Insurance—Making the Safety Pledge

March/April 2006

The scrap industry has had a rough couple of years in terms of accidents, fatalities, and significant insurance losses. In response, many individuals—including ISRI’s safety team, ReMA members, and the staff and insurersof the RecycleGuardsm insurance program—have tried different approaches to promote safety in the industry. These individuals can’t change the tide by themselves, of course. It takes the industry as a whole—all of you—to change the results.

Of course, implementing a safety program, using safety checklists, and holding safety meetings don’t automatically translate into positive loss results. A safety program is much more than a list of practices and procedures in a binder created to impress OSHA or insurance loss control specialists. The point of a safety program is to help you run your business efficiently, safely, and profitably while protecting your most valuable asset—your employees.

As with any great undertaking, implementing an effective safety program isn’t quick or easy. Positive change doesn’t just happen, nor does change happen overnight. If you want to run a marathon, you must first commit to the goal, then follow a strict training regimen. In the same way, improving safety takes commitment—commitment to developing a comprehensive program, enforcing its rules, transforming unsafe work behavior into safe behavior, and remaining vigilant at all times. In short, it requires making safety your company’s mission, above productivity and profit.

In February, ReMA sent out a request asking members to sign a Safety Pledge—essentially, a commitment to operate “Safely or Not at All.” That pledge is a wonderful step toward raising the awareness, importance, and focus of safety in the recycling industry. Improving the industry’s safety performance will mean fewer accidents, fewer insurance losses, and—ultimately—lower premiums for the companies involved.

On that topic, many recyclers ask me how they can lower their insurance costs. My response is simply that they are the single biggest contributor to controlling their insurance costs. Their loss experience determines whether they pay more or less than their peers, whether it’s through the application of an experience modification factor on their workers’ compensation policy or on their general liability and automobile insurance premium. If their loss experience improves, so will their premiums. Similarly, if the industry as a whole reduces its losses, everyone’s overall costs will decrease.

If you’re ready to take the next step in influencing the ultimate cost of your insurance, you might want to consider a loss-sensitive insurance program. Under such a program, your own losses play a much greater role in determining your insurance cost. This approach is not without risk, but your firm might be a good candidate if it’s financially strong and has a proven track record on safety. Work with your insurance agent to determine if this approach is right for your firm.

Once you’re comfortable with assuming substantial deductibles, thus taking on more risk, you have other options for reducing the cost of your insurance. You can form your own captive insurance entity or join a captive group. In the first case—a single-owned captive—you truly determine most of your own cost of risk over the long term. In a group captive, you’re still subject to the results of the group as a whole, but you might have more say in determining who is in that group.

With both types of captives, there will always be costs associated with managing the entity, buying reinsurance, handling claims, loss control, and other miscellaneous items. Still, if your experience is good over the long term, this approach should produce the lowest net cost. If you’re interested in this approach and meet the criteria, we can explore the possibility with you and your agent.

To discuss the various insurance options—guaranteed cost (traditional), loss-sensitive, and captive—visit us at the ReMA convention in Las Vegas or call 888/225-4725. 

—Monica McNally, senior vice president of RecycleGuard/Willis of New Hampshire Inc. (Portsmouth, N.H.)

The information contained in this document has been prepared and/or assembled by Willis RecycleGuard for informational purposes only and is not intended to provide legal advice. Readers should not rely on this document or act upon any of the information contained in this document without first consulting competent legal counsel.

The scrap industry has had a rough couple of years in terms of accidents, fatalities, and significant insurance losses. In response, many individuals—including ISRI’s safety team, ReMA members, and the staff and insurersof the RecycleGuardsm insurance program—have tried different approaches to promote safety in the industry. These individuals can’t change the tide by themselves, of course. It takes the industry as a whole—all of you—to change the results.