Re: Insurance Cost Savings for Printe
5/11/98 8:54 AM
Karen and Printech'ers:
The discussion started by Karen is a good one. As it happens, my insurance carrier's loss control expert was to visit me last Friday, so I took that opportunity to discuss your questions and comments with him. I'll try to reflect his thoughts here.
The first observation is that liability costs are not generally broken out, and this includes costs related to environmental risk. Rather, liability reflects exposure to all types of risk. So how did John Roberts Company obtain some breaks on the environmental side?
It works like this. Exposure to risk is still there, but in our case exposure was determined to be well controlled (as evidenced by our Environmental Management System and by our practice of environmental audits, etc.). When a special coverage is requested, it is then that an insurer will break out liability for this risk area. Behind the scenes in what appears to be a "seamless" process to the insured, the insurer will assess the liability and often seek to spread any risk with re-insurance firms. This is where it gets harder to track. According to my source, there are four pricing categories for insurance based upon risk assessment.
If the requested coverage is available at all (it may not be), Category One is priced at the level "everyone" would pay. Categories Two and Three would require additional information to a greater degree, and may reflect some discounts. Category Four is for the truly exceptional case, where exceptional performance has been demonstrated. Where this all gets interesting is that there may be either a large spread or hardly any spread at all between the categories. This info is closely held by the insurance copmpanies, so we're not likely to find out the price spread. Finally, market conditions then enter the formula. This means insurers may choose to absorb the "costs" of coverage for environmental, paying the re-insurer themselves, and then take less on other parts of the liability coverage package to "get the deal done". As I said earlier, this all appears as a seamless process to the insured.
It is for these reasons that it is likely hard to get specific "case studies". On the question of insurance companies using "checklists" to measure environmental (and safety) performance, my source believes that to be the case. He has offered to reaffirm this and possibly obtain such a checklist from some contacts he has. If we do get such a checklist, I may be able to share it with you (once it has been "sanitized').
I hope this info helps fill in the blank spaces in the preceding discussion.
The John Roberts Company