Risk Management User Group

December 2, 2005

WELCOME

Michael L. Hay, CRM, CGFM, CPPM

MEETING AGENDA

• 8:30 – 8:45 Introduction Mike Hay

• 8:45 – 9:00 Healthcare Networks Jonathan Bow

• 9:00 – 10:00 Claims Update Terry Myers

• 10:00 – 10:15 BREAK

• 10:15 – 10:45 Property Insurance Program Sally Becker

• 10:45 – 11:15 Lessons Learned from

Hurricanes Rita & Katrina Sam Stone/Sam Arant

• 11:15 – 11:45 Calculating Frequency/Severity

& Max. Probable/Possible Loss Benny Vanden Avond

• 11:45 – 1:00 LUNCH

• 1:00 – 4:00 REPS System RM Specialists

Erin Thompson

HEALTHCARE NETWORKS

Jonathan BowExecutive Director

CLAIMS UPDATE

Terry Myers

Director of Claims Operations

BREAK

See you in 15 minutes

Statewide

Property Insurance ProgramPresented by:

Sally Becker, CPCU, ARM

SORM Risk Management Specialist

Today’s Agenda

• State Property Myths

• Myth Busters

• Property Program Details

• Advantages of Program

• Enrollment Process

• Contact Information

State Property Myths

• Myth #1– The State is “self-insured” for property losses

• Myth #2– State agencies cannot purchase insurance

• Why??

State Property Myths continued

• Senate Concurrent Resolution No. 3 of 1921– “State shall carry its own insurance upon

State buildings and contents…– …State hereafter at the end of each two years

period to set aside approximately one per cent of the value of all public buildings owned by the State, as a sinking fund…”

Myth Busters

Myth Busters

• A Resolution is not a Law or Statute

• The following are Laws…

Myth Busters continued

• Government Code §418.172– “Property damage insurance covering state

facilities may be purchased by agencies of the state if necessary to qualify for federal disaster assistance funds.”

Myth Busters continued

• Education Code §51.966– “(a) The governing board of an institution of

higher education may purchase insurance insuring the institution and its employees against any liability, risk, or exposure and covering the losses of any institutional property.”

Myth Busters continued

• Labor Code §412.011– The office (SORM) shall: “(c)(2) purchase

insurance coverage for a state agency…under any line of insurance other than health or life insurance…”

– “(e) A state agency…may not purchase property, casualty, or liability insurance coverage without the approval of the board.”

Property Program Details

• Purpose– Establish a state of the art property coverage

program– Develop consistent property coverage across

all state agencies– Offer a mechanism to insure previously

uninsured property– Use the collective buying power of state

agencies to obtain competitive policy terms and conditions

Property Program Details continued

• Development– RFP was issued by SORM– Thirteen agents and insurers attended Pre-

proposal conference– Fourteen agents requested market

assignments– Ten markets were assigned– SORM received three proposals– Palmer & Cay and The Jenkins Agency

awarded program for presenting the program in the best interest of the state

Property Program Details continued

• Parties Involved:

Property Covered

• Buildings

• Contents

• Fine Arts

• Boiler & Machinery

• EDP (computers & software)

• Time Element (business interruption)

• Mobile Equipment

Perils Covered

• Flood• Windstorm• Fire• Extended Coverage • Theft• Vandalism• Sprinkler Leakage• Earthquake

Limits, Deductibles, Rates

• Limits – Up to $1,000,000,000

• Deductibles – Beginning at $5,000

• Statewide Premium Rates – – Based on Building Construction

• Credits for higher deductibles• Credits for sprinkler systems• Small Debits for Windstorm and Flood Prone

Areas

Advantages of the Program

• Coverage from a top-rated admitted carrier– National Union Fire Insurance Co of

Pittsburgh (AIG)– Best Rating A+ XV

• Broad terms and conditions• Competitive pricing• Common expiration date• Opportunity to transfer risk of currently

uninsured properties

Enrollment Process

• 90 days prior to renewal, SORM will contact agencies to complete application and provide underwriting information

• SORM forwards materials to Palmer & Cay who sends to AIG for quote

• SORM evaluates AIG’s quote proposal

Enrollment Process continued

• SORM with Palmer & Cay presents quote to Agency

• Agency accepts proposal

• Palmer & Cay issues binders and invoices to each individual agency

• Agency remits premium directly to Palmer & Cay

Information Needed

• Completed Application including property schedule

• Loss History – 3 to 5 years– If currently insured, insurer’s loss run– If not insured, agency listing of losses

