October 2013
By: Nathan Brainard, Vice President, Environmental Division of IOA | Waste Advantage Magazine
Let’s be honest, we all want to believe our company is truly the best in the industry. We feel our company is truly the best in the industry. We feel our company can outperform the competition from both a physical service and customer service standpoint. If we can’t believe we have built something better than the competition then who will? As a company executive or owner you have to believe this or odds are you are preparing to sell or close your doors. As entrepreneurs, we are wired to believe that we can do it quicker, more efficiently and with a better end result than anyone else in the marketplace. The real question, however, is how do we prove it?
Insurance carriers have pulled back the reigns over the past year. They are being more selective than they have been in the past 10 + years because the hardening of the market allows them to be selective in whom they offer policy terms to. When an agent is working with an underwriter they are asked all sorts of questions about your company, safety culture and safety program, claims, owner involvement and myriad of other items so they can get comfortable in offering a proposal for your review. If they can’t get comfortable with the workplace initiatives you have in place, odds are they are not going to offer you terms, and move onto another submission they are more comfortable with. So, what can you do to help elevate your company from, “just another submission” to something showing you truly are “best in class”?
Every underwriter is going to have their own set of items they want to see implemented within your company. The more of these teams you have in place the better since the underwriter can then make a case internally as to why they offered you the coverage and premiums they put forth. We are going to discuss some of the more “global” items an underwriter looks for. Obviously, there are more than what is written here, but if we address those that are the most common, you will at least have a place to start your evaluation of how your company stacks up.
Training
While there is no news flash here, it is the most widely asked question by underwriters. They want to know if you have a formal, written training program. Do all new hires go through the program? How long does it last? Is there ongoing training throughout the year, or do you only train the folks when they are originally hired and then let them do their work? Do you have a dedicated Safety Director? If so, do they spend 100 percent of their time on safety related matters, or do they have other non-safety related duties?
The more training you do the better. It is widely recommended that you incorporate various types of training. This would include classroom, online and in the field as well as your normal weekly or monthly toolbox talks. As the employees in our industry have varying degrees of education as well as potential language barriers, a multifaceted training approach is considered ideal. For any training you provide to the employees, you should document both the topic and attendance. You can then add records of all training by employee to their file in the event that they ever have a claim and state that he or she was not trained on a specific subject.
One of the largest pitfalls we see by companies is cessation of training because their claim count is very low. This is a terrible idea. When claims are not happening or are very low you should take the opportunity to further educate and train the employees. While things are good now, you don’t want your employees to become lackadaisical or complacent – they get carless and that is when a claim happens. Constant training is the foundation for a “best in class” environment.
SAFER Score/Pre- and Post- Trip Reports
While the latter are internal documents, their use is widely documented whether you are aware of it or not in the form of a SAFER Score. If you are scratching your head, look no further than your last DOT inspection. Each time your vehicle is stopped and inspected by DOT, a report is generated. This information is then passed on and published at safer.fmcsa.dot.gov. Underwriters are using this tool more and more frequently. They are also putting a tremendous amount of weight on the results of this information.
Once on the Website, they can search by your company name or DOT number. After locating your company in the system, they are able to see a wealth of information they consider vital to their process. This would include information such as, the last time your MCS-150 was filed (should be done annually), what your company’s Operation Class is, whether you haul, the results of your DOT inspections for the past 24 months (Out of Service ratio compared to industry average), as well as crash data and driver inspection info.
We have found a majority of companies are not aware that underwriters use this tool. Furthermore, they are not aware of the amount of importance underwriters place on this data. Because a majority of the information within this site is verifiable, they put a large emphasis on it. If you are running a 39 percent Out Of Service Rate against an industry standard of 20 percent, you are now fighting an uphill battle with this underwriter.
This makes your pre and post-trip inspections paramount. Your drivers should be trained to not only conduct their inspections, but also to submit their results to their supervisor or head mechanic daily. If there are items that need attention, they can be addressed and the vehicle can be brought up to a passing standard. This will not only be reflected in your SAFER score, but will also help alleviate fines imposed by DOT.
Recently, I met with a client whose SAFER Score was dismal at best. They were not aware they needed to be filing an MCS- 150 on an annual basis. Their head mechanic had become complacent and had stopped doing it four years earlier. This threw off their listed vehicle and driver count, which had serious implications to their Out Of Service Rate. While they had not had any auto accidents other than minor fender benders over the past two years, the underwriters were declining the account because they felt the company was placing unsafe vehicles on the road. Furthermore, the client was irritated as he felt his company was being picked on by DOT. DOT would wait for the company trucks to come out of the landfill and hit them with an inspection. Generally, landfill roads are unpaved and tend to be bumpy. This causes items such as light bulbs to wiggle loose, mud flaps to come off, etc. All these are reportable in the Out of Service category on the SAFER Website.
The best way to combat the DOT “cherry picking” approach is for your driver to have a copy of the pre-trip inspection they conducted that morning in the cab with them. While it may not necessarily get you out of the citation, it could help. The drivers need to be diligent in their duty of operating a safe vehicle around in the public. As with anything else in life, most people will take the path of least resistance. This is true with DOT. If you begin to earn a reputation of an “easy target” for their inspections they are going to keep an eye out for your trucks – “work harder when easy prey is abound.”
