Antony Ireland

Antony Ireland is a London-based financial journalist. He can be reached at

2014 Teddy Award Winner

The TLC Behind the Roar

A proactive and holistic approach to employees’ well-being has resulted in huge reductions in work-related injury claims for Harley-Davidson. 
By: | November 3, 2014 • 7 min read

Their iconic machines are renowned the world over, embodying care-free thrills on the open road. Yet behind Harley-Davidson’s roaring engines and glinting chassis is a measured approach to manufacturing — particularly when it comes to employee safety.

Indeed, so comprehensive is the company’s approach to its workers’ health that it scooped a 2014 Theodore Roosevelt Workers’ Compensation and Disability Management Award.


Dave Eslinger, a Milwaukee-based senior vice president of claims with the Hays Cos., has seen firsthand how Harley-Davidson’s workers’ compensation program has evolved over the last few years. He believes the company has become unrivaled among its peers when it comes to the allocation of resources and expertise for reducing claims.

“The program is different [from others in the manufacturing sector] primarily because of the team Harley-Davidson has assembled to monitor its claims. Other employers often don’t devote that type of resource to their claims function,” he said. “They are doing a great job.”

Beth Mrozinsky, director of workplace safety and health, Harley-Davidson

Beth Mrozinsky, director of workplace safety and health, Harley-Davidson

Beth Mrozinsky, head of workplace health and safety at Harley-Davidson, admitted that sweeping improvements to the company’s approach to safety have been “a very expensive proposition,” but she believes the outcomes will far outweigh the costs. The numbers already speak for themselves.

Due to the nature of the business, which revolves around the production and testing of high-spec motorcycles, often involving moving heavy machinery, the majority of claims are musculoskeletal disorders and injuries. In 2009, these injuries accounted for 80 percent of total claims. But thanks to widespread initiatives to improve risk awareness and safety procedures, that figure fell to 50 percent by 2013.

Total injuries fell from 778 in 2009 to 252 in 2013. Meanwhile, workers’ compensation claims were reduced by 68 percent in that time, and more than $3.6 million in annual workers’ compensation claim costs have been wiped off the bottom line of the business, while insurance renewal rates are down.

Not bad, considering a recent change to the company’s manufacturing operating system allows it to increase its workforce up to 30 percent during high-cycle production times — resulting in an influx of untrained temporary workers. The average age of Harley-Davidson’s manufacturing employee base is currently between 45 and 50 years old.

Shifting Gears

So how did Harley-Davidson improve workplace safety so dramatically in such a short time? The first challenge was to overcome lingering liabilities from years gone by. It placed all legacy claims on individual action plans with the goal of complete resolution — and to date has closed 95 percent of these claims and their long-term liability risk.

Looking forward, the steps Harley-Davidson has taken to improve the safety of its employees and claims costs to the company are wide-reaching. Having severed ties with unwanted vendors, the company created a “hybrid workers’ compensation claims model” through which a focus group comprised of Harley-Davidson and vendor partners, including health and physical therapy center staff, field nurse case managers, consultants and brokers regularly report and analyze claims developments.

Emilia Molle, corporate wellness manager, Harley-Davidson

Emilia Molle, corporate wellness manager, Harley-Davidson

Harley-Davidson has also invested heavily in health, safety and risk management-related staff. Indeed, Harley-Davidson’s employees have access to a range of health facilities, from wellness centers to gyms and physical therapy centers, all designed to keep them in optimal shape and reduce the risk of injury.

On-site employee medical resources include nurses, case managers, physicians, occupational/physical therapists and athletic trainers, in addition to full service health and fitness centers. This has proven one of the most effective ways of reducing claims costs.

In the last year, the company boosted its on-site physical therapy center resources in the form of full-time certified athletic trainers to complement its existing early intervention program for musculoskeletal disorder issues; it hired a dedicated medical director; and also put in place a full-time ergonomic specialist at each manufacturing location to identify and eliminate risks in the workplace.


“Harley-Davidson is very aggressive with early intervention,” said Eslinger. “They have athletic trainers on staff to treat minor strains, for example, which can take care of the claim right there without the need for any outside medical intervention or attention.”

The company has also hired a dedicated workers’ compensation adjuster for each region, each with a maximum caseload cap and the creation of an annual “Adjuster Summit” to align findings.

The company instigated corporate-wide ergonomic projects to educate staff on the risks associated with each particular task, as well as numerous other initiatives to raise risk awareness among the workforce — including the two-year implementation of a health and safety technology system to standardize safety programs.

