What can companies do about safety?
One lesson learned very clearly through all this is that safety should be of the highest priority. It’s fairly easy in the aftermath of an accident to say, ‘If we just did something a little differently, perhaps we could have kept this whole thing from happening.’ Inevitably, the extra cost of doing that thing is minute in comparison to the consequences of not doing it. There’s no question that every industrial company is focused on making sure it has done everything it can do to make sure a disaster doesn’t happen. From a safety standpoint, here are some issues we saw in the Gulf spill: How do you establish controls about who has the authority to stop unsafe operations? How do you manage that within your company so that if there is something unsafe going on, you can communicate properly on how to stop it immediately?
How can companies determine if their insurance is sufficient?
I’ve never heard of a company that had a big claim and said, ‘I wish I had bought less insurance.’ Almost always, the first question asked is, ‘Did I buy enough?’
When a claim happens, you want all you can get. Most of the time, buying additional limits is quite inexpensive.
After a disaster, most firms wish they had purchased more limits, and if they were concerned about their budget, they would have reduced costs in another area. They could take bigger deductibles or remove unimportant coverages.
I’m not saying you have to spend more money, but that most firms, in the aftermath of a disaster, would have spent their dollars in a different way than they did.
To help companies make that decision, they can use our Risk Financing Decision Platform. It helps companies by doing dynamic financial modeling of how they spend their insurance dollars. It can measure the impact of different program options against a company’s specific financial criteria used to drive its business. It is a sophisticated way of aggregating a lot of insurance options by using historical loss data and other loss forecasting methods to stress-test the different options.
How does the platform work?
You can put simulated losses through different insurance programs, then measure the results. Whatever metric is important in their business, it can measure the impact of different loss scenarios against those metrics under a variety of different programs.
It can help a company try different limits on for size, so to speak. Set them, run them through the model, look at the results, then decide if you are more comfortable with this spending versus this outcome. It’s a very flexible process that allows companies to home in on the program that is optimal for them.
Bruce Jefferis is CEO of Aon Energy. Reach him at [email protected]. Leo G. Walter III is executive vice president, Aon Risk Solutions East Central Inc. Reach him at (330) 734-6101 or [email protected]. The Aon Energy Risk Symposium is scheduled on Jan. 19, 2011, in Houston, Texas. Aon will present a one-day conference to address the latest risk management issues facing companies in the upstream, midstream, downstream and service sectors. Contact Jefferis for more information.
