Sophisticated Risk Management and Prevention Programs Lead to Lower Losses

In the same way that preventive medicine can lead to fewer illnesses, risk management tools can lead to lower losses from catastrophes, higher profits for underwriters, lower premiums and happier clients. Many losses can be prevented or reduced through increased levels of inspection; improved construction and design; and better maintenance and safety practices. For example, employers have long recognized that better safety programs and employee education in the workplace will lead to reduced workers’ compensation claims. The same logic applies across a broad range of insured businesses. As corporate clients around the world have become more focused on expense control as a result of the recent recession, insurance firms have a distinct opportunity to gain new clients by offering value-added services that help manage overall risks, while reducing downtime due to accidents along with total costs of insurance.

Business insurance underwriters now offer extensive newsletters, online sites and personal representatives to assist their clients in identifying and reducing risks. The publication of brochures and web sites means that best practices information can be pushed out to even the smallest insurance customers. The reduction of workers compensation insurance claims is a prime focus of such programs.

Elsewhere, underwriters that specialize in large industrial insurance policies provide extensive loss prevention services that may include access to engineers and consultants who are specialists. For example, see the web site of Rhode Island-based FM Global, a mutual Property and Casualty (P&C) insurance firm focused on business risk insurance, www.fmglobal.com. FM Global (originally Factory Mutual Insurance Company) places an emphasis on risk control and loss prevention. Its staff includes more than 1,000 engineers who are skilled in risk analysis, safety and loss prevention. Industries in which FM specializes include the chemical, health care, forest products and power generation sectors, all of which face unique risks and potentially large losses. FM operates the FM Global Research Campus on 1,600 acres in Rhode Island. Here, its scientists and engineers study all aspects of loss prevention. For example, the campus includes a fire technology laboratory of 108,000 square feet. In the lab, FM engineers can simulate fires of various types and test the latest in fire control technology. Another lab enables FM workers to duplicate wind-driven rain or debris and other weather risks such as extreme freezes and the highest level of hurricanes. The campus also researches electrical hazards. In addition to conducting basic and applied research, the labs sell approval ratings for industry products and services, using the FM APPROVED mark. The company publishes its findings in an extensive list of books, videos and workshops. Loss prevention and intense risk management enable the company to offer highly competitive products in such areas as boiler and machinery insurance, cargo insurance, factory coverage and construction insurance.

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