The three top incident types at each manufacturing location are also subject to their own focus groups, while complex claims are subject to weekly case management reviews.

Sue Gartner, corporate health services manager, Harley-Davidson

Sue Gartner, corporate health services manager, Harley-Davidson

Harley-Davidson has also developed return-to-work and stay-at-work policies including lifestyle assistance, while also updating its employee selection process to include comprehensive medical screening to determine the employee’s capability to safely perform the job.

“This didn’t start overnight — our program has morphed over the years. Every step of the way we would analyze what was going well, and what was not, and we would revamp our process and go again,” said Sue Gartner, corporate health services manager at Harley-Davidson.

“We were never sitting still — we were always moving, like a chess piece,” she said.

Culture Shift

But more challenging than implementing any of the individual initiatives has been the process of effecting an organization-wide attitude shift — resulting in increased accountability, risk awareness and discipline.

“When we were initially involved, there was a loose set of procedures in place that have tightened up significantly with respect to the performance of people across the team,” said Eslinger, reflecting on how far the company has come.

“From defense counsels to nurse case managers, to third-party administrators and broker consultants; everyone has responsibility to the program.

“The company has created an awareness that it is serious about its workers’ compensation program and is trying to curb costs. It’s been a culture shift that has evolved over time.”

“We were never sitting still — we were always moving, like a chess piece.” — Sue Gartner, corporate health services manager at Harley-Davidson

Eslinger added that Harley-Davidson’s investment in its program has led to fewer claims disputes — not only does it apply a more rigorous approach to claims investigation, but perhaps more significantly, the provision of on-site health services for its staff has reduced the need for third-party medical treatment and challenges to settlements through independent medical exams.

“The big emphasis is on timely contact [with employees], treating workers fairly, paying the claims you owe, and denying and defending the ones you don’t. If someone is injured on the job they are taken care of, but if there are questions concerning the claim or accident, it is going to be investigated.”

Along the way, Mrozinsky and Gartner faced a number of obstacles, including a misalignment of stakeholder interests and needs.

“We knew we needed to change the culture but we were not prepared for the level of resistance,” Mrozinsky said, commending the “personal and unwavering leadership support and involvement by Harley-Davidson’s CEO, vice president of HR and other senior company leaders,” as well as the role of vendor partners such as third party administrator Gallagher Bassett, in getting the message across.

“It’s truly a partnership with our vendors, both internal and external. We couldn’t do it if we didn’t all agree to the strategy and were aligned philosophically,” said Gartner.

Mrozinsky added that she is particularly proud of the way the workers’ compensation program has become holistic — both in its organization and also the approach to managing employees’ general health.

“We went from talking about the health center, the fitness center, the therapy center, to talking about the wellness center collectively rather than its individual components,” she said, while Gartner added: “We had great program in the past but things were fragmented. We’ve pulled together and are working as a team. We are all of one mind-set and know what direction we are going in.”


“We try to think outside of the box to respond to employees’ needs, and look at employees’ whole wellness, not just responding to work-related incidents,” Gartner said.

That means going out to the shop floor to talk to employees, instead of waiting for employees to come talk to the claims team.

As well as saving Harley-Davidson millions in claims losses last year, the provision of wellness services has also contributed to improved employee engagement and productivity.


Read more about all of the 2014 Teddy Award winners:

11012014_02_cs_honda_150x150Building Value with Trust: Honda of South Carolina boosted its involvement with injured worker cases, making a positive first impression on employees and health care providers.


11012014_03_cs_harley_150x150The TLC Behind the Roar: A proactive and holistic approach to employees’ well-being has resulted in huge reductions in work-related injury claims for Harley-Davidson.


11012014_04_cs_compass150x150Quick to Act: Compass Group is lauded for its safety initiatives and for a return-to-work program that incorporates all of its business lines.



11012014_05_cs_coldspring_150x150Healing the Healers: Teddy Award winner Cold Spring Hills Center for Nursing and Rehabilitation proved that even small organizations can make a huge difference in their employees’ lives.


Antony Ireland is a London-based financial journalist. He can be reached at
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Supply Chain

An Eye on the Chain

Being a prompt payer insures against insolvency supply chain risk.
By: | October 15, 2014 • 6 min read

Supply chain risk had been steadily escalating for the last few decades, but it took natural disasters in Japan and Thailand in 2011 to bring the true extent of the risk to the surface.


