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Risk Management
Tuesday | 28 August, 2012 | 5:39 pm

Power of protection

By Jeffrey C. Terry & Steven Bojan

Surviving market transitions in every industry, from metals to insurance

August 2012 - Life for a metals company would be less challenging if the marketplace were void of fluctuations. Imagine how stable operations, budgets and business plans would be if the metals industry didn’t experience the highs and lows of pricing and ever-changing levels of demand and capacity.

The metals industry experiences cycles similar to the insurance industry. The property, casualty and commercial automobile insurance industry is in a state of transition. There is pressure on underwriting companies to increase pricing (get more premium rates), reduce coverage (potentially leave a company exposed), act more prudent in risk assumption (decline more applications) and increase risk participation (increase deductibles, retentions, limit coverage).

Commercial automobile insurance (fleet insurance) is an area receiving premium pressures across the United States and in global markets. There are proactive steps a metals company can take to mitigate unfavorable changes in its fleet insurance program.

Fleet safety program: Surveys indicate 60 percent of middle-market companies have a fleet safety program and 90 percent of them enforce it. Written safety policies and documented training offer a structured roadmap for drivers. In addition, the documentation can be used as evidence in litigation or to explain a company’s position in compliance audits.

Control fleet exposures: Controlling exposures includes pre-loss measures, post-loss procedures and vehicle maintenance programs. Many metals companies use loss-prevention strategies to ensure more predictable and stable loss performance. It is critical to secure motor vehicle reports on drivers annually. Reports provide a history of the driver’s moving violations, and past performance is a key way to identify at-risk drivers. Sophisticated fleets have established criteria to spell out the ramifications for future moving violations, which can include remedial training, additional monitoring, suspension of driving privileges and even termination.

Handheld device policy: It’s rare for a driver in today’s environment not to have a handheld communication device. Distracted driving is one of the leading causes of motor vehicle crashes. Controls that include restrictions on the use of mobile communication devices greatly reduce the likelihood of crashes and can be an important tool in reducing a company’s financial exposure if a distracted driver causes a collision.

Driver training: Fleets that succeed in reducing vehicle crash frequency and severity use ongoing, documented driver training and monitoring, which covers topics such as defensive driving and pre-trip inspections. Managers, dispatchers and maintenance personnel need to be involved in this program. All training should be conducted in a professional manner and use both loss history and on-road safety data to help stress its importance.

Maintenance: Proper vehicle-maintenance programs are preventative medicine for fleet performance. Regardless if a program is administered internally or externally, the key is consistent maintenance by trained experts. Communication from drivers regarding any vehicle issues and daily, documented inspections of vehicles are critical.

Commercial vehicle statistics

Many metals companies’ fleets include large trucks. The U.S. Department of Transportation compiles statistics on large trucks (gross vehicle weight more than 10,000 pounds).

Eight percent of fatal accidents in 2010 involved large trucks. Of the total fatalities, 76 percent were occupants in another vehicle that was involved in the accident, 15 percent were occupants of a large truck and 9 percent were non-occupants of a vehicle. Sixty percent of fatal large truck crashes were from frontal impact on the large truck.

Using the most effective safety and risk-management tools is important, but given an insurance marketplace that is in transition and moving toward rate increases, having proper programs in place will help companies have greater control over future results. MM

Jeffrey C. Terry is senior vice president with HUB International Insurance Services in its Los Angeles office. HUB International is a top-10 U.S.-ranked insurance brokerage and risk management firm with its headquarters in Chicago. Jeff has specialized in risk management consultation and insurance program design for the metals industry for more than 20 years. Jeff can be reached at This e-mail address is being protected from spambots. You need JavaScript enabled to view it . Steven Bojan is a senior transportation risk consultant for HUB International. Steve has specialized in fleet safety and risk control for more than 15 years and provides expert consultation in compliance, risk assessment, and loss prevention to fleet related companies throughout North America.

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