Cynthia Kane, 58, allegedly suffered shortness of breath due to breathing in petroleum fumes over a prolonged period. Kane had already “lawyered up,” so a statement was out of the question. Her file during her 15 years with Union Manufacturing raised no suspicions. Kane was a nonsmoker, and she had never complained to the company nurse about pulmonary problems.
I arranged to tour Kane’s work location. It was separated from the machine shop, where the actual manufacturing took place, by a floor-to-ceiling wall with glass windows. The assembly area was not particularly dirty, and I verified that the HVAC system was up to specifications and maintained twice annually.
Kane didn’t appear to be in any distress as she did her job.
Kane’s shift ended at 5 p.m., so I returned to the plant at 4:45 that afternoon and waited in the parking lot. I followed her as she made her way home in a fairly new two-door sports car. She stopped at a dry cleaner on the way. I parked and waited nearby for 10 minutes. When she didn’t come out, I decided to
This was a large operation with the cleaning machines in the back room. There were huge fans throughout the store, but even so there was an unmistakable kerosene-like smell from the solvents used in the dry cleaning process.
At the counter, I asked the clerk about dry-cleaning bedspreads while I strained to see into the back of the store. It was evident Kane was working.
I scratched my head. Why didn’t her attorneys name the shop as a co-defendant on the claims petition? It had far greater pulmonary exposure to airborne contaminants than Union Manufacturing.
The next day, I went back to the dry cleaner and asked to speak with Kane. The flustered counter person said they had no employee by that name. I went back to the dry cleaners three more times during the next two weeks, and each time, I saw Kane’s car there.
I arranged to have a disability evaluation by a pulmonologist, who confirmed that Kane had a mild pulmonary disability (5 percent PPD rating). After reading my report, the doctor concluded the condition was not due to her work at Union Manufacturing. Kane’s attorney had a disability report rating Kane at 25 percent PPD.
I couldn’t fault Kane for wanting a part-time job to help pay for living expenses (and her sports car), but she left me no choice but to deny the claim against Union.
I called her counsel and explained that we’d have to go to trial. He was incredulous, until I explained my findings.
“Your client didn’t tell you about her ‘under the table’ deal at Salerno’s Dry Cleaning, did she?” I asked him. “I personally observed her working there on three different occasions, and noted the smell of the dry cleaning solvent was very strong.
“I am willing to bet that exposure is the proximate cause of any pulmonary disability she has, rather than from a clean and temperature-controlled environment at Union Manufacturing Co. My examining physician agrees.”
The attorney reluctantly agreed to withdraw the petition. Kane continued to work at Union, and whether she kept her night job at the dry cleaner wasn’t my concern. A good investigation paid off and the claim against Union Manufacturing hit a snag.
BOOCS Program Could Lower Obesity-Related Injury Risk
Employers seeking to improve their employees’ health and reduce illnesses and injuries may want to look to a Japanese model. By instituting a unique health education program started in that country, health risks among obese workers were significantly reduced — up to 15 years later.
The program used a new method of health education among workers in the 1990s. A follow-up study published recently in the Journal of Occupational and Environmental Medicine may hold promise for an alternative to traditional methods to help improve the well-being of the workforce.
“The results indicate a mortality benefit by participation in [the Brain-Oriented Obesity Control System] program,” the study said. “For prevention of metabolic syndrome, effective measures are strongly needed in the future, and it is suggested that [the] BOOCS program will contribute to them as a new approach for health promotion.”
The follow-up study results were released as the prevalence of obese workers continues to increase. According to the study, the increase amounts to “25.1 percent for males and 23.9 percent for females in the United States as a body mass index of 30 or higher in 2003 to 2009, and 28.5 percent for males and 11.6 percent for females in Japan as a BMI of 25 or higher in 2011.”
Along with the increase in BMI is a higher risk of metabolic syndrome, which increases the risk of cardiovascular disease, especially heart failure, as well as diabetes. Metabolic syndrome is defined as a disorder of energy utilization and storage, diagnosed by a co-occurrence of three out of five conditions, including abdominal obesity, elevated blood pressure, elevated fasting plasma glucose, high serum triglycerides, and low high-density cholesterol levels.
“Hazard ratios were calculated with survival curves drawn to evaluate the mortality effects by the program participation,” according to the report. “The results support a protective effect on mortality by participating in [the] BOOCS program.”