• Date• Cause – Fire, Hail, Windstorm, Flood, etc.• Location • Damage amount

Contacts

• SORM

– Sally Becker 512-936-1573• sally.becker@sorm.state.tx.us

– Benny Vanden Avond 512-936-2942• benny.vandenavond@sorm.state.tx.us

Lessons Learned From Hurricanes Rita & Katrina

Presented by:

Sam Stone & Sam Arant

SORM Risk Management Specialists

Relief Efforts Responses from State Agencies

• Twenty-four (24) responses received from state agencies

• Sixteen (16) state agencies provided assistance following Hurricane Katrina

• Eight (8) state agencies provided assistance following Hurricane Rita

• Twelve (12) state agencies provided assistance following Hurricanes Katrina and Rita

Relief Responses from State Agencies continued

Over 550 state employees provided assistance following Hurricanes Katrina and Rita

– Emergency rescue– Law enforcement– Evacuation assistance– Financial information– Unemployment

assistance– Medical services– Provided shelters for

evacuees

– Emergency equipment and supplies

– Chaplain services– Environmental

assistance– Delivering emergency

supplies– Job counseling– Animal health

assistance

Workers’ Compensation Claims Involving Hurricane Relief Efforts

(State Employees) • Twelve (12) claims to date involving Hurricane Katrina relief

efforts.

• Five (5) claims to date involving Hurricane Rita relief efforts.

• Eight (8) workers compensation claims involved Department of Public Safety employees. Next highest number of claims (4) involved Texas Parks and Wildlife Department employees.

• State Agencies that reported workers compensation claims: Texas Parks and Wildlife Department, Texas Department of Public Safety, Texas Health and Human Services Commission, Governor’s Task Force (TEEX), and the University of Houston.

Workers’ Compensation Claims (State Employees) continued

• Causes of Workers’ Compensation Claims– Possible contaminated water (2 claims)– Possible contaminated air (5) – Wind from storm (closing door on DPS Trooper’s

hand) (1)– Putting up tents (1)– Lifting activities at evacuation center (1)– Clearing debris (1)– Providing medical care (1)– Evacuation activities (3)

Workers’ Compensation Claims (State Employees) continued

• Workers’ Compensation Injuries– Upper respiratory infections (5 claims)– Contact dermatitis (2 )– Twisted ankle (1)– Low back strain (1)– Needle stick (1)– Fracture of hand (1)– Tendonitis of hands (1)– Abrasions of leg (1)– Insect bites (1)– Heat exhaustion (1)– Shoulder strain (1)

Workers’ Compensation Claims (Volunteers)

• Five (5) claims• All at evacuation centers in Texas• Two (2) claims due to possible contaminated air• Three (3) claims due to evacuation center

activities• Resulting injuries:

– Upper respiratory infections (2 claims)– Injured finger (1 claim)– Shoulder strain (1 claim)– Back strain (1 claim)

Issues and Recommendations

• Issue 1: Many emergency responders were not properly immunized before the emergency event.

• Recommendation 1: The state should strongly consider providing inoculations to all state employee responders. Pre-disaster inoculations should include diphtheria and tetanus toxoid (DPT), and hepatitis B. Post-disaster inoculations, if warranted, include hepatitis A, typhoid, cholera, meningococcal, and, if indicated, rabies vaccines.

• Recommendation 2: Each state agency that participates in emergency response activities should track the status of inoculations for all potential employee responders, and assure that all potential responders are up to date on their inoculations.

Issues and Recommendations continued

• Recommendation 3: Agencies who allow employees to volunteer in emergencies should track and monitor their volunteers’ inoculation status and arrange for post-event inoculations as necessary.

Issues and Recommendations continued

• Issue 2: The state has no consistent means to assure that state emergency responders have adequate inoculations against illness and disease.

• Recommendation 1: The State of Texas should assure that all responders are properly inoculated prior to an emergency response activity. The costs of inoculations could be significantly reduced by procuring and providing inoculation services through the Texas Department of State Health Services.

Issues and Recommendations continued

• Issue 3: Personal protective equipment was often non-existent or inadequate to safeguard employee health and safety.

• Recommendation 1: All state agencies providing emergency responders should, at a minimum, assure that their response employees have disposable nitrile or chemical resistant gloves; disposable N-95 particulate masks, or disposable half-mask respirators; goggles; protective clothing; and/or protective footwear.

• Recommendation 2: State responder agencies should establish and implement procedures to inspect and replace, if necessary, personal protective equipment during an emergency response activity.

