Being proactive about workplace safety can help a company improve its safety record and lower losses and reduce insurance costs.
Two insurance professionals emphasized the benefits to pallet and sawmills businesses in remarks they made at the National Wooden Pallet and Container annual leadership conference. Brad Van Swol and Dennis Bilancia discussed insurance issues related to the pallet industry during the conference in Arizona.
Van Swol is a vice president with Hays Companies, a nationwide firm that provides risk management, insurance, and employee benefits consulting. He works primarily within the forest products insurance practice at Hays.
Bilancia is vice president and account director for property and casualty lines for the Marsh & McLennan Agency, a nationwide insurance broker that provides risk management and insurance.
In their remarks and in discussions with Pallet Enterprise, Van Swol discussed commercial property insurance, and Bilancia discussed workers’ compensation and auto coverage.
An important factor in property and casualty insurance considerations is electrical systems, noted Van Swol. Make sure electric controls panels are tightly sealed and secured to prevent dust from entering and building up. Electrical connections should be secure. Areas around machinery should be clean and dry. Machine components should be properly aligned and lubricated to prevent excessive wear and friction. All these factors help prevent sparks or heat from coming into contact with dust or sawdust and sparking a fire.
Companies should have thermographic imaging of their operations, he suggested, typically every 24 months. In fact, some insurance companies will provide the service, which must be performed by a level one certified electrician. Insurance companies that cannot provide the service probably can provide referrals to qualified electricians, he added. The cost is in the range of $1-2,000 for a company with about 40-50 employees. Having the service done will favorably impact insurance rates or premiums.
Thermographic cameras detect “hot spots” of potential failure in electrical systems, including motor control centers, motor/drive combinations, pumps, fans, compressors, electrical connections, industrial gearboxes and transformers.
“Be proactive,” said Van Swol. “That’s really a big thing. When you’re ahead of potential problems, the insurance company will recognize this.” Results or findings from thermal imaging scans should be documented.
Maintaining cleanliness around electrical components and machinery could be one of the responsibilities of an employee who is accountable for plant housekeeping, suggested Van Swol. Electrical systems should be checked daily, he added. Ideally, having on-site management conducting daily facility and equipment checks is preferred by insurers. Having a documented program in place for housekeeping, welding safety and electrical checks will demonstrate to insurers that you are attentive in your day-to-day operation and more likely to be ahead of possible claim issues.
Businesses that do not incorporate such programs tend to have more loss activity. Insurers recognize this reality. In fact, their statistics bear it out. Proactive managers experience less losses, reactive managers have more frequent losses. For obvious reasons, insurance companies prefer to work with business owners that are proactive.
Stacking pallets can be an issue for insurers. Pallets should not be stacked more than 30 units high, suggested Van Swol. It may seem like a minor issue, but insurance carriers have a negative experience with pallets stacked too high. Falling or collapsing stacks of pallets damaging buildings or equipment are a frequent and recurring claims issue. In addition, there should be ample separation between stacks of pallets and buildings if pallets are stored outside. Indoors, there should be ample clearance space around sprinkler heads and building roof rafters. Maintain open aisles, and make sure fire extinguishers and control panels are not blocked by stacked lumber or pallets.
“The main thing is have it under control,” said Van Swol. If a representative of your insurer visits, “they’re going to look at it.”
Safety in welding practices is another area of focus. He mentioned a real-life example of a sawmill where old bandsaw blades were welded into sections to be taken away for recycling. The task was done regularly inside the sawmill near the end of the work day on Friday. No special safety precautions were taken in the work area. As a result, sparks got into sawdust one Friday as the welding was being done, and the sparks smoldered through the night while the plant was closed. The resulting blaze caused a total loss of the building and a $3 million claim for a fire that could have been avoided.
“Weld when staff are around,” said Van Swol. Surface areas should be clean and also sprayed down to control sparks. Like other practices, they should be controlled by management and documented. When an insurance underwriter or safety engineer inquires, a company should be able to explain their welding procedures and provide documentation of their welding safety program.
“All of this may seem tedious, but it’s about a safe workplace and a more insurable workplace. You have a say in the rate you pay to insure your operation,” said Van Swol. “Why pay the insurance company more than you have to? Use those saved insurance dollars toward other aspects of your business.”
Just because insurance premiums have not risen substantially in a number of years doesn’t mean you necessarily have an advantageous rate, according to Van Swol. Your insurance rate may be consistent, but high. “You may be paying 25, even 35% more than you have to,” he said, and reduce those rates simply by adopting safe workplace practices. “Any money invested to make your business a safer, more insurable operation will be returned when it comes to lower insurance pricing. And, a safe work environment creates a situation where insurance companies will compete for your business. Competition is good. When insurance carriers compete, pricing decreases.”