Traditional approaches to behavior modification typically begin with prohibitions against unhealthy behaviors such as eating high-caloric foods, drinking alcohol, and smoking. Because of its strictness, this method “frequently results in the rebound of body weight and the appearance of [a] guilty conscience,” the report said.
BOOCS “begins with no prohibition,” the report said. It “is a unique method prioritizing the recovery from fatigue, in particular, ‘brain fatigue,’ and it eventually induces better lifestyle modification and improvement of body weight and serum lipids.”
The program includes two principles and three rules as a basis for “effective and active guidance.” The principles are “do not prohibit or order yourself as possible” and “do something pleasant for yourself.” The rules include:
- Do not practice what you dislike even if it is good for your health.
- Do not prohibit what you like even if it is bad for your health.
- Do only what you like among good things and matters for your health.
The Japanese inventor of the program has said the approach “is quite useful for making the participants fully aware of the fundamentals of health promotion and disease prevention, which leads them to modify their health behavior,” according to the study. “He also insists that prohibitive and compulsive instructions are ineffective for behavior modification, and, in particular, those people who understand [the] significance of health would result in failure through such methods and fall into vicious circle such as rebounding body weight.”
The authors do not speculate on why the program works and say more research is needed. However, they point to the study results as proof that it is effective.
Public service employees working for a municipal government in Japan were introduced to a health service organization in 1992, which included health exams, seminars and guidance, and insurance programs. The BOOCS portion of the service included 10 one-day and two-day seminars annually with lectures on health care by physicians and practical exercises by professionals such as a physical instructor, a dietician, and a psychologist.
The initial study and 15-year follow-up research into an obesity program among Japanese workers included three groups. Workers who participated in the Brain-Oriented Obesity Control System were called the intervention subjects. Among the nonparticipants, comparative obese controls were those who had a body mass index of at least 25 or health problems related to obesity while reference subjects were the remainder. In the follow-up study 15 years later, the researchers identified participants who were deceased and their causes of death.
“Compared with comparative obese controls, hazard ratios for all causes were significantly lower in participants [of the BOOCS program] at 0.54,” the report said. “The “significant mortality changes” persisted during the follow-up period. “One of the reasons for such preventive effects of [the] BOOCS program may be related to improvement of obesity during follow-up.”
The authors noted that among male participants in the BOOCS program, BMIs decreased in the first five years of the study by 1 percent to 5 percent compared to both groups of nonparticipants. “These data coincide with the previous reports that both all-cause and cancer mortality were associated with obesity,” the report said. “These effects brought by [the] BOOCS program may result in the protective effect for mortality in this study.”
The results were not seen to the same extent among females. The authors speculated that it could be due to sociological factors, saying traditional gender roles remain and many women leave the workforce upon marriage or childbirth.
In conclusion, “the standardized mortality rates for all causes and all neoplasms in comparison with the general population were statistically lower among participants [in the BOOCS program] and reference subjects, which may be due to the healthy worker effect,” the study said.
2015 General Liability Renewal Outlook
There was a time, not too long ago, when prices for general liability (GL) insurance would fluctuate significantly.
Prices would decrease as new markets offered additional capacity and wanted to gain a foothold by winning business with attractive rates. Conversely, prices could be driven higher by decreases in capacity — caused by either significant losses or departing markets.
This “insurance cycle” was driven mostly by market forces of supply and demand instead of the underlying cost of the risk. The result was unstable markets — challenging buyers, brokers and carriers.
However, as risk managers and their brokers work on 2015 renewals, they’ll undoubtedly recognize that prices are relatively stable. In fact, prices have been stable for the last several years in spite of many events and developments that might have caused fluctuations in the past.
Mark Moitoso discusses general liability pricing and the flattening of the insurance cycle.
Flattening the GL insurance cycle
Any discussion of today’s stable GL market has to start with data and analytics.
These powerful new capabilities offer deeper insight into trends and uncover new information about risks. As a result, buyers, brokers and insurers are increasingly mining data, monitoring trends and building in-house analytical staff.
“The increased focus on analytics is what’s kept pricing fairly stable in the casualty world,” said Mark Moitoso, executive vice president and general manager, National Accounts Casualty at Liberty Mutual Insurance.
With the increased use of analytics, all parties have a better understanding of trends and cost drivers. It’s made buyers, brokers and carriers much more sophisticated and helped pricing reflect actual risk and costs, rather than market cycle.
The stability of the GL market also reflects many new sources of capital that have entered the market over the past few years. In fact, today, there are roughly three times as many insurers competing for a GL risk than three years ago.
Unlike past fluctuations in capacity, this appears to be a fundamental shift in the competitive landscape.
“The current risk environment underscores the value of the insurer, broker and buyer getting together to figure out the exposures they have, and the best ways to manage them, through risk control, claims management and a strategic risk management program.”
— David Perez, executive vice president and general manager, Commercial Insurance Specialty, Liberty Mutual
Dynamic risks lurking
The proliferation of new insurance companies has not been matched by an influx of new underwriting talent.
The result is the potential dilution of existing talent, creating an opportunity for insurers and brokers with talent and expertise to add even greater value to buyers by helping them understand the new and continuing risks impacting GL.
And today’s business environment presents many of these risks:
- Mass torts and class-action lawsuits: Understanding complex cases, exhausting subrogation opportunities, and wrangling with multiple plaintiffs to settle a case requires significant expertise and skill.
- Medical cost inflation: A 2014 PricewaterhouseCoopers report predicts a medical cost inflation rate of 6.8 percent. That’s had an immediate impact in increasing loss costs per commercial auto claim and it will eventually extend to longer-tail casualty businesses like GL.
- Legal costs: Hourly rates as well as award and settlement costs are all increasing.
- Industry and geographic factors: A few examples include the energy sector struggling with growing auto losses and construction companies working in New York state contending with the antiquated New York Labor Law
David Perez outlines the risks general liability buyers and brokers currently face.
Managing GL costs in a flat market
While the flattening of the GL insurance cycle removes a key source of expense volatility for risk managers, emerging risks present many challenges.
With the stable market creating general price parity among insurers, it’s more important than ever to select underwriting partners based on their expertise, experience and claims handling record – in short, their ability to help better manage the total cost of GL.
And the key word is indeed “partners.”
“The current risk environment underscores the value of the insurer, broker and buyer getting together to figure out the exposures they have, and the best ways to manage them — through risk control, claims management and a strategic risk management program,” said David Perez, executive vice president and general manager, Commercial Insurance Specialty at Liberty Mutual.
While analytics and data are key drivers to the underwriting process, the complete picture of a company’s risk profile is never fully painted by numbers alone. This perspective is not universally understood and is a key differentiator between an experienced underwriter and a simple analyst.
“We have the ability to influence underwriting decisions based on experience with the customer, knowledge of that customer, and knowledge of how they handle their own risks — things that aren’t necessarily captured in the analytical environment,” said Moitoso.
Mark Moitoso suggests looking at GL spend like one would look at total cost of risk.
Several other factors are critical in choosing an insurance partner that can help manage the total cost of your GL program:
Clear, concise contracts: The policy contract language often determines the outcome of a GL case. Investing time up-front to strategically address risk transfer through contractual language can control GL claim costs.
“A lot of the efficacy we find in claims is driven by the clear intent that’s delivered by the policy,” said Perez.
Legal cost management: Two other key drivers of GL claim outcomes are settlement and trial. The best GL programs include sophisticated legal management approaches that aggressively contain legal costs while also maximizing success factors.
“Buyers and brokers must understand the value an insurer can provide in managing legal outcomes and spending,” noted Perez. “Explore if and how the insurer evaluates potential providers in light of the specific jurisdiction and injury; reviews legal bills; and offers data-driven tools that help negotiations by tracking the range of settlements for similar cases.”
David Perez on managing legal costs.
Specialized claims approach: Resolving claims quickly and fairly is best accomplished by knowledgeable professionals. Working with an insurer whose claims organization is comprised of professionals with deep expertise in specific industries or risk categories is vital.
“We have the ability to influence underwriting decisions based on experience with the customer, knowledge of that customer, and knowledge of how they handle their own risks, things that aren’t necessarily captured in the analytical environment.”
— Mark Moitoso, executive vice president and general manager, National Accounts Casualty, Liberty Mutual
“When a claim comes in the door, we assess the situation and determine whether it can be handled as a general claim, or whether it’s a complex case,” said Moitoso. “If it’s a complex case, we make sure it goes to the right professional who understands the industry segment and territory. Having that depth and ability to access so many points of expertise and institutional knowledge is a big differentiator for us.”
While the GL insurance market cycle appears to be flattening, basic risk management continues to be essential in managing total GL costs. Close partnership between buyer, broker and insurer is critical to identifying all the GL risks faced by a company and developing a strategic risk management program to effectively mitigate and manage them.
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.