Insurance Companies are hedging their bets through premiums while the Manufacturing Industry is placing their wagers on luck.

The worlds of gambling and insurance are similar in many ways. Both are built upon elements of probability, modeling and quantification of risk. Professional gamblers are well informed on the odds of one play versus another; an understanding of modelling can improve those odds to improve the chances of winning. Professional underwriters and Actuaries understand premiums must be adequate to pay future claims and expenses; an understanding of modelling helps quantify risk and improve the ratemaking process.

Insurance companies, like casinos, make extensive use of statistics like mortality tables and other data to determine the “odds” of such an event occurring.

While the casino wants the odds in their favor to make a profit, an insurance company pays attention to statistics to ensure they can continue to provide services to all of their customers. While a visit to a casino can make you a winner, an insurance policy is only designed to restore the insured to pre-calamity status. Finally, the biggest difference is that for a bettor to “win” against an insurance company, they are to some degree, required to suffer a loss.

Gambling and insurance inherently involve risk. In gambling, risk is speculative. The world of insurance deals with underwriting and timing risk.

Building a culture of safety ultimately translates to lower insurance premiums

Business Insurance Magazine has sited that premium prices in the United States increase on an average of 10.4% yearly. There are cases where companies’ premiums have gone from $300,000 to over $1,000,000 between renewals.

Manufacturing companies who would like to save on their insurance premiums should first focus on instituting a comprehensive functional safety program.

Functional safety has always been mentioned as being the #1 most important aspect of company culture; however, their actions don’t seem to support this claim.

There is not a company on the planet that wants a poor process safety record, higher worker’s compensation losses, or massive increases in insurance costs; yet, the reality is that upper management has the most significant impact on whether their company is safe or not and many simply don’t take the proper action.

Unfortunately, most companies believe functional safety is about being lucky, which couldn’t be further from the truth. Functional safety has nothing to do with hoping for improvements or wishing for an accident-free operation. It requires commitment throughout the organization to have a world-class safety program. A written safety plan is only the beginning. First step in changing culture requires buy-in and action that supports the plan. Secondly, and of highest importance, the plan must be led and enforced by upper management.

The manufacturing industry comes with many risks

Protecting your employees against injuries is a basic cost of doing business. However, many manufactures don’t realize relying on insurance alone for protection is neither wise nor cost-effective. Injuries and illness in the workplace cost much more than increased insurance premiums. Time off from work lowers productivity and reduces profits. When safety protocols are not followed it can also lead to equipment failure or damage. Unexpected capital costs can cripple companies or, at the very least, severely impact their bottom line.

Saving money on insurance premiums is possible in this market, but it must start with management looking in the mirror. Insurance premiums are cyclical, but taking accountability and demanding a top-tier safety culture will provide numerous benefits. Saving money on premiums, reducing employee turnover and boosting morale are just a few of these benefits.

The old cliché’ has never been more relevant.... it is a Win-Win!

Lower Premiums-Higher Profits!

Insurance isn’t designed to make you a winner. It is designed to help minimize the financial impact of any covered incident.

If you want to be proactive and eliminate risks before they lead to an incident, protecting your company’s people, the company’s image and maximize productivity please contact us and let’s discuss your situation.

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Tagged as:     risk     Mark Kozub     functional safety  

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