Issues and Recommendations continued

• Issue 4: There was no means available to assess chemical and airborne hazards prior to exposing state employees.

• Recommendation 1: An “advance team” should be deployed first to identify exposures; identify personal protective equipment that is needed; and do sampling of air, water, liquids, or soil for the presence of hazardous materials prior to dispatching responders.

• Recommendation 2: TPWD Game Warden and DPS Trooper emergency kits should include sampling and testing equipment.

Issues and Recommendations continued

• Issue 5: There was not a process in place for decontamination of state equipment after its use.

• Recommendation 1: Decontamination procedures of emergency response equipment, and decontamination of emergency response personnel should be documented. Agency risk management should get copies of all decontamination reports.

Issues and Recommendations continued

• Issue 6: As a result of flooding and/or rain, affected state buildings may now pose a hazard for mold exposure to returning state employees.

• Recommendation 1: State buildings that experienced flooding or water damage should be tested for mold prior to re-occupancy.

Issues and Recommendations continued

• Issue 7: Many of the state buildings that were damaged during Hurricane Rita were not covered by property insurance.

• Recommendation 1: State agencies with facilities in high risk areas should be required to maintain current replacement costs for building and contents; and should periodically conduct cost benefit analysis in order to determine the effectiveness of transferring the risk of loss through the purchase of property insurance.

Issues and Recommendations continued

• Issue 8: There was a lack of coordination for requesting, receiving, and returning state assets used for emergency response.

• Recommendation 1: Coordination for requests of state emergency assets, (equipment and personnel) by other states could be handled better if all requests are done through the Governor’s Division of Emergency Management.

Loss Frequency & Severity Measures

Presented by:Benny Vanden Avond

SORM Risk Management Specialist

Risk Management Process

• Step 1: Mission Identification

• Step 2: Risk Identification

• Step 3: Risk Analysis

• Step 4: Consider Alternatives– Risk Control– Risk Finance

• Step 5: Implement and Monitor

Risk Analysis

• Process by which previously identified risks are measured and evaluated– Judge relative significance of each risk – Prioritize for future risk management action

• Key Analysis Ratios– Frequency– Severity

Key Risk Analysis Ratios

• Frequency– The number of times an event occurs during a

given period of time

– # Losses / # of Exposures

Frequency Example

• Data– 15,000 Vehicles– 600 Collisions

• Frequency:

600 / 15,000 = .04

Frequency in REPS

• Five frequency levels available– Extremely unlikely to occur– Possible, but unlikely to occur– Moderate risk of occurrence– Likely to occur– Likely to occur in the immediate future

• Example:– A major earthquake occurring in Austin, TX

Risk Analysis Ratios

• Severity– The amount of harm caused by a loss

– $ Losses / # Losses

Severity Example

• Data– 15,000 Vehicles– 600 Collisions

• 400 Liability Claims: $15,000• 200 Physical Damage Claims: $13,500

• Severity: [400($15,000) + 200($13,500)] / 600 = $14,500

Severity in REPS

• Five severity levels available– Slight: No impact to agency– Appreciable: Some impact to agency– Serious: Jeopardizes agency– Severe: Severely affects agency– Catastrophic: Shuts down agency

• Example:– A major earthquake occurring in Austin, TX

Concerns with Measuring Severity

• Very Difficult– Indirect Losses

• Example: Bank robbery

– Contagion (Spread of the Problem)• Example: Bil Mar

• Because it is hard to predict, we have to estimate

Loss Severity Measures

• Maximum Possible Loss– Size of loss at its absolute largest– Example:

• Christmas light factory has a fire that burns all its inventory on September 1st

• Maximum Probable Loss– In all likelihood, the largest loss expected to occur– Example:

• The same fire is contained to only part of the factory by the its fire suppression equipment, i.e. firewalls, sprinklers

• Still very subjective!!

Maximum Possible and Maximum Probable Example

MPL Measures in REPS

• Text fields available for Maximum Possible and Maximum Probable Loss estimates

• Careful and structured analysis of identified risk issues

• WHAT??

Sources of Data

• SORM provided sources of information– Online Property & Casualty Claims Reporting

System– Workers’ Compensation Claims Data– Lost, Damaged or Destroyed (LDD) Property

Reports

Sources of Data continued

• Other sources of information– State Property Accounting (SPA) Database– Interactions with Internal & External

Resources– Interactions with other State Agencies– On-Site Inspections

Questions ??

LUNCH

REPS Training begins at 1:00

Risk Management User Group

Thank you for attending

Happy Holidays!!