The Courage to Create
When I think of the courage to create, and the accompanying traits of passion and perseverance that define Risk All Stars, I can’t help but think of Renee Crow of Kimpton Hotels and Restaurants.
Like a number of our Risk All Stars winners, Crow manages risk at a company that is experiencing rapid growth. Rapid growth brings opportunity. But rapid growth, as we know, carries risk.
When Crow joined Kimpton, the company owned 24 properties. Now, it owns more than 60.
Although customer service underlies so much, there is a laser focus on it in the hospitality business. Much is expected and very little is forgiven.
The organizations these professionals manage risk for are stronger because of their courage.
According to Crow, Kimpton sets high customer service standards, but it was also facing legal snares from guest and employee interactions gone bad. She devised a training program that enabled Kimpton staff across the country to re-enact various customer service scenarios and learn from them.
Crow humbly states that she did what she did because she’d seen enough bad training approaches to know better. But I say what she did was innately brilliant.
She took a risk, or a negative, and created employee engagement across the board in seeking solutions. This is an era when employee disengagement is reported to be at high levels across many industries. The cost of risk at Kimpton has plummeted as a result.
The creative courage of Risk All Stars winner Kris Finell of Rytec Corp. also comes to mind. Finell possessed not merely the courage to create, but also the moxie to confront.
Rytec, another fast growing company, is a manufacturer of high-speed industrial doors. You can easily see the risks and the results when something goes wrong.
Rytec salesmen were in the habit of removing industrial door safety features at the behest of customers. Finell, practically brand new in her role as risk manager, put a stop to it.
Waivers that allow customers to remove safety features on Rytec doors are now a thing of the past.
Finell also had the courage to remove a broker that was friends with one of her supervisors. The relationship wasn’t working for her vision, so she vetted a number of candidates and chose one with the right fit for her.
Talking to these Risk All Stars reminded me that it’s not enough to see something; you have to say and do something. The organizations these professionals manage risk for are stronger because of their courage.
2015 Risk All Stars
Angeli Mancuso: On a Mission to Revitalize (+Responsibility Leader)
Manager, Employee Health & Safety, Cottage Health System
By getting the board of directors behind a goal to decrease patient-handling injuries, Angeli Mancuso has improved employees’ quallity of life.
Timothy Fischer: With Military Precision (+Responsibility Leader)
Tim Fischer was given nine months to address the risk implications of a sizable spin-off.
Tim Kirsch overhauled his company’s safety mission, protecting drivers on the road while slashing workers’ comp claims costs.
The urgent need for a creative solution inspired one Risk All Star to create a unique excess casualty program with benefits on several levels.
Jennifer Cable’s degree is in opera performance. She is also a risk management maestro.
Tracey Gasper: Service Centered (+Responsibility Leader)
This risk manager’s savings for her company can be measured in the millions.
Elizabeth Queen: Building a Unified Travel Program (+Responsibility Leader)
With an existing program now spread enterprise-wide, traveling employees have an improved experience, while the company enjoys lower costs and reduced risk.
One Risk All Star took on the daunting challenge of quickly relocating a sprawling headquarters, and without a single moment of down time.
David Brooks quantifies and manages risks across every industry and product offered by XL Catlin.
Brent Cooley: Shakespeare Minus the Tragedy (+Responsibility Leader)
A series of potentially high-severity events drove the push to launch a safety organization that will help keep theater students safe for years to come.
New to her position in risk management, Rytec’s Kris Finell set about correcting just about everything she could get her hands on.
Albert Fierro: The Fruits of Long, Hard Labor (+Responsibility Leader)
With decades of expertise in captive insurance, Albert Fierro was the ideal person to help AARP rein in its rising workers’ compensation costs.
Adding role playing to training efforts helped Kimpton Hotels’ risk manager teach employees how to avoid mistakes that drive up the cost of claims.
Treasury now drives risk management throughout Meritor’s business units, thanks to the efforts of Todd Chirillo.
Florida’s insurance pool members can rest easy that, thanks to Jeannie Garner’s initiative, they can bounce back in the face of severe storms.
When staff reductions and organizational change made strong leadership imperative, Amanda Lagatta rose to the challenge.
Commercial Auto Warning: Emerging Frequency and Severity Trends Threaten Policyholders
The slow but steady climb out of the Great Recession means businesses can finally transition out of survival mode and set their sights on growth and expansion.
The construction, retail and energy sectors in particular are enjoying an influx of business — but getting back on their feet doesn’t come free of challenges.
Increasingly, expensive commercial auto losses hamper the upward trend. From 2012 to 2015, auto loss costs increased a cumulative 20 percent, according to the Insurance Services Office.
“Since the recession ended, commercial auto losses have challenged businesses trying to grow,” said David Blessing, SVP and Chief Underwriting Officer for National Insurance Casualty at Liberty Mutual Insurance. “As the economy improves and businesses expand, it means there are more vehicles on the road covering more miles. That is pushing up the frequency of auto accidents.”
For companies with transportation exposure, costly auto losses can hinder continued growth. Buyers who partner closely with their insurance brokers and carriers to understand these risks – and the consultative support and tools available to manage them – are better positioned to protect their employees, fleets, and businesses.
Liberty Mutual’s David Blessing discusses key challenges in the commercial auto market.
