Navigating the Future of Risk Management

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Non-economic factors affecting premiums, such as increased litigation and higher jury verdicts, may be associated with anti-corporate sentiments and racial inequality movements. This phenomenon is often called social inflation. As insurance premiums continue to rise, there are a few ways to offset some of the losses due to social inflation. (Credit: Giordano Aita/Stock.adobe.com)

The pandemic and the economy present various challenges for risk management teams across the country, including difficulties in the insurance market, emerging risks, and challenges associated with changing business operations.

The recent virtual conference, Elevate, presented by Out Front Ideas with Kimberly and Mark, hosted a panel of risk management professionals who discussed the range of issues they face. Guests included:

  • Melora Copeland — Director of Insurance, Compass Group USA
  • Kelly Oyler — Senior Director, Insurance Risk, Walgreens Boot Alliance
  • Jane Sandler — Vice President, Global Risk Management, McKesson
  • Dawn Watkins — Director, Integrated Disability Management, LAUSD

Risk transfer programs and renewals

The Los Angeles Unified School District (LAUSD) is largely self-insured and is the second largest school district in the nation. LAUSD faced challenges before the onset of the pandemic, with most of its students below the poverty line. For some students, the lunch they received during their school day could be their only meal of the day, creating a significant crisis when schools were closed during the pandemic. Seeing an ultimate need, LAUSD launched a food program, providing a meal to anyone in need, providing over 100 million meals in the process. Other parts of their program provided school supplies, diapers, tests and COVID-19 vaccines.

Like most employers, LAUSD has been inundated with requests for reasonable accommodations for disability, expanded remote work opportunities, and vaccination policies. However, reducing silos and encouraging the integration of departments has helped meet these demands, providing faster resolutions. Their workers’ compensation program has also adapted quickly through telehealth, outreach to injured workers, and increased efforts to resolve claims through settlements.

Compass Group, a leading food and hospitality company, has felt the effects of the tough market on its insurance program while paying close attention to cybersecurity during this renewal season. His strong relationships with technology partners and operators proved essential throughout the submission process. Explaining to his brokers how he has specifically invested in technology has also been important during renewals. Knowing that everyone is impacted during a cyber event, properly handling a breach and communicating it across your business can make all the difference. You also want to anticipate your renewal and make sure you don’t buy too much, as difficult market trends are likely to continue into 2022.

As a leading supplier and marketer of healthcare products and services, McKesson has experienced the same with a tough market after 14 consecutive quarters of price increases. Successfully managing the various implications comes down to strengthening relationships and avoiding silos. It partnered with brokers and carriers and invested in tools to manage the total cost of risk. Not expecting a soft market to return any time soon, better positioning of its risk management program included:

  1. Use of the network — Work with your risk managers, rely on your market relationships and have various options to optimize your coverage.
  2. Using Analytics – Using a risk finance optimization study can help visualize a risk profile and better understand the pricing of your particular risk. It can also help frame the internal dialogue around boundaries, deductibles, and self-insured layers. McKesson employs captives and has grown it by creating a portfolio of products that enhance its ability to support the business, including funding high deductibles, quarter-sharing diapers with insurers, and taking its own diapers where the Pricing was not correct.
  3. Loss Control Risk Mitigation Investments – This should be included in the overall strategy and detail how risk managers can support the critical mission of the business while enabling it to move forward.

Walgreens attributes the success of its program in part to its relationships with underwriters within its carriers. While price is certainly important during renewal season, trust in partnerships can have an incredible impact. Analytics also plays an important role in driving conversations with senior executives to uncover their perspective on risk appetite and ensure strategies are aligned when building your program.

Impacts of social inflation

Non-economic factors affecting premiums, such as increased litigation and higher jury verdicts, may be associated with anti-corporate sentiments and racial inequality movements. This phenomenon is often called social inflation. As insurance premiums continue to rise, there are several ways to offset some of the losses due to social inflation:

  1. Safety and Loss Prevention – Technology can help determine the cause of accidents, thereby handling claims accordingly and ultimately avoiding litigation. Accident prevention training can also help.
  2. Claims Handling — Some general liability claims can be resolved through early settlements. Typically, leaving such claims to a jury results in an outcome worse than settlement.
  3. Diversity, Equity and Inclusion Initiatives — Embracing the community can help understand the mindset of individuals, including customers and employees, and build a better baseline. Hiring minority-owned law firms can also provide a different perspective that your organization may not have seen before.

Worker’s Compensation Programs

First and foremost, your workers’ compensation program must be worker-centred. This is a major principle of risk management within your program. Communicate early and often with injured workers and advocate for your employees so they have contact in the event of a disaster. Successful programs also include a strong emphasis on medical management and holistic care for the individual and ensuring that individual business sites do not pay to bring an injured worker back to work.

Using specialists, physiotherapists and rehabilitation facilities can help get an injured worker back to work and eventually settle a claim. Settling these lifetime claims can prevent a costly event from occurring in the future. The presumptions also change which professions have compensable claims, particularly relating to COVID-19. However, the best way to manage the cost of claims is to understand the data behind your program. Understand which departments are causing losses and why.

See the archived recording of this session here.

Kimberly george is the Senior Vice President of Corporate Development, Mergers & Acquisitions and Healthcare at Sedgwick Claims Management Services, Inc. She can be reached at [email protected]. mark the walls is vice president of communications and strategic analysis at National Security. He can be reached at [email protected].

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