In addition to the enormous financial and human losses suffered in those countries, businesses around the globe faced major disruption as key suppliers were wiped out and supply chains ground to a halt.

It was a harsh wake-up call.

“The events in Japan and Thailand really gave rise to a realization of how much greater the risk in people’s supply chains is today than 10 or 20 years ago,” said David Shillingford, senior vice president, supply chain solutions for Verisk Analytics.

“Supply chains have become more efficient — thinner, longer — but in many ways less resilient.”

Video: Supply chain risk management as discussed at the University of Bath.

In the automotive industry, for example, there are significant interdependencies regarding raw materials and parts. The Japanese tsunami wiped out essential component manufacturers and halted car production around the globe.

Meanwhile, added Shillingford: “Supply chain disruption in the pharmaceutical industry can be very costly because of the value of the ingredients, and in both pharmaceuticals and food there are evolving compliance risks to consider too.”

In fact, in today’s interconnected world, almost all industries are affected by supply chain risk. And as an increasing amount of production is farmed out to specialist manufacturers — often in emerging markets — risk is becoming more concentrated.

Sid Feagin, director, enterprise risk management, Aon Risk Solutions, noted that it is now common for firms across many industries to farm out 85 percent or more of their core product to a long chain of suppliers.

“In many cases the risks associated with this are uninsurable, which makes the management of supply chain risk paramount to the success of an organization,” he said.

A Lack of Visbility

However, gaining visibility into the risks of suppliers deep into a complex supply chain is extremely difficult, and many companies have turned to analytic software for help.

“A lot of businesses have a pretty good grip on their direct suppliers, but it’s the second, third, fourth tiers in their supply chains where there is a gap in knowledge and information and an accumulation of risk,” said Caroline Woolley, leader of Marsh’s global business interruption center of excellence.

Computer manufacturer Lenovo uses suppliers from all around the world. According to Mick Jones, the firm’s vice president of supply chain strategy worldwide, analytics have become an essential risk management tool in addition to improving business efficiency. So much so that the firm has created a role akin to a “chief analytics officer,” running analytics teams stationed around the world, he said.

Caroline Woolley, Leader, Global Business Interruption Center of Excellence, Marsh

Caroline Woolley, Leader, Global Business Interruption Center of Excellence, Marsh

“Analytics offers massive value to the business. We are at a start of the journey of using analytics to help us focus on risk. We are investing a lot of time in getting product visibility and order visibility along the entire supply chain, which is an area we can always improve on,” said Jones.

Jones explained that analytics have become essential given the volatile environment of the last five years characterized by natural disasters, socio-economic unrest and financial instability.

“The algorithms in the software are becoming more intuitive and intelligent, so you are able to do more with data and analytics,” he said.


“In four years, we’ve moved from a very ‘descriptive’ analytics approach — reporting, scorecards, dashboards — through to a more ‘prescriptive’ approach, using simulation and optimization tools to almost predict what is going to happen going forward.”

However, meaningful data on supply chain risk is patchy because a great deal of supply chain risk is not insured and companies typically don’t keep detailed records of their losses. Such risk historically fell between the cracks as far as insurers were concerned, but the last decade has seen a number of specialist products emerge to protect companies against these risks.

“These losses were treated almost as operational risk, which was something companies had to deal with on daily basis, so they weren’t recorded,” said Woolley.

“As we are seeing more of these incidents and getting more data on the impact of supply chain risk, we are seeing a lot more interest in alternative supply chain policies.”

Shillingford said that analytics being developed by Verisk could make it easier for both companies and insurers to identify and calculate the impact of supplier risks more accurately.

“We want to encourage ‘risk-adjusted supply chain optimization.’ Often, supply chain optimization focuses only on efficiency, but we rarely hear people talk about risk and resiliency. In order to do that you have to put a value against the risk,” he said.

“The events in Japan and Thailand really gave rise to a realization of how much greater the risk in people’s supply chains is today than 10 or 20 years ago.”  — David Shillingford, senior vice president, supply chain solutions, Verisk Analytics.

“The chasm between the amount of risk not insured at the present time and the amount of capital available to be deployed to insure supply chain risk [results from a] lack of visibility into the risk. If we are able to provide that visibility it could be the biggest risk transfer opportunity of the next 10 years.”

