In the construction industry, injuries commonly lead to more expenses than just the hard cost of a claim. An injured employee not only brings about lost wages, medical expenses, and rehabilitation costs but also can lead to reduced efficiency, added overtime pay, additional administrative work and more.
Similarly, an injury to a non-employee can lead to business losses in the form of an operations exposure, leading to defense costs, injury costs, and other damages. We can find further exposures in the form of wrongful termination, sexual harassment, and inappropriate employment conduct.
To mitigate and minimize these additional expenses, it’s important that your priorities include more than just the most basic and predictable losses. It’s easy to end up with tunnel vision, paying attention to safety alone, as the jobsite seems to be where most losses take place. This can provide a false sense of security, as safety is only one pillar of protecting your bottom line. Without persistent attention to all three pillars, your loss control system can break under the pressure of these exposures, ultimately crushing your bottom line.
The three pillars of a comprehensive loss control system
Pillar one consists of safety programs. Its purpose is to reduce both the frequency and severity of accidents. Pillar two, loss prevention, involves taking steps to prevent an accident from happening. Pillar three is about loss reduction; minimizing hazards and exposures after an accident happens.
Understanding how these three pillars protect your bottom line, and solidifying each pillar with employees (from field to office employees), will lead to a comprehensive and strong loss-control system.
Safety Programs: Workplace injuries are very expensive, and the costs will reach beyond your insurance policy. Breaking up a crew because of an injury can affect their efficiency, leading to deadlines being missed and preventing other crews from doing their jobs. The way some companies combat this is to give overtime to other employees. Overtime pay can be a huge expense. Higher labor costs can lead to less profit on a job. Every construction company should work with an insurance broker to bring in an unbiased and experienced safety consultant to help identify ways to improve. They should work with your team and be able to deliver quite a lot of service for little to no cost to you.
Loss Prevention: When it comes to preventing losses, what protocols do you currently have in place to foresee a potential loss? The Inland Marine Underwriters Association has found that partially completed projects are more susceptible to losses than completed ones, so it set up a six-part guide listing the four perils that are most common on the jobsite. They are fire-related exposures, water-related exposures, wind-related exposures and crime exposures.
This document, which is about builders’ risk loss prevention, is a great guide to structuring your full loss-prevention program. A construction-focused broker will have access to this guide.
Loss Reduction: Although the first two pillars are about how to keep accidents from happening, the third is about minimizing the effects of accidents if they occur. One common way to reduce the losses associated with a workers’ compensation insurance claim is to put together a return-to-work program. A quick path to failure, however, is to use one that was set up by following a standard template. In fact, many doctors have become suspicious of companies using these turnkey programs. The one-size-fits-all approach associated with these template programs doesn’t adequately deal with the very specific circumstances typical of construction-related work-comp claims. Working with an insurance broker can help you set up a custom-made loss-reduction program that can minimize losses.
Since losses are inevitable, minimizing the effects they have on your bottom line is essential to keeping your company profitable and strong. Spending a great deal of time and money on safety initiatives can be a great start. As you put in place all the pillars needed for a comprehensive loss control system, you will be able to keep losses away from your hard-earned bottom line.
Eric Messer is a construction-industry business and risk consultant in the Milwaukee office of Marsh & McLennan Agency LLC. He can be reached at (262) 797-6281 or firstname.lastname@example.org.