Best Practices for Risk Management

09/08/2022 Written by: Gary Semmer

The construction industry is facing a number of “external” challenges ranging from materials price inflation, supply chain delays, and labor shortages which translates into scheduling, productivity, and profitability issues.

Although we have no control over these external factors, we can help our construction clients control the following equation:

Total Cost of Risk (TCOR) Premiums + Deductibles + Risk Management Expenses/Construction Revenues= .0050% to 1.5% (acceptable range) and maintain a competitive advantage.

Let’s explore the “Best Practices” of a Risk Management Program to achieve these results:

  • Safety Program/OSHA Compliance: Review every element of your program including safety manual, safety orientation & training, and OSHA compliance with your safety director or other responsible individuals. If you use a 3rd party safety consultant consider having a mock OSHA audit performed to get ready should you get pulled into an OSHA situation to avoid steep fines and reputational harm. Share these results with your insurance carrier’s loss/risk control rep or consultant to demonstrate you’re doing everything possible to mitigate risk.
  • Claims Management: Review your past five years of claim history/loss runs for frequency trends and severity claims to determine how you can either avoid them or mitigate them in the future. You should also perform a periodic claims review with your insurance broker & Insurance carrier to close out older claims that can impact your Workers Compensation EMR and General Liability & Business Auto premiums.
  • Contract Review and Compliance: Set up a standard contract review process to make sure your insurance program aligns with the insurance requirements in contracts your signing to avoid any surprises which can land you into a “breach of contract” claim and lead you into possible litigation with upstream parties you’re contracted with.
  • Renewal Preparation: This is becoming an “ongoing” process with the steps above to put yourself into the most favorable position as you start the renewal process three to four months prior to renewal dates.

First step is to meet with your insurance broker to review renewal updates (i.e. payrolls, sub-work values, equipment, and vehicle changes) along with any updates on safety/ OSHA issues and open claims that will impact your renewal program.

Next, based on market conditions you should discuss what your current carrier(s) renewal appetite is, and whether you need to go to market and seek alternative proposals. If your current carriers are going to restrict any coverage require higher deductibles/retentions or increase rates outside of the normal range, then ask your broker to select two to three carriers who fit your risk profile. Have them prepare submissions to go to market and set a deadline of three weeks prior to renewal to review and evaluate proposals.

  • Alternative Marketplace: In going through the renewal process, you may find that you are in a better position to take on more risk by securing higher deductibles/retentions. Conversely, you may be “captive ready” and may want to entertain a group or single cell captive program to take control over your program.        

At AssuredPartners, we represent over 20,000 construction clients nationwide with 200+ offices to serve you. Contact our experienced team of Construction & Surety Professionals to help you achieve your lowest possible Total Cost of Risk (TCOR).

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