by Debbie George
In addition to their social costs, workplace accidents and injuries have a major impact on your bottom line. You may try to minimize the costs of accidents by saying they are covered by insurance; however, insurance covers only a portion of the total accident cost. Moreover, as the number or the cost of accidents increases, so will your insurance premiums. Accidents directly and indirectly reduce your profitability.
Information obtained from the Pumpro Property & Casualty Insurance Program, and based on a 10-year period from 2003 through 2012, identified the top three causes of losses experienced by a concrete pumping company as hose whippings, vehicle accidents and contact with electrical wires. In total dollar amounts paid during the 10-year period, hose whippings topped the list with an average of $150,603 paid per claim. Vehicle accidents, which occurred more frequently, with a ratio of five vehicle accidents to every hose whipping accident, came in second overall, but had the lowest average cost per claim at $18,978. Contact with electrical wires occurred least often but were the most expensive, with the average amount paid per claim at $277,928. Note that these averages only include amounts paid to a third party claimant and do not include any payments made by a pumping company’s workers’ compensation carrier for injuries to an employee.
In addition to the amount paid by the insurance carrier, the concrete pumping company incurs less obvious, indirect costs that are usually uninsured. The indirect costs of accidents are usually greater than the direct costs. A conservative estimate is that for every one dollar of direct accident costs, there are three dollars of indirect costs. Some studies indicate the hidden costs can be four to 10 times the insured costs. As auto accidents are the most frequent type of loss experienced by a pumping company, consider the following indirect costs a company may incur:
• Lost time from work by the injured employee
• Administrative time by supervisor to investigate the accident
• Loss of use of the boom pump while it is being repaired or replaced
• Schedule delays
• Poor customer relations
• Time to attend depositions, mediations or trials
• Failure to fulfill your contract or job order
• Implementation of corrective measures
• Lower employee morale
• Loss of insurability
• Increase in future insurance costs due to increased accident frequency or severity
If one uses the above formula to determine the indirect costs, the average vehicle claim increases to $75,912, with $56,934 coming directly from a pumping company’s net profit! As many pumping companies have experienced, it can take from two to five years to settle claims involving a hose whipping or contact with electrical wires, thus increasing the indirect costs dramatically and affecting a company’s bottom line. Studies suggest that, based on the above average, a hose whipping claim can cost more than $450,000 in indirect costs. Impossible? Just start estimating the indirect costs—payrolls for idle workers at the job site while emergency personnel are tending to the injured worker, administrative time by supervisors to investigate the accident, impact on your future insurance premiums, and time to attend depositions and trials, to name a few. The costs for these items add up over a five-year period!
Just as there are many hidden costs due to accidents, there are hidden savings in accident prevention. For this reason, the phrase “loss control” is often used in safety management. Every accident you prevent saves direct and indirect accident costs—money that remains in your pockets. Other benefits of loss prevention efforts include:
• Employees will not be injured or killed
• Property and materials will not be damaged or destroyed
• Operations will flow more smoothly
• Increased employee morale and security at work
• Better relationships with customers
By implementing a loss control program, a pumping company can reduce the frequency and severity of accidents which will, ultimately, increase your profitability. Educate yourself and your employees on the new ASME B30.27-2014 standards, obtain safety information offered by the ACPA and work with your insurance company risk control specialist. Safety is more than just words on a piece of paper. It is a way of doing a business— a way of living. Make the commitment to safety today and ensure the future of your company!
To learn more about the PumpPro insurance program for concrete pumpers, please contact or have your insurance agent contact Debbie George at debbiegeorge[at]normanspencer[dot]com, call (937) 432-3505, or visit their website at www.norman-spencer.com. Pumpro is a nationally recognized insurance program endorsed by the ACPA that is tailored specifically to meet the property and casualty insurance needs of concrete pumping companies.