Captive insurance programs are gaining more attention in the current marketplace. Van Swol recently proposed a captive insurance program for a company’s liability, workmen’s compensation, and auto coverage that potentially would save that business about $40,000 annually in insurance costs.
“Captive insurance is a form of asset protection just like we think of traditional insurance most of us have on our business,” explained Van Swol. “However, in a captive program, your rate, i.e. your premium, is determined in part by your losses, and yours alone.”
It’s not easy to qualify for a captive program. Financial statements are looked at closely. Loss history is analyzed; typically, five years of loss history is reviewed. And many insurance agents do not have access to captive programs.
Van Swol said, “I suggest everyone at least inquire with their insurance agent if a captive program option is available to them. Insurance costs savings can potentially be quite significant, but gaining coverage through a captive program is not easy. Captive program managers are very selective.”
He also suggested that pallet companies and sawmills should talk to their insurance representatives about hireability programs that can help them identify good job candidates who translate into long-term employees. That is important, he said, because when you can identify candidates who will stay, you will have higher caliber workers who do better work, produce more, and work safely — reducing liability.
Bilancia offered several suggestions for obtaining “best in class pricing” for auto and workers compensation coverage.
Safe practices for fleet operations start with hiring the right people to be drivers. “You should have written criteria for drivers,” said Bilancia. In addition, there should be orientation training for new hires as well as ongoing training for driving at night, in snow or similar conditions, or special hazards. Vehicles should be maintained and inspected regularly to ensure that key components are in good working order.
Vehicle accidents should be analyzed, and the company should respond proactively. Be able to tell your insurance agent or carrier why it happened and what you’re going to do in order to prevent it from happening again.
Companies should be familiar with their SAFER score, the system used by the Federal Motor Carrier Safety Administration for evaluating interstate trucking operations. If a company has experienced fines for violations of vehicle maintenance or driver fitness, they must be able to explain those circumstances to a loss prevention consultant.
Similarly, safety training and procedures should be documented for workers’ compensation insurance coverage. Procedures for training, machine guarding, lock-out and tag-out, and more should be in written form and followed.
Bilancia suggested getting a company’s insurance broker or agent or safety consultant involved in regular meetings. He also proposed inviting OSHA officials to do a ‘mock audit’ of a company’s facilities. In a mock audit, OSHA officials will look for safety infractions, but they alert a business to them so they can be remedied, and the company is not penalized. Insurance companies “love to see mock OSHA audits,” said Bilancia.
“It makes your business more insurable,” added Van Swol.
It is also important to get prompt medical attention for an employee who is hurt on the job, said Bilancia. “If you wait more than 24 hours, claims grow.”
Also, it is important for an injured employee to return to work as quickly as possible, even if they are performing different, less strenuous duties.
In response to a question about workers’ compensation, if it is better for businesses to cover small claims themselves in order to keep insurance rates down, Bilancia was emphatic: no. Paying claims out of pocket is “bad, bad, bad,” he said.
“You start paying a claim, you own the claim…You want to report the claims to your insurer,” he advised.
Safety Best Practices to Improve Your Insurability
• Daily cleaning — Make sure dust collection equipment is secure, not leaking, working properly. Empty dust collection and wood scrap bins daily.
• Maintain dust-free environment — Clean all surfaces, concealed areas, electric panels and motor control boxes, motors, under elevated equipment.
• Dust removal — Make sure all ignition sources are turned off or are removed; blow with less than 15 psi or use approved vacuum. Have written guidelines to cover the above and retain written plans at least one year.
• Housekeeping — Keep work areas clean, sanitary, orderly. Have a housekeeping schedule adequate for each area. Aisles should be clean and free of obstacles. Ensure access to fire equipment and exits. Liquid spills to be cleaned up promptly. Smoking receptacles emptied, watered, etc. Special attention around areas that generate wood scraps, sawdust, chips, etc.
• Electrical systems and components — Keep it clean, dry, tight, friction-free. Thermographic imaging regularly. Document all inspections and testing. Electrical safety checklist — exposed wiring or cords, insulation worn, connections secure, etc.
• Stacking pallets — Maintain 50 feet between buildings and stacks of pallets. Maximum 30 pallets high, rows 50-75 feet wide and 100-150 feet long. Maintain 15 feet of aisle space between rows of stacked pallets.