Post Offer Physicals
Does your company currently conduct post offer physicals? If not, you should give serious consideration to implementing this practice. The most common push-back we hear from company owners is there is a cost associated with this approach, and given the turnover rate associated with the industry they feel the money isn’t worth spending. We understand your concern; however, would you consider money well spent if you could prevent an erroneous worker’s comp claim in the tens of thousands of dollars range that would affect your experience MOD for the next four to five years? Doctors are able to ask patients things you as the employer are not able to ask. If you send the potential hire in for a physical and a description of the work they have been offered, the doctor can determine if there are any conditions within the scope of work the potential hire cannot do. The doctor can then sign off on the fact that the potential hire is physically capable of doing the duties you have hired them for. And if they find they are not fit, you have potentially eliminated a worker’s comp claim waiting to happen. A post offer physical is much less costly than a worker’s compensation claim.
Safety Equipment
Many companies have installed dual facing camera systems, backup cameras, CPS systems and many other systems to help keep their employees as well as other drivers and pedestrians’ safe. Insurance companies love to know about this, and in many cases they might be able to offer a premium discount for having these tools installed. There is a catch though. The systems have to be in working order and the data collected needs to be analyzed and used for training within the company. Recently, one of my clients was involved in a horrific claim where the injured party ended up having a leg amputated because of the injury. The client had a camera system in the truck, but unfortunately the recording device had been jarred loose so there was no data for use in defense of the claim. It became their word verse the word of the injured party. The claim settled for several million dollars. Had the equipment been working, it potentially could have changed the outcome of that claim. If you are going to spend the money on a system, make sure you spend the money to maintain it.
The other component to this equation is whether or not the underwriter is being told about your installed technology. This is something you need to make sure your agent is aware of and sharing with the underwriters. If you are not telling your agent about this, you could be missing out on valuable premium credits.
Driver Criteria Progressive Discipline Plans
Every carrier who is interested in writing insurance for the waste and recycling industry has a supplemental form the agent is required to submit in addition to the standard Acord forms and loss runs. On just about every supplemental form there is a question regarding driver discipline. Most companies will tell the agent when going over this document that if the driver meets the insurance carrier guidelines they are good to go. Insurance carriers tend to feel differently about this. They want to see that a company had their own set of criteria in place, and that those criteria are more stringent than what the carrier requires. Carriers feel that if you have a written set of criteria all drivers must meet, then you are taking things very seriously. To take it one step further, if you have a progressive discipline process in writing that all drivers/potential drivers have signed off on, they really get excited. They feel you are taking the time to lay out the ground rules and potential repercussions of their actions. By taking your standards higher than that of the insurance carrier, you are going above and beyond the industry standard of relying on what the carrier deems suitable.
Route Observations
While it can be argued that this is more relevant to residential collection than commercial or roll-off collection, the fact remains that it is important. If you have a supervisor monitoring a collection route and they see something that is obviously out of sorts they can take immediate action. This can prevent the same bad work habits from occurring again and also provides information that can be used to train others within the company. Finding first hand examples will always be easier for employees to relate to. We recommend you have a checklist of items your supervisors take with them and use so all drivers are being held to the same set of standards. It is also recommended that you provide your agent with a copy of the template so that they can share it with the carrier. Here again, carriers love to see this kind of system in place.
Background Checks/Integrity Testing
Both of these options are starting to become more prevalent in business today. Background check can range from a simple criminal check to full-blown history of the applicant. There is a cost to have them done, but if you were able to decline a potential hire because they had a history of workplace violence would you? What if you had a route collecting at a school and found the applicant was a convicted child predator?
Integrity testing also has a cost, but initial feedback from both employers and insurance carriers is very positive. There are several companies out there offering this service and the prices range depending on the size of your company. What is really interesting is their ability to weed out the undesirable employee. These would be the folks who apply for a job that are inclined to steal from the company, lie to you as the employer, come to work under the influence of drugs or alcohol or who might file a false claim in an effort to score a quick payout.
The ability to weed the bad apples out from the good can and will have a dramatic impact to your company from both a morale and claims standpoint. You don’t want to employ individuals who will be disruptive internally as that type of attitude can spread. You also don’t want to hire someone on Monday who will have the first claim filed by the end of the first week.
Taking a Proactive Approach
These are just a few of the items underwriters are currently putting a lot of stock in. Each carrier has their own additional set of criteria they deem valuable. If you have not done so, ask your agent what makes your carrier tick. Perhaps there is something with little or no cost that you could implement immediately that would generate a premium reduction.
It is also important to note that implementation of the above items are not guaranteed to prevent a claim. After all, claims are just another word for accidents and accidents can and will happen. This is why you buy insurance in the first place. If, however, you take a proactive approach to your claims mitigation, you stand a much better chance of controlling claims as opposed to hoping they simply don’t happen. Odds are the proactive approach will also garner you some policy credits along the way.
Nathan can be reached by calling 407.788.3000 or emailing nathan.brainard@www.ioausa.com.
Special thanks to Brian Hart, Safety Links, for his contribution to this piece.