Tracking Insolvency Risk

While data on weather or catastrophe-related supply chain losses is increasingly abundant, it is far more difficult to track the risk of insolvency within a supply chain in real time. The financial data of companies is released sporadically and can be incomplete. Given the precarious nature of the economy since 2008, the risk of suppliers going bust is very real.

“Insolvency is a significant risk but it may be near impossible to fully understand,” said Feagin. “The key to understanding whether a supplier is solvent or not comes down to access of information.


“I see companies relying on various sources of information which may be too old or inaccurate to draw relevant conclusions from.”

According to Shillingford, while there are a variety of companies that offer services to assess financial strength, “each has a different methodology, usually expressed as a score, and all face similar challenges obtaining financial data for suppliers to their client’s suppliers.”

Indeed, the software industry has yet to develop an approach that can map solvency risk in real time.

Jones said that analytics play virtually no role in mitigating insolvency risk in Lenovo’s supply chain. “We deal with global suppliers who are based in many parts of the world and the data is difficult to get, but we do have a very sound supplier management approach that allows us to identify issues earlier and more collaboratively.”

Feagin said it’s crucial for companies to focus on their relationships with their suppliers, rather than just crunching numbers.

“In order to get these numbers you need to build up a relationship and trust with the suppliers. Without a strong relationship, you don’t have much power to gain information.


“There is not a piece of software out there that can tell you whether or not to do business with a particular vendor — it comes down to taking a strategic and focused approach to managing supply chain risk.”

He also noted that companies add uncertainty to their supply chains by failing to pay their suppliers promptly.

“The greatest insurance [against insolvency risk in the supply chain] is being a prompt payer and having a good relationship with suppliers,” he said.

Antony Ireland is a London-based financial journalist. He can be reached at
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Construction Risk

Keeping the Water Flowing

The project to install an intake tunnel beneath Lake Mead has been beset with delays and insurance losses.
By: | August 4, 2014 • 7 min read

It has been described as one of the most challenging tunneling projects in the world. As if the technical demands weren’t tough enough, a major city is waiting on its completion in order to avert a potential water supply crisis.

Lake Mead is the largest reservoir in the United States, fed primarily from snowfall from the Rocky Mountains. The lake is the primary water source for Las Vegas (providing 90 percent of its drinking water), but due to increasing droughts, water levels are gradually declining, putting the city’s and surrounding areas’ water supply at risk.


The lake currently feeds the valley through two intake pipes, but with water levels dropping year-on-year, it is projected that one of the existing pipes will soon find itself above the water and obsolete.

If successful, an $817 million project to build a third intake pipe under Lake Mead, sponsored by the Southern Nevada Water Authority (SNWA), will vastly improve the efficiency of water flow to Las Vegas. At present, almost half of the water piped through the existing intake routes is lost through leakage.

Video: This CBS Evening News report on the drought in Nevada and California highlights the Lake Mead construction.

However, Lake Mead Intake No. 3 has been beset with problems and delays. The ground beneath the lake has proved hazardous and unpredictable. Since construction began, the tunnel has suffered collapse, flooding and even a fatality.

SNWA declined to speak to Risk & Insurance® about the project as it was in the midst of negotiating insurance renewals. However, it did confirm that the latest setbacks — worse than expected ground conditions and damage to a major digging machine — have pushed the projected completion date back to “summer 2015.”

Mark Reagan, leader of Marsh’s Global Construction Practice, assembled the project’s insurance program on behalf of SNWA and lead contractor SA Healy (parent of Las Vegas Tunnel Constructors). It is an insurance program that has already been put to the test.

According to Reagan, the program — which is underwritten jointly by numerous leading insurers from around the world, including the major European reinsurance markets — has so far taken the various losses in its stride.

“Builders risk coverage is designed to deal with issues arising from collapses and other unforeseen events, and is responding appropriately. There is still some work to do, but a substantial portion [of the claims activity] has been agreed to,” he said.

While the Lake Mead project may be challenging, engineering underwriters suggest that collapse, flooding and even fatalities are nothing new when it comes to projects of this nature.

The safety and working conditions of the contractors, who toil in high temperatures and unpredictable conditions, are covered by a workers’ compensation policy. Sadly, one contractor was killed in 2011 when a pressure build-up behind a wall he was working on led to a lethal explosion.

“It is always tragic when there is a fatality. In this case, the workers’ compensation was effective and kicked in immediately,” said Reagan.


In addition, the program includes professional liability policies, while the various contractors and subcontractors on the project may also arrange separate property insurance for certain machines and equipment.

