Managing an Effective Owner Controlled Insurance Program The Safety Administration Perspective

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Managing an Effective Owner Controlled Insurance
ProgramThe Safety Administration Perspective

• Vaughan Hargrave CHST, ASP
• Risk Control Consultant
• Aon Risk Services/ Construction Services Group
• Los Angeles, CA
• Vaughan_Hargrave_at_ars.aon.com

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Material Sources

• OCIPs- Look Before you Leap www.agc/safety.Inf
  o/ocip.asp
• Owner Controlled Insurance Programs A View
  from the Trenches,
  Constructor magazine Sept 2001 Ken Carpenter
  and Edward Keeter
• OCIPs- The Owners Perspective by Tim East
  Director of Risk Management, The Walt
  Disney Company
• Construction Safety Management Engineering
  Daryl C Hill, Editor
• Quickstart/ Safety Administration Manual
  Vaughan Hargrave

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Definitions

• OCIP Owner Controlled Insurance Programs
• Wrap up See above
• CCIP Contractor Controlled Insurance Program
• Rolling OCIP/ CCIP An ongoing program involving
  multiple projects belonging to owner or
  contractor

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Aons OCIP Portfolio

• Government Office Complexes, Prisons
• Utilities Water and Sewer Tunnels, Pipelines and
  Plants
• Schools LAUSD, LACCD, UCLA, and USC
• Hospitals UCLA, USC
• Housing Esprit, Residential, and School
  Dormitory
• Airport LAX
• Entertainment Disney,Bellagio
• Project Values 100 Million to 5 Billion

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OCIPs Owners benefit who

• Have aggressive Loss Control and Claims
  Management
• Have large projects that can carry economy of
  scale
• Are seeking a risk financing tool covering most
  site exposures
• Are seeking a powerful Risk Management Tool

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Advantages include

• A decrease in cost through savings in premium
• Elimination of many third party/ cross liability
  lawsuits
• A source of potential profit if well managed

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Areas needing caution include

• Owner involvement of General Contractor feedback
  in specifying , evaluating, acquiring and
  administering the OCIP including program coverage
  and services
• Failure to create ownership can create problems
  leading to alienation of the GC, difficult
  communication,low morale and increased losses

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The GC should evaluate

• How the wrap-up affect the contractors insurance
  costs relative to volume
• What gaps are presented in insurance coverage
  with an OCIP
• How do the Owner and Broker intend to administer
  the wrap-up

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The key players in an OCIP

• Owner Broker
• GC(s) Insurance Carrier
• Contractors/ subs OCIP Program
  Administration

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Know your teammates

• Skill level
• Experience
• Willingness
• Attitude

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Know the rules of the game

• Read the contract prior to bidding
• Read the OCIP program
• Insurance is usually separate
• Safety program is part of the contract and
  enforceable as such

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Whats at stake for the Owner

• Many GCs insurance cost is from 3 to 4 of
  contract value
• Owner can purchase project coverage at 2 to 3
• Cost reduction of 1 to 2 on 100 Million
  1 -2 Million in
  potential savings
• Most OCIP programs today offer a base savings
  plus incentives
• Safety can become a profit center versus
  perceived cost

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Whats at stake for the Contractor

• OCIP may affect the overall cost of insurance by
  reducing economy of scale
• A large well run GC may lose a competitive edge
• A smaller GC with the willingness and good
  management may find a growth opportunity
• What are the rewards at the end of the project

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Who benefits from these savings

• Owner
• GC
• Subs
• One , some or all?
• All can benefit if the OCIP is well run and has
  shared incentives

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Well Managed OCIP s

• An incentive or refund if losses are low
• Have owner involvement
• Have professional safety management
• Have an experienced OCIP construction claims
  manager
• Have buy-in from all parties into policy coverage
  and OCIP management

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Poorly Planned OCIPs

• One player with no team
• Lack of team input and ownership
• Low morale
• Weak or nonexistent Risk Control
• Poor claims management coordination

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Staffing A key to a well run OCIP

• Owner/ Broker
• Carrier
• General Contractor
• Contractors

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How much staffing is required?

• How much can you afford to hireor lose?
• Consider The direct cost of average injury is
  10 K
• Construction indirect cost multiplier is 2 to 20
  times
• A conservative uninsured indirect cost per injury
  is 25K

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Staffing

• Many OCIPs are requiring approved staff
• A dedicated, identified person is usually
  required at 50 employees and a qualified
  supervisor otherwise
• The GC list of duties and requirements may
  require additional safety or administrative
  staff
• Owner can adjust the Broker and Carrier presence
• A full time daily presence onsite by competent
  qualified staff is a must regardless of the
  source

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Remember

• A qualified full time person can reduce risk,
  protect savings and earn profit
• A team approach with various skill sets and
  perspectives can enhance the safety
• Value and savings can be added by the right team
  and right attitude
• Understaffing while savings millions is not risk
  well managed or value for the dollar

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What are the Risks and Rewards

• Extra Costs vs. Increased Productivity
• Time demands vs. Extra training received
• Business as usual vs. Best practices learned
• Less Project Profit vs. More competitive edge

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Safety Administration- Are you OCIP ready?

