Thinking prevention: too often agents, brokers and even risk managers will use loss prevention only as an afterthought.

Mark Twain once said," I have seen an entire family lifted out of poverty and into affluence by the simple boon of a broken leg. I have had people come to me on crutches, with tears in their eyes, to bless this beneficent institution. In all my experiences of life, I have seen nothing so seraphic as the look that comes into a freshly mutilated man's face when he feels in his vest pocket with his remaining hand and finds his accident (insurance) ticket all right."

While this may be a somewhat cynical view of the insurance industry, Twain was not far from the truth if he was describing jury verdicts and settlements for injuries and losses in the United States. As litigation has replaced baseball as our national pastime, insurance companies and risk management professionals are spending inordinate amounts of energy defending clients and their companies from litigation and trying to mitigate loss payouts. What can risk management professionals, carriers and insurance brokers do to help stem the tide? Preach loss prevention and loss control.

Too many times the insurance agent, broker and even the risk manager will use loss prevention only as an afterthought once the claim or suit has been brought or settled. This type of knee jerk reaction is not business savvy. In the current pliable insurance marketplace, premiums are driving the thought process and not loss prevention. This is a first-class mistake.

The realities are that every injury, accident, directors and officers lawsuit or property loss has a tremendous ripple effect throughout the company. Organizations pay for injuries and losses when they happen. But mere payment is not enough. Corporations can no longer look at losses as just a part of doing business on a balance sheet. Issues such as goodwill, company reputation, employee morale, loss productivity and all the "under the iceberg costs" that go with a loss add up to staggering numbers. If organizations do not invest in prevention, they will continue to invest aggressively in failure costs. This is where it is incumbent upon the savvy insurance carrier and broker/agent to assure that the goals of the risk manager or business owner are pointed toward safety and loss prevention. The future is prevention.

While the message of prevention comes from various partners, each of them must have an integrated approach to educating, training and preventing. The first player is the carrier. Most insurance companies have loss-prevention teams or personnel who are either in-house or contracted. These are safety professionals who have technical expertise to evaluate and work with the client on identification, analysis, engineering and training. Most do great jobs, but some still have the "Hector the Inspector" approach to safety services. They arrive at a client's facility, walk around, talk to a few employees, jot down a few notes, snap some digital photos, jump back in the company car and then send an inspection report to the client about what the client needs to fix. This is not loss prevention but prevention lost.

Another vital but untapped resource that the carrier provides is its own claims personnel. Not only should they be handling the claim, but claims personnel can and should make recommendations that can help to prevent future losses. When they gather information related to the claim, they should add to the file notes what they think can or has been done to correct the problem that caused the injury or loss. Carriers should think about having internal safety personnel and claims professionals not only meet regularly to discuss claims and safety training, but be housed on the same floor. The proximity, team approach and communication can be keys to success in preventing claims and jury verdicts.

The next player in the integration approach to safety is the agent or broker. Too many firms train their client executives on selling products or lines of coverage but fail to educate them on loss prevention. Educating a broker or agent on a retrospective insurance program is just as important as what the coefficient of friction is on a slip test. The broker or agent has to clearly understand the goals of the client.

Which leads to the last loss-prevention team member and the most important--the client. The client has to use his or her knowledge of company culture and resources to reduce exposures and prevent claims. The carrier and broker must meet regularly with the client to assure that the client is staying focused on loss prevention. With assistance from the broker and carrier, the client can see an integrated team approach to prevention which will help reduce costs and build a stronger relationship.

Lance Ewing, a Best's Review columnist, is vice president, risk management, for Caesars Entertainment, and RIMS president 2003-2004. He can be reached at [e-mail].