Comparing Apples

Kate McGinn XL Environmental Exton, Pa. www.xlenvironmental.com

INSURANCE TERMS AND EXPENSES CAN significantly affect a company's profitably, so it is important that waste companies determine how their risk management efforts measure up. Consequently, benchmarking insurance and risk management programs can be a good way to identify your company's strengths and weaknesses, justify potential investments and improvements, or verify existing programs' investment returns.

A benchmark is a standard by which something, such as a product, process, program or service, can be measured or judged. When buying insurance, knowing how your business' exposures compare to other similar companies helps insurance agencies determine rates, terms, liability caps and other policy features prior to the renewal process.

There are many variables in insurance program parameters that allow waste firms to determine where they stand in their industry or against other commercial insurance buyers. According to a report, “Benchmarking — A Critical Tool for Insurance Buyers,” released by New York-based, Marsh, a risk and insurance services firm, qualitative and quantitative benchmarks can include:

Benchmarking can help to determine whether an insurance program is competitively priced, whether the terms of the insurance policy represent industry standards and whether a company's loss history is on par with other waste industry businesses. The analysis can support or refute the effectiveness of risk management efforts and determine where improvements, such as more employee training to prevent accidents or workers' compensation losses, are needed.

According to Marsh's report, benchmarks also validate success. For instance, if a waste company's workers' comp losses are consistently 2 percent of its payroll, while the industry hovers at 4 percent to 5 percent, the company's loss control efforts are effective.

To perform a benchmark, information concerning industrywide insurance standards, including average limits, worker retention and other major coverage features, can be obtained from trade associations, insurance agents or brokers, and insurance companies. Also, a number of governmental organizations, including the Occupational Safety and Health Administration (OSHA), Washington, D.C., collect insurance loss information. Two insurance rating organizations — the Insurance Services Office Inc., Jersey City, N.J., and the National Council on Compensation Insurance, Boca Raton, Fla. — offer benchmarking services to the insurance industry and corporate risk managers.

In today's economy, it helps to know where your company stands in relation to the rest of the industry. But more importantly, analyzing a company's losses can be the first step toward removing the triggers that cause loss.