• In the field where the money is made or lost
• Theory becomes applied science
• Program implementation A
  Team Approach

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Pre-job

• Pre-job Safety Administration requirements
• Current Safety program, IIPP, Code of Safe
  Practices
• JSA/ JHA/ AHA processes
• Training programs for craft and supervision
• Accident reporting and investigation
• Drug Testing policy
• Sub contractor pre-qualification
• Risk management tools

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Safety program, IIPP, Code of Safe Practices

• OCIP pre-approval generally required - plan
  ahead and allow time for review
• Take this as a free service and not barrier to
  production or an intrusion
• An updated program without training is not
  complete

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JSA/ JHA/ AHA Processes

• Develop a program from the crafts up for current
  work if not in place
• Review plans and procedures for specific project
• Add new tasks as part of pre-bid due diligence
• Warning many projects may not be business as
  usual and may require added diligence

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Accident reporting and investigation

• Have a program in place and minimum requirements
  for timely reporting
• Use it as a learning experience and tool
• Tie it to revisions of JHA/ JSA for complete
  follow-through
• Remember Better to make a big deal of a small
  incident than have a big incident

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Training for craft and supervision

• OCIP will likely require 10 hour OSHA for
  Supervisors and Foremen
• Some will require this for all persons or more
  for Supervisors
• Have craft specific training current and
  adequately documented
• Good News The OCIP will likely provide a portion
  of this training or at a minimum will assist

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Drug Testing policy

• Most OCIPs will require this
• Have a plan to follow for when to test and how
  results are handled
• Is near miss testing required and done?
• What about the PLA and State requirements

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Sub contractor Pre-qualification

• Is it just lowest bidder? Not on an OCIP
• Check out the financial, OSHA, EMR data reported
• Remember the sub can be a profit enhancement and
  risk reduction
• Or they can be your worst nightmare

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Risk Management Tools

• Contract language
• Limit exposures to lower risk
• Check insurance coverage, especially for gaps in
  OCIP coverage
• Know your coverage, limits and risks

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Project Level Safety Administration

• Project Safety Duties and OCIP Requirements
• Emergency Plans
• Orientations
• Inspections
• Training
• Recordkeeping
• Subcontractor Management

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Project Safety Administration continued

• - Drug testing
• -Medical care
• -Workers Compensation
• -Environmental
• -Communication Meetings

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Emergency Plans

• General plans are the norm
• Site specific will be required
• Medical, Fire, Weather are a minimum
• Others may be required due to local conditions

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Orientations

• First impressions are important
• Who will give the orientation, where and
  what does it cover
• Use the time to meet with subs
• Check out tools and equipment before mobilization

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Inspections

• Designate competent and qualified persons
• Do specific, regular, random and focused
  inspections
• Have inspections done by craft, supervisory,
  safety, OCIP and others
• Dont forget the Recordkeeping and what to keep
  and how long

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Training

• Develop a training matrix
• Schedule times and locations
• Have programs prepared for short notice
• Have detailed and accurate Recordkeeping
• Who, when, what content and adequate delivery or
  testing
• Verify pre-delivered training

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Recordkeeping

• Critical to Risk Management
• Statistics and written reports timely and
  complete
• Daily, weekly and monthly
• Have a flow chart of reporting procedures to
  monitor progress

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Subcontractor Management

• Verify pre-qualification information
• A pre-project orientation is critical
• Identify management and Safety personnel
• Involve sub in OCIP duties, roles and
  responsibilities
• Inspect tools and equipment before mobilization

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Drug Testing

• Have a testing program in place
• Identify testing and reporting protocols
• Maintain program and reporting privacy

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Medical Care

• OCIP will identify clinics
• Have onsite provisions and trained personnel
• Arrange for treatment protocol for First Aid
• Develop after hours protocol

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Environmental

• Not usually a part of OCIPs
• SWPP plans and Recordkeeping are non-OCIP issues
• Housekeeping is keywhat is acceptable
• Spills and offsite damages by contaminates may be
  a GL issue-or not

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Workers Compensation

• Have postings and enrollment information complete
• Identify carrier and reporting protocol
• A return to Work program will be required
• Reporting of near misses/WC/ OSHA does not follow
  chain of command
• OSHA reporting is a contractor responsibility

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Communication The Key to Effective Management

• How and how much information is shared
• Has a set calendar of meetings daily, weekly or
  monthly
• Relay information from inspections, incidents and
  events

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Meetings Gathering and dispensing information

• Listen to learn and speak to share information
• Share events to prevent repeat occurrences
• Plan, plan, plan

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Safety meetings and frequency Suggested or
required by OCIP

• OrientationsPre-job, scheduled daily, weekly or
  as needed
• Tool Box meetings weekly
• Supervisory meetings Weekly
• Subcontractors Weekly or Monthly

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Safety meetings -continued

• Safety Committee Weekly or Monthly
• Incident / Injury Review Weekly or as needed
• Pre-job Safety Huddle/ STA Daily or as needed
• Project Progress/ Planning minimum weekly or as
  needed
• Safety Walks/ Inspections Daily, Weekly and as
  needed (formal or informal)

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• A well designed OCIP can address the GCs
  concerns of fairness and equity and give the GC
  the risk management tools to create value,
  revenue and profit.
• Owner Controlled Insurance Programs a View
  from the Trenches, Constructor magazine Sept
  2001 Ken Carpenter and Edward Keeter

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• The potential for reducing a projects risk
  management costs is ultimately determined by the
  safety performance of the GC and subcontractors
  and not by the manipulation of premiums, cash
  flow and risk sharing
• Owner Controlled Insurance Programs a View
  from the Trenches, Constructor magazine Sept
  2001 Ken Carpenter and
  Edward Keeter

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Conclusion

• Whether you have an excellent safety program or
  want one will determine success in an OCIP
  environment. A good attitude is the best tool to
  bring to a successful project.