Safety Equals Manageable Insurance Costs

May 29, 2006
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The turbulent waters known as business profitability have been affected by the spiraling costs of business and employee insurance rates over the past several years. If the waters are to calm down a bit, it will be because business owners are taking matters into their own hands and fighting the multiheaded insurance monster.

The HVAC community is not immune to the triple-digit increase in insurance premiums over the past several years. While contractors cannot control the effects of natural disasters and claims/litigation increases in non-HVAC businesses, they can implement changes in their own businesses to reduce or minimize insurance costs that threaten to cut back or eliminate employee benefits or force price increases in basic services.

One way to fight back is to have a company-wide safety program, including employee training and rewards for accident-free time on the job. A good safety record can lower insurance premiums, not to mention play an important role in winning bids on projects requiring contractors with good safety records.

PASSING ALONG SAFETY TIPS

Probably the most universal answer for the best safety tip is to "slow down and use your head." A lot of contractors will agree that by taking the necessary time to complete a task and ensure that all the i's are dotted and t's are crossed, a lot of accidents can be prevented.

Larry Taylor, of Air Rite Air Conditioning Co., makes safety a personal thing. "We spend time talking about not what the physical damage to a building or vehicle may be but rather try to focus some on getting them to think about how their family will suffer from their lack of good decision making," he said. "Try to focus them on how their family will miss them if they are killed or how their family will suffer economically from their inability to work and provide due to them making a dumb decision.

"We try to make them understand that they are not Superman, and they can be hurt."

Three other consultants said that awareness is an important safety tip. "The single most important safety tip a contractor or anyone could give to their employees is to be aware of your surroundings at all times," said Arthur Pickett, of Royal Air Systems Inc.

"This advice will help in all aspects of an insurance program. If you are aware of your surroundings while in a vehicle, you will be aware of the traffic situations and you will have less accidents - therefore less premium associated with your experience modifications."

"The biggest safety tip we give employees is to be aware of hazards around you," said Russ Donnici, of Mechanical Air Service Inc. "We work in a potentially hazardous industry and constant awareness is important. We don't have a tangible number in savings dollars but we know that the underwriters take into account the regular safety meetings we have."

Jeff Somers, of Monsen Engineering Co., noted, "In two words we say ‘Be Aware.' Teaching our employees to stay focused is our primary message. This awareness and the reduced accidents lower our EMR [Experience Modification Rate] thereby lowering rates and making us a more desirable company to do business with."

Safety should be part of a culture, rather than just reduced to several tips. At least that's the opinion of Dave Dombrowski of Metro Services/ARS-ServiceMaster. "The business must live and breathe safety at every level from the management down through the field," he said.

"Every meeting must have a safety component. Every jobsite must be safe without regard on how it affects the profitability of the job. Management must accept ownership of the entire process and live it every day."

The newest member of The NEWS' Contractor Consultant panel, Ken Bodwell of Innovative Service Solutions, Orlando, Fla., thinks an entire company should embody the culture of safety.

"I do not think it is the safety tip that is important, but rather a safety culture in an organization," Bodwell noted. "It starts from the top down. We don't have safety contests or prizes for being safe, we expect it. We have a safety team with representation from service, installation, and the office. The team brings to senior staff any suggestions or problems with solutions.

"Every month a safety discussion is part of the monthly tech meeting; on installation projects, there is a toolbox safety meeting every week at the jobsite. We have been several years without a lost time accident. However last year we were plagued by several traffic accidents of which our drivers were ticketed. The safety team instantly focused on defensive driving. We saw minimal increase in insurance because of the proactive approach."

USING SAFETY TO LOWER INSURANCE COSTS

There are various ways for contractors to integrate safety into a company culture, including training programs and reward mechanisms. One way to promote safety is to have a dedicated safety professional on staff. It could be a current employee or one that is hired specifically to run a safety program.

"We were not able to improve worker safety until we dedicated a full-time safety officer to managing and promoting our safety program," said Jim Hussey of Marina Mechanical.

"Then things began to improve. When Dennis [safety officer] showed up on a jobsite and sent our crew home because the owner had failed to provide safe staging that was properly supported and installed, then our employees began to understand that we were focused on ensuring their safety. Once we began to demonstrate through our actions that their safety was of vital importance to us, our employees began to respond and support our program.

