Prioritizing loss prevention

January 24, 2024

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By Andy Kovacs, Manager, Risk Services.

Employee injuries, and even fatalities, are unfortunately a common occurrence in the United States. According to the Occupational Safety and Health Administration (OSHA), 5,190 workers — or an average of 15.03 per day — died on the job in 2022. Employers reported to OSHA about 2.8 million injury cases in 2022, averaging 7,671 per day. 

Organizations seeking to better protect their people and reduce their loss costs will be well served to develop a loss prevention playbook. In this blog, I’ll highlight some strategies for prioritizing prevention and bringing your organisation’s playbook to fruition. 

Historical analysis

As Maya Angelou said, “You can’t really know where you are going until you know where you have been.” Being proactive in safety requires an initial analysis of past losses, identified by line of coverage (workers’ compensation, general liability, motor, etc.), location and risk class. The purpose of such analyses is to determine accident trends through frequency (number of losses) and severity (dollar amounts) from a historical perspective. Of course, the frequency and severity of accidents affect organizations’ insurance premiums based on carriers’ underwriting parameters, as well as experience modifiers through the National Council on Compensation Insurance (NCCI) for workers’ comp premium promulgation.

According to H.W. Heinrich’s theory of industrial accident prevention, illustrated by the safety pyramid, frequency is the first indicator — regardless of severity. The pyramid depicts a relationship of one serious injury accident to 10 minor injury accidents, 30 damage-causing accidents and 600 near-misses. Simply put, for every 600 near-misses ($0 severity), there will be 30 accidents (low value severity), 10 minor accidents (low-to-moderate value severity) and one serious accident, potentially including death (major value severity). 

Injury trends may include several common causes, such as slips-and-falls, being struck by various objects, chemical exposures, and motor vehicle accidents. Another aspect of trending involves multiple accidents at the same customer/employee location or involving the same individuals. Let’s say an analysis reveals that a single individual was involved in 18 motor vehicle accidents; this indicates a clear need for driver safety training and counseling, and employee termination may even be warranted. Using Heinrich’s safety pyramid, even if all the collisions were minor in nature, it would not be a question of if a potentially catastrophic accident will occur, but when.

Reactive, then proactive action plans

After reviewing past losses, an action plan should be developed to address the trends identified in the analysis process. Although this method is reactive, it is a necessary step toward being proactive in preventing future accidents. Like Maya Angelou’s quote, once you understand where your losses have occurred, you are better prepared to prevent them from happening again. 

Through accident investigation and root cause analysis — both of which are designed to prevent future occurrences — you can begin the proactive phase of your safety programme. This can be achieved with a few standard techniques that are effective in reducing accident frequency and severity. These are the basis of what’s referred to as loss control. The hierarchical order of loss control is as follows:

  • Engineering controls: These are physical methods to reduce or mitigate the risks associated with various work activities. This can include workplace redesign or modification of various work areas to reduce hazards: slip-resistant flooring/mats, machine guarding, increased ventilation, proper chemical storage, guardrails and barriers, bottleneck clearance and preventive maintenance. 
  • Administrative controls: These focus on work practices and can involve process training, workflow adjustments, job rotation, limiting access to hazardous areas, policies and procedures, and, in some cases, changing work behaviors. 
  • Personal protective equipment: The final recourse after engineering and administrative controls have been exhausted, PPE can include fall protection, hard hats, gloves, safety glasses/goggles, respiratory protection, hearing protection and protective clothing. 

Monitoring and evaluation

Once analysis is complete and controls are in place, the next step involves monitoring all phases that have been developed, implemented, and enforced. Most organizations undertake an assessment period to allow feedback from all stakeholders on the effectiveness of the programme and determine what improvements to pursue. 

Expectations of positive results in terms of loss reductions must be tempered by scrutiny and patience. Typically, a new or revised safety programme will yield benefits 2-3 years after implementation and cannot be rushed to the desired conclusion. 

One keynote to the methods and techniques discussed here relates to insurance carriers’ response to the initial changes. As part of the usual underwriting processes, any advances in an organisation’s loss control or safety programme — regardless of immediate results — are viewed positively and may be reflected in renewal premiums. As an example, two years into a revised risk management programme on which I worked with an oil and gas company, the organisation saw its workers’ compensation premium reduced by 42%, from $9 million to $5.2 million! 

Although safety programs are generally viewed as an expense center in the world of profit and loss, I encourage clients to consider just how much profit margin would allow for a $3.8 million increase in net income. What’s more, safety efforts are designed to protect the most valuable resource of all — human health and welfare.

Learn more — read about how Sedgwick’s risk services can improve your workplace safety programme