On revenue-generating projects, delays like those experienced at Lake Mead could cause billions of dollars of business interruption losses, which would often be insured under a delayed start-up policy. However, said Reagan, public entities with large balance sheets typically choose to absorb this risk rather than buy insurance.

Regardless, there is no potential income from the Lake Mead intake tunnel to insure; its entire purpose is to improve the water supply to Las Vegas. Yet, while the delays may not have catastrophic financial implications, they could be a disaster for the city if the project is not completed soon. One working intake pipe is simply not enough.

Risky Business

While the Lake Mead project may be challenging, engineering underwriters suggest that collapse, flooding and even fatalities are nothing new when it comes to projects of this nature.

“Tunneling projects all over the world have encountered problems, and it is not unusual for a tunnel project to face a delay,” said Manfred Schneider, head of engineering, North America, for Allianz.

The biggest challenge when tunneling, he said, is that it is almost impossible to predict how the ground beneath the surface will perform.

“Any tunnel project, to a degree, faces uncertainty. The problem is that you can only be 100 percent sure what you are facing when you start digging,” Schneider said.

“There are always imponderables when you start digging hundreds of meters under the earth.”


According to Marsh’s Reagan, even the most well prepared tunnel engineers can face setbacks.

“You could go to a site and drop 100 test bores, but until you put your 5- to 6-foot diameter pipe or 20-foot tunnel in the ground you just don’t know.”

“It is vital,” said Patrick Bravery, an underwriter at Lloyd’s syndicate Talbot Underwriters, “to have a system in place enabling you to react to what you find and adjust your design and processes to meet the challenges the ground throws at you.

“The challenge is to weigh the technical requirements the ground imposes upon you against the commercial realities of trying to deliver the project on time and on budget — that’s where tension can arise.”

According to Bravery, a major concern for tunneling underwriters is that the cost to repair a tunnel problem is often more than the original construction cost.

“This gearing effect has caught insurers out in the past,” he said.

He added that problems and costs can be further exacerbated when tunneling under a body of water.

“It is essential to keep the tunnel bore dry and open — if you lose that position and the bore becomes inundated, the cost to recover the situation is going to climb very rapidly.”

Reagan said that, while the issues experienced at Lake Mead have caused lengthy delays, the cost could have been worse.

“It wasn’t as bad economically as some collapses have been, relative to the cost of the project,” he said, estimating that the most recent collapse equated to about 4 percent to 5 percent of the value of the tunnel.

Reagan added that only underwriters able to absorb potential catastrophic losses involve themselves in these projects.

“This is a beefy business; you don’t get hobbyists in this space,” he said.

“Tunneling is a high hazard, catastrophic loss business. Insurers need strong balance sheets, engineering expertise and appetite.”

Market Capacity

Reagan — whose employer, Marsh, brokers the majority of the world’s major tunnels — estimated there is typically capacity of about $500 million for large tunneling projects. But according to Schneider, insurers were “scratching their heads” back in the early 2000s over whether to even continue insuring tunnels due to the high levels of uncertainty and frequency of expensive losses.

Since then, the insurance and tunneling industries jointly produced a code of practice for contractors designed to mitigate risk.

“The code of practice didn’t solve all the issues, but it did make tunneling more insurable,” Schneider said, explaining that, while not all insurers insist on contractors meeting code of practice standards as a condition of coverage, it is common practice — particularly in Europe.


“We expect contractors to demonstrate they are following a rigorous risk management program,” said Bravery, noting that Talbot benchmarks potential clients against the code. And according to Bravery, risk management standards have improved dramatically over the last 10 to 15 years.

“Insurers can take some credit, but most of the credit has to go to the contractors and client bodies who recognized that the best way to get secure funding and approvals was to demonstrate they could work underground more predictably, on time and on budget,” he said.

“Regular collapses were not helping them.”

With loss experience improving, competition to insure tunnel projects is increasing.

“The number of insurers prepared to consider tunneling projects has grown massively in the last five or six years,” said Bravery.

“The appetite for tunneling projects is sufficient and quite competitive now, compared to 10 or 12 years ago.”

Events at Lake Mead have done little to dispel the perception of tunneling as one of the riskiest construction endeavors. But there is no time to dwell on that.

Insurance is doing its job to keep the project going, and the future of Las Vegas depends on it.

Antony Ireland is a London-based financial journalist. He can be reached at
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