"Slogans and contests are of little value. Actions speak louder than words. And the actions must be constant. We do not wish to see any of our valued employees lose their ability to earn a living or support their family due to an accident or injury.

"What is the result? Our workers comp mod factor went from 1.26 to 0.76 in just three years. That is a substantial reduction in workers' compensation insurance premiums."

Using weekly meetings as a staging area for safety discussions is an important part of HVAC business. That's the opinion of Scott Getzschman of Getzschman Heating & Sheet Metal. "We cover safety in every department meeting weekly, and each employee signs off on the meeting," he said.

"We utilize toolbox talks as the resource. This doesn't eliminate accidents, but it does raise awareness. We also have quarterly projects to train our employees on the different pieces of equipment such as scissor lifts, lulls, fall protection, fork lifts, and power equipment that we use each day."

Talking about safety on a regular basis may be repetitious and sometimes boring, but it also works. "Our goal is to ensure that safety is everyone's concern and is always on their radar screen," said Ann Kahn of Kahn Mechanical.

"To accomplish this goal, we use several approaches, such as monthly safety meetings, safety flyers inserted in pay envelopes, safety slogans on the company calendar and break room message board, company-provided safety equipment (goggles, gloves, masks, etc.), and incentive pay for identifying hazardous conditions in our shop."

OTHER TIPS FOR LOWERING INSURANCE COSTS

Beyond practicing workplace safety and safety at home, there are other ways for contractors to keep insurance costs in check. Paying out of the pocket for smaller claims and higher deductibles is one way.

"We are told that some of the biggest factors to our control of insurance costs include our partnering with the insurance industry by paying the small claims out-of-pocket rather than file a claim; and reporting all accidents so that records can be kept and protection of our company is ensured," said Aaron York of Aaron York's Quality A/C. "We have opted for slightly higher deductibles using this plan which aids in keeping premiums down.

"I am told that the number of claims filed has a major impact on the costs of insurance. By keeping down the claims, the insurance underwriters view us as a good risk and give us every break possible."

Studying the history of insurance claims is also an important key to reducing costs. "We have found that a way to reduce our liability insurance claims is to analyze them and look for some common items and eliminate or mitigate them," noted Roger Grochmal of Atlas Air/ClimateCare.

"For example, we service a significant number of attic-installed high-velocity air conditioning systems. With our humid summer climate, we insist that our customers install a secondary drain pan with a moisture sensor and an automatic shut-off switch. Three years ago, we had a dozen serious water damage claims. This year we only had two minor claims, both within our deductible."

Kevin Comerford, of Service Champions, said that lowering insurance costs can be as simple as cleaning up the paperwork. "Contractors can lower their insurance costs by making sure their people are in the right class code," he said. "I have seen it where I have put the wrong person in a code and it was costing me 35 percent to 50 percent more for that person than it should have.

"I have been told by my insurance agent that there is a new workers' comp class code for HVAC technicians this year. In past years, we have had to put our guys in plumbing codes and even sheet metal codes, which have higher rates than what I understand the new HVAC class codes will be."

Hank Bloom, of Environmental Conditioning Systems, believes that preventive measures can go a long way to lowering insurance premiums. "Include yearly physicals as preventive care in health insurance," he said. "Co-pays for doctor visits coming directly from an employee's pocket seem to help control unnecessary office visits, and therefore help with premium costs when history is reviewed."

One more thing: Get to know your insurance agent. It is important to have a history with an agent who knows your business and exactly what you need. If you have a long-term relationship with an agent, take steps to strengthen it. If you keep jumping from agent to agent, you may wind up paying dearly.

"The two keys for us have been to be proactive in our company about safety and finding the right carrier and agent," said Vince DiFilippo of DiFilippo Service Co. "Your agent is so important in that he knows you and your business. He needs to be your activist, always looking for ways to help your business. [Our agent] Tom is our insurance expert and knows way more than us. We rely on him to help us make the best decisions and he knows that."

Sidebar: Member Profile

Ken Bodwell is the newest member of The NEWS' Contractor Consultant panel. Bodwell is CFO and Partner with Innovative Service Solutions, Orlando, Fla. He is the current president of the Florida chapter of the Air Conditioning Contractors of America (ACCA). Bodwell is an industry veteran who believes in best business practices and a unified contracting community.

Publication date: 05/29/2006

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