers must identify and analyze the full range of risks and take action to mitigate them. That includes making sure that everyone who works for your company understands the importance of safety in general and risk control in particular.
Insurance should be a major part of that effort. Because trucking companies face a wide range of potential losses, coverage of all types is needed, including, but not limited to: auto liability, workers’ compensation, physical damage, cargo and property.
Active loss-control strategies must be equally comprehensive because no matter how careful a carrier may be, accidents do happen, and some losses simply can’t be avoided.
If an accident occurs, a carrier that is forced to react without the benefit of prior planning loses much of its control of the situation. Law enforcement may have to be involved, along with attorneys and claims professionals.
Managing post-loss fallout can be expensive, confusing and time-consuming.
To avoid that scenario, budget in an orderly and cost-effective way both for preventive activities and for a well-planned strategy for post-loss actions — and do it well ahead of time. Strategies for keeping safety loss at a minimum may even provide a possible defense if the situation winds up in court.
On a more positive level, a corporate commitment to safety helps attract customers. As shippers’ margins have shrunk, they have become more demanding about lower rates and greater safety. They want to be sure their transportation partners have measures in place to prevent loss and disruption to their businesses. They also want reliable, well-maintained trucks and trained drivers with good safety records.
A solid risk-management program also can help to recruit and retain quality drivers with the solid safety records required by the Federal Motor Carrier Safety Administration’s upcoming CSA program.
Putting risk management to the forefront helps to attract other key employees as well and bestows a good reputation on a carrier both in the trucking industry and the community.
To establish a stellar risk-management program for your company, begin by making safety an ongoing and consistent corporate message.
All personnel — from drivers, mechanics and dispatchers to company managers and top executives — should be included in the program.
If the company heretofore has expected dispatchers to push drivers to make a certain number of deliveries even if they are fatigued, managers must make sure there is an immediate change of message, with safety canceling the old mandate of making deliveries at all costs.
Using speed too excessive for driving conditions and delaying vehicle maintenance also are practices that must stop, with the word going out from the top of the organization down to the troops.
Further sensible procedures for reducing risk include:
• Reviewing routes and locations of key shippers for the most efficient schedules to avoid congestion and construction activities.
• Implementing incentives or recognition programs to encourage safe driving.
• Giving drivers the authority to make practical decisions when faced with less-than-safe conditions.
• Encouraging effective pre-trip safety checks and vehicle maintenance.
• Steering drivers away from rest stops and overnight locations known to be cargo-theft hot spots. It’s also useful to mark vehicles so they are easy to spot if they go astray and to equip them and their loads with tracking devices.
When losses do occur despite careful risk management, the most critical factor in recovering a stolen load is how quickly the details are reported to law enforcement and to specialist cargo-theft units. A new national cargo theft-data sharing system dubbed CargoNet helps greatly with this and also will allow better theft pattern analysis as the database grows. Our firm and many of our competitors are enrolled in CargoNet.
A robust and carefully implemented program for risk management and loss control will mean:
• Fewer unexpected out-of-pocket costs.
• Fewer hours spent by management on legal and other fees after a major loss.
• Consideration of more cost-effective insurance plans.
• Help for the claims team if something goes wrong.
• Lessened negative effects to the firm in the event of an accident — or unflattering media coverage.
And when insurance renewal time comes, trucking companies that have taken these steps will find their efforts rewarded.
Hiscox is an international specialist insurer with headquarters in Bermuda and offices worldwide. Based in Boston, the author is part of Hiscox USA.
