Adjuster risk management tools – Part 1
Corporate risks come in all shapes and sizes, but each must be examined and addressed.
Editor’s Note: This 7-part series will provide guidance on how to handle day-to-day loss exposures efficiently.
Every profession has a multitude of risks to manage. Risk management itself is a profession, with various processes, procedures and tools to follow and use properly to avoid problems. However, the key to any form of risk management is carefully utilizing available risk dollars between risk control and risk financing to achieve the best result.
Risk implies loss, and loss has cost, whether or not an actual loss occurs. Owning a car has risks, and most purchase expensive auto insurance to cover a potential loss. If no loss occurs, the money for insurance was a cost and is spent again for the policy’s renewal.
The risk management formula is simple: first, identify the exposures. This may include identifying and examining potential perils that might cause a loss. Next, search for hazards that might trigger such a peril, and decide how to address that hazard. Some hazards are accepted, others modified or reduced, and some simply eliminated. This is part of the “risk control” or “loss prevention” process.
Once the program is in place, the risk is reduced, but not eliminated. Some means of paying for loss may result, requiring planning and financing. Insurance is one such way, and this series will discuss others.
Risk managing ‘pickles and jams’
After 21 years as a corporate risk and claims manager for a major international risk services company, whenever I was asked to describe this complex job, the best answer was, “food services: I dealt with pickles and jams!” Occasionally a sheriff would serve a lawsuit somewhere, and when it arrived at the home office, there were only a few days to respond. Each lawsuit or claim had to be investigated, evaluated and resolved, even minor ones with little or no liability.
There were several thousand automobiles that had to be risk managed, and thousands of employees who could generate claims involving workers compensation, disability, dishonesty (that was rare), unemployment, garnishments and employment practices. There were buildings and their contents and all of the computers, plus hundreds of leased premises that might suffer loss, each with a lease that had to be reviewed, often with “certificate of insurance” requirements. We negotiated every “hold harmless and indemnity agreement” and evaluated every contract for hazards.
After eleven years of handling claims, the risk management assignment was a step into the wider arena of risk science, which included publishing and teaching. Until then, “risk management” consisted of several executives who managed one or two of the various corporate insurance policies, where each with different agents, different companies and different inception dates and coverages. In short, coverages were non-concurrent and scattered.
The first task involved bringing them together to see what was involved. It took several years to accomplish concurrency with a single broker, and even then, it took years to conclude old retrospectively rated policies. Policy coordination is just a small part of adjuster risk management; it’s the risk analysis, follow-up and evaluation that takes time. In some companies, the employee benefits programs are also the risk manager’s responsibility. Something stronger than Excedrin may be needed!
Over the next few months, we will look at the various aspects of risk management as they may apply to adjusters and provide some insight on risk avoidance and management to reduce the frequency and severity of loss.
Ken Brownlee, CPCU, (kenbrownlee@msn.com) is a former adjuster and risk manager based in Atlanta, Ga. He now authors and edits claims-adjusting textbooks. Opinions expressed are the author’s own.