As Vice President, Loss Control for Property Casualty Insurers Association of America (PCI), Keith Lessner works with PCI’s members to develop public policy affecting the insurance industry.
In this interview, Lessner explains how the insurance mechanism can help safety, health and environmental (SH&E) professionals manage risk and control losses.
Please provide a brief description of your role and responsibilities as Vice President, Loss Control for PCI.
I am responsible for working with our members to develop mitigation public policy affecting the insurance industry and for supporting our field staff and lobbyists in implementing that policy. I also work with our member loss control executives to identify and implement broad-based, industry-wide loss control programs that can be appropriately addressed by our trade association through cooperative actions.
How does PCI help SH&E professionals manage risk and control losses? What resources does PCI have available for SH&E professionals?
PCI strives to create an environment in which our member companies may use their loss control and risk management resources to support their policyholders in minimizing insured risks. We interact regularly with states that regulate insurance loss control services to encourage those states to use insurance resources effectively and efficiently to promote safety. We provide a range of compliance services and materials to assist our members in meeting their obligations.
Because federal, state and local mitigation public policy can have a significant impact in controlling a range of insured losses, we closely monitor, and where appropriate, work to shape debates on these issues. We actively support mitigation policies that affect insurance operations and aim to influence their development so that they are effective, and we work to supplement and complement the mitigation efforts of insurers and other safety service providers.
PCI, at the direction of our members, also implements non-legislative programs to address broad-based insurance loss control concerns. For example, PCI worked with the Council on Certification of Health, Environmental and Safety Technologists to develop an examination for insurance loss control practitioners to provide a highly credible means of demonstrating competency. Three years ago, we formed an alliance partnership with Region III of the U.S. Occupational Safety and Health Administration to provide small-business occupational safety training to our members’ small-business policyholders. We regularly communicate with our members to solicit their concerns and their interest in developing these types of programs.
Based on your experience, what risk management and loss control issues are currently of greatest importance to SH&E professionals? How will PCI work with SH&E professionals to address these issues?
The pace and range of newly emerging technologies pose significant challenges for SH&E professionals. These challenges require monitoring and keeping abreast of new risks created by new processes and technologies (such as nanotechnologies), of new means of detecting and assessing risks (such as improved weather tracking systems) and new safety technologies for mitigating risks (such as remote surveillance systems). To accomplish this, SH&E professionals are faced with the need to master more diverse, and frequently very specific, types of expertise. These challenges can also require SH&E professionals to respond to issues and to implement programs where safety issues are unsettled, as information is uncertain or incomplete.
PCI provides a forum for our members to discuss these concerns and the kinds of problems they present and to identify and link our members to useful sources of information. In some cases, our members ask us to bring in experts to discuss issues with them, particularly where issues have a unique insurance focus or adequate information is not readily available.
With respect to public policy, what new challenges does PCI expect to face this year?
Our major concern at PCI this year is catastrophic risks. Insurers in coastal areas face intense scrutiny. Many of these problems arise from our inability to accurately estimate the risk of catastrophic events. Mitigation is universally recognized as a key part of resolving catastrophic insurance crises. We are particularly interested in federal, state and local policies that address the mitigation of natural and manmade catastrophes. These policies deal with creating public and private programs to support and encourage mitigation, funding and coordinating needed research, creating appropriate financial incentives and promoting awareness and understanding of the benefits of mitigation.
PCI supports workers’ compensation reform. How does this reform impact occupational safety and health in the long term?
Workplace injuries and illnesses ultimately give rise to workers’ compensation insurance. In the mid- and late-1990s, workplace safety legislation was a major component of efforts to drive down the costs of workers’ compensation insurance. Workers’ compensation safety reforms of the mid-1990s and the creation of OSHA more than 20 years earlier have had a significant and long-lasting impact on businesses’ interests in workplace safety, the extent to which they seek professional safety and health advice and the extent to which they implement safety programs. More recently, legislative efforts to control workers’ compensation costs focus on controlling medical expenses, fraud and return-to-work programs. Workers’ compensation insurance remains an important factor in stimulating safety because the premiums establish a quantifiable measure of the costs of workplace accidents that help guide safety investment decisions.
PCI has been active in the development of national voluntary consensus standards (ANSI standards). What value does PCI see in these standards, and how have they benefited the insurance industry?
The contributions that national voluntary consensus safety standards make to safety are too frequently undervalued. These standards typically provide the basis for the voluntary guidelines and mandatory requirements that federal, state and local governments establish to promote safety. They serve as the basis for many of the measures businesses and individuals choose to follow when they receive safety assistance. For insurers, these standards are often the starting point for establishing underwriting standards and for recommending how their policyholders can control insurance costs. Equally important, a standardized prescription that has been reviewed and vetted by interested parties greatly enhances communications to accelerate the regulatory process, to coordinate discussion and research and to allow more safety measures to be adopted.
In your opinion, how can SH&E professionals use safety management system standards, such as the ANSI/AIHA Z10 standard “Occupational Health and Safety Management Systems,” to reduce risk and losses?