“Since the recession ended, commercial auto losses have challenged businesses trying to grow. As the economy improves and businesses expand, it means there are more vehicles on the road covering more miles. That is pushing up the frequency of auto accidents.”
–David Blessing, SVP and Chief Underwriting Officer for National Insurance Casualty, Liberty Mutual Insurance
More Accidents, More Dollars
Rising claims costs typically stem from either increased frequency or severity — but in the case of commercial auto, it’s both. This presents risk managers with the unique challenge of blunting a double-edged sword.
Cumulative miles driven in February, 2016, were up 5.6 percent compared to February, 2015, Blessing said. Unfortunately, inexperienced drivers are at the helm for a good portion of those miles.
A severe shortage of experienced commercial drivers — nearing 50,000 by the end of 2015, according to the American Trucking Association — means a limited pool to choose from. Drivers completing unfamiliar routes or lacking practice behind the wheel translate into more accidents, but companies facing intense competition for experienced drivers with good driving records may be tempted to let risk management best practices slip, like proper driver screening and training.
Distracted driving, whether it’s as a result of using a phone, eating, or reading directions, is another factor contributing to the number of accidents on the road. Recent findings from the National Safety Council indicate that as much as 27% of crashes involved drivers talking or texting on cell phones.
The factors driving increased frequency in the commercial auto market.
In addition to increased frequency, a variety of other factors are driving up claim severity, resulting in higher payments for both bodily injury and property damage.
Treating those injured in a commercial auto accident is more expensive than ever as medical costs rise at a faster rate than the overall Consumer Price Index.
“Medical inflation continues to go up by about three percent, whereas the core CPI is closer to two percent,” Blessing said.
Changing physical medicine fee schedules in some states also drive up commercial auto claim costs. California, for example, increased the cost of physical medicine by 38 percent over the past two years and will increase it by a total of 64 percent by the end of 2017.
And then there is the cost of repairing and replacing damaged vehicles.
“There are a lot of new vehicles on the road, and those cost more to repair and replace,” Blessing said. “In the last few years, heavy truck sales have increased at double digit rates — 15 percent in 2014, followed by an additional 11 percent in 2015.”
The impact is seen in the industry-wide combined ratio for commercial auto coverage, which per Conning, increased from 103 in 2014 to 105 for 2015, and is forecast to grow to nearly 110 by 2018.
None of these trends show signs of slowing or reversing, especially as the advent of driverless technology introduces its own risks and makes new vehicles all the more valuable. Now is the time to reign in auto exposure, before the cost of claims balloons even further.
The factors driving up commercial auto claims severity.
Data Opens Window to Driver Behavior
To better manage the total cost of commercial auto insurance, Blessing believes risk management should focus on the driver, not just the vehicle. In this journey, fleet telematics data plays a key role, unlocking insight on the driver behavior that contributes to accidents.
“Roughly half of large fleets have telematics built into their trucks,” Blessing said. “Traditionally, they are used to improve business performance by managing maintenance and routing to better control fuel costs. But we see opportunity there to improve driver performance, and so do risk managers.”
Liberty Mutual’s Managing Vital Driver Performance tool helps clients parse through data provided by telematics vendors and apply it toward cultivating safer driving habits.
“Risk managers can get overwhelmed with all of the data coming out of telematics. They may not know how to set the right parameters, or they get too many alerts from the provider,” Blessing said.
“We can help take that data and turn it into a concrete plan of action the customer can use to build a better risk management program by monitoring driver behavior, identifying the root causes of poor driving performance and developing training and other approaches to improve performance.”
Actions risk managers can take to better manage commercial auto frequency and severity trends.
Rather than focusing on the vehicle, the Managing Vital Driver Performance tool focuses on the driver, looking for indicators of aggressive driving that may lead to accidents, such as speeding, sharp turns and hard or sudden braking.
The tool helps a risk manager see if drivers consistently exhibit any of these behaviors, and take actions to improve driving performance before an accident happens. Liberty’s risk control consultants can also interview drivers to drill deeper into the data and find out what causes those behaviors in the first place.
Sometimes patterns of unsafe driving reveal issues at the management level.
“Our behavior-based program is also for supervisors and managers, not just drivers,” Blessing said. “This is where we help them set the tone and expectations with their drivers.”
For example, if data analysis and interviews reveal that fatigue factors into poor driving performance, management can identify ways to address that fatigue, including changing assigned work levels and requirements. Are drivers expected to make too many deliveries in a single shift, or are they required to interact with dispatch while driving?
“Management support of safety is so important, and work levels and expectations should be realistic,” Blessing said.
A Consultative Approach
In addition to its Managing Vital Driver Performance tool, Liberty’s team of risk control consultants helps commercial auto policyholders establish screening criteria for new drivers, creating a “driver scorecard” to reflect a potential new hire’s driving record, any Motor Vehicle Reports, years of experience, and familiarity with the type of vehicle that a company uses.
“Our whole approach is consultative,” Blessing said. “We probe and listen and try to understand a client’s strengths and challenges, and then make recommendations to help them establish the best practices they need.”
“With our approach and tools, we do something no one else in the industry does, which is perform the root cause analysis to help prevent accidents, better protecting a commercial auto policyholder’s employees and bottom line.”
This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Liberty Mutual Insurance. The editorial staff of Risk & Insurance had no role in its preparation.