Risk Management Report 2011
The purpose of this report is to provide information, both programmatic and statistical, to help us understand and incorporate risk management measures into the everyday tasks we perform. Some general and unique challenges that have faced Clackamas County will be addressed as well. Knowing there is no crystal ball for forecasting the future needs of the County, we must rely on the experiences and statistics of previous years to project potential areas of future loss.
Clackamas County has 381,775 residents living within an area of 1,879 square miles. The county is primarily rural but does include 17 cities and local governments. Clackamas County employs approximately 2,275 full-time, part-time, seasonal and temporary employees, along with many volunteers. County government consists of departments organized to provide the following services: transportation and development, sewer, public safety/law enforcement, tourism, public and governmental affairs, libraries, community health and social services, taxation and assessment, as well as internal administrative services.
It is the intention of Clackamas County to preserve and protect the assets of the County from accidental loss at the most economical cost. Also, just as importantly, the County’s goal is to provide a safe, secure and healthful working environment for its employees. The County has elected to retain exposure to loss primarily through self-insurance and transfer exposure through purchased insurance only when the premium cost has been determined to be cost-efficient compared to the exposure.
The management and control of the County’s risk management program is a function of the Risk and Benefits Division, within the Department of Employee Services. A Risk Management Committee provides oversight of this function with the day to day management provided by the Risk Manager. Our philosophy is that risk management must be so much a part of County culture that it becomes a value rather than merely a priority that shifts as other priorities change. The primary areas managed through this program are: liability, workers’ compensation, vehicles and unemployment claims administration, loss control services, insurance, and contracts.
To compare our program with like entities, we calculate the cost of risk as a percentage of budget and payroll. Costs include: actual claims expenditures, insurance premiums, staff salaries and benefits, materials and supplies, consultants and contractors. From the graph you will see that our cost of risk increased significantly (Budget - .24 and Payroll - .31) in the 10/11 fiscal year compared to the increase the prior year of .004 and .03 respectively. The majority of this increase relates to an increase in claims costs, specifically liability claims. Two large liability settlements accounted for 79% of the increase in liability claims costs. (You may notice that the Summary of Overall Costs graph shows a decrease in claims costs. The reason for this apparent discrepancy is that the claims cost figure used in the cost of risk calculation is the amount paid on claims from all years while the Overall Costs graph figures are the amounts paid on claims filed in each particular fiscal year. We still have claims from older years that continue to generate costs significant enough to cause the cost of risk to increase.)
Services to the Organization
Risk Management staff provides the following services to the organization:
- Internal consulting services for departmental staff on preventing and controlling risks, including risk assessments;
- Workers’ compensation, liability, vehicle, property and unemployment claims administration;
- Marketing, purchasing, and administration of property, excess liability and workers’ compensation, and other miscellaneous insurance policies and bonds;
- Review of County contracts for insurance requirements and indemnification language;
- Employee and supervisory training on risk-related topics, including tort liability, workers’ compensation, loss control and employee safety;
- Coordination of modified duty assignments and physical rehabilitation programs for injured workers;
- Loss control consultative services for employee safety and environmental issues;
- Ergonomic consultations.
The 2010/11 fiscal year continued to be a challenging year on a number of fronts. The economy is rebounding more slowly than expected with resources continuing to shrink. Shrinking resources impact risk management measures in various areas. Attention to safety is stressed because departments need to continue providing high quality service, even in the face of dwindling resources.
Unemployment costs rose to a new high as people struggle to deal with the economic challenges.
From the graphs below you will see that the number of liability claims went down by 17%, vehicle claims went up by 10% and workers’ compensation claims decreased by 