Safety standards that stress programmatic approaches and management actions are important in the evolution of safety tools. Defining “best practices” program components and management systems will be exceptionally helpful in implementing effective safety programs. SH&E professionals have adapted these tools to a wide range of businesses with different operating environments, financial constraints and management systems and have helped businesses apply the standards to promote safety. Making businesses aware that there is agreement on safety steps they can take, which can be customized to their needs, is a powerful tool that has been used to good effect. Broader success in enacting mandating management program standards, however, faces hurdles. Simultaneously defining requirements with sufficient specificity to be enforced while accommodating vastly different business operations is a challenge, which must be dealt with in mandating management practices.
We continue to hear that loss control operations are curtailed in the insurance industry. Do you believe this is true? What are your predictions for future loss control operations in insurance?
Loss control operations in the insurance industry are changing, just as SH&E operations in the public sector and private industry are also changing. In some companies, we see insurers rebalancing loss control resources between risk assessment and risk improvement. We see some insurers looking more carefully at which policyholders are the best candidates for loss control services and which are best for risk improvement and risk assessment services. We see some insurers relying more heavily on claims agents and communications personnel to provide services that require less technical experience or specialized skills. We see some insurers augmenting the functions performed by their loss control departments with external inspection services, modelers and external safety consultants with specialized skills.
However, assessing underlying risk phenomena and supporting policyholders in mitigating insured losses remain an integral part of the business of insurance. As insurers consider new and emerging lines of insurance that rely more heavily on predicting risks without the benefit of an expansive loss history, the traditional insurance loss control functions of risk assessment and improvement will become more important. Further, insurance companies’ loss control practices reflect the growing awareness of safety benefits held by the public sector, businesses and individuals. Safety and risk management practices are meaningful determinants of economic security and social welfare. I would expect that as the SH&E profession continues to evolve, loss control in the insurance industry will become more sophisticated and will be applied more selectively with greater attention to achieving objectives in a broader range of insurance policies.
How can SH&E practices play a key role in international insurance issues?
SH&E practices are valued in large international corporations where the scale of operations makes the benefits of risk management visible. These organizations have coordinated international insurance programs that address SH&E concerns. In many developing and less-developed countries, the public sector is the primary provider of insurance and safety services. To the extent these countries open their markets to private business and foreign firms, insurers can make a robust body of risk management technology, including SH&E practices, available.
How can SH&E professionals make the most of the insurance mechanism when developing a safety program?
By having a clear understanding of the role that insurers play in promoting safety and of the diversity of insurance company approaches, SH&E professionals can take full advantage of what insurers can provide. Given that the cost of insurance is one of the most readily available quantified measures of risks, understanding the range of options for pricing insurance and the variety of safety services that insurers provide will help SH&E professionals encourage choices that promote safety.
The insurance industry has long supported the concept that SH&E investment can help an organization’s competitive position. What data and statistics have you seen that support this concept? How does PCI advocate to its customers that SH&E investment is a good business strategy?
While new studies that show the cost-effectiveness of SH&E investment continue to be produced, it is difficult to produce credible, broad-based data that cause major shifts in aggregate safety investments. It is expensive to collect and analyze safety information with sufficient detail to make a convincing argument. It is challenging to design studies that control the complex interactions of the many factors affecting safety and safety outcomes. People who require “proof” that safety pays are a challenging audience. Documenting cost-effectiveness with quantifiable data is a long-term incremental process that will require sustained effort. Meanwhile, the effort to encourage safety investment must be supplemented with persuasive communications that stress the qualitative economic and social benefits.
What are PCI’s plans and goals for this year?
This year, PCI is focusing on minimizing catastrophic loss exposures. We are interested in advancing state and federal programs that support stronger building codes, provide mitigation incentives, increase awareness of the need for and benefits of mitigation, assist risk bearers in understanding and implementing mitigation measures, minimize inefficiency in mitigation programs and fund and coordinate mitigation research. These kinds of programs affect the degree of risk and the costs of managing them. We will also look at a handful of states that regulate insurance loss control services to see if we can bring some added effectiveness and efficiency.
Keith Lessner is Vice President, Loss Control for the Property Casualty Insurers Association of America (PCI), a national property/casualty insurance trade association headquartered in Des Plaines, IL that represents over 1,000 companies. At PCI, he is responsible for monitoring and developing policy on legislative and regulatory safety issues, insurance loss control operations, building codes, mold and lead paint and for identifying and developing cooperative action programs to support members’ needs in relation to these issues.
Prior to PCI’s creation in 2004, Lessner addressed safety, environmental and loss control issues at the Alliance of American Insurers for 22 years. During this time, he worked in developing and advocating public policy and in producing compliance services that address the regulation of insurance safety services and building codes. He also organized a variety of industry-wide public/private partnerships to promote workplace safety with federal and state government agencies, coordinated the production and marketing of the association’s loss control training products and provided research and planning services.
Lessner holds both bachelor and master degrees in economics from the University of Missouri, and he has completed advanced course work in international economics and business at Syracuse University. He is certified as an Associate in Risk Management by the Insurance Institute of America. Prior to joining the Alliance, he was responsible for the risk management function for the state of Illinois.