I read with interest and appreciation Roger Crombie's article "Aversion to Risk Breeds Linguistic Absurdity." (Risk & Insurance®, Sept. 15, 2004, page 11.) However, I must take exception to your reference to the well-known and oft-repeated McDonald's coffee case.
Characterizing the plaintiff backhandedly as a "moron" is undignified and reveals your apparent lack of appreciation for what actually occurred. I hope you will endeavor to check your facts in the future before relying upon the entirely unsupported and unjustified common sentiment about this infamous case.
Risk Management Consultant
Great Article. ("Aversion to Risk Breeds Linguistic Absurdity.") You should run a contest for the best ones out there. Having been involved in safety for nearly 30 years, I understand the need for warnings, but some things are just ridiculous. In Washington, D.C., I saw a sign in the elevator that read "Possession of lit tobacco products is prohibited." Guess someone argued that holding a lit cigarette or pipe is not really smoking. I bought a set of heavy-duty car jack stands that read, "Do not work under car while on Jack Stands." So what do they think I bought them for?
While it could have been the translator, I bought an electric toothbrush that said, "Do not use while sleeping." We have a beer cooler at our sportsman's club that has this warning on it: "Not for use for storage of flammable liquids." Darn, there go the flaming shots.
Bruce E. Cunha
Manager, Employee Health and Safety
In the article "Red Storm Rising" (Risk & Insurance® November 2004, page 44) author Frank X. Altiere III does a good job of highlighting the value provided by the third-party administrator in helping employers minimize their workers' comp costs.It would be short-sighted to underestimate the vital role these organizations play in the implementation of safety programs, risk assessment protocols, return-to-work programs, and their core competency of claims administration.
However, the author's notion that risk managers should actively manage a 90 percent-to-10 percent ratio for medical-and indemnity-to-TPA costs is a little difficult to understand. Shouldn't the magnitude of the overall workers' comp spend be more important than how those dollars are allocated? If medical inflation is having its way with medical and indemnity costs, the prudent risk manager should actively pursue administrative cost reductions. Adhering to basic ratios may simplify the management of these costs, but it may not prove to be the most effective methodology.
The prevalent, astronomical rise in medical costs provides an opportunity for risk managers to stand out. Today's CFOs and CEOs value those senior managers that pursue innovative cost reductions by challenging long-held business practices and paradigms.
If risk managers are so inclined to adhere to the author's 90-10 rule they really don't need to do much. The TPA's contingency fee, such as the percent of savings charge, should maintain that balance quite nicely on its own.
Senior Vice President
Network Synergy Inc.
January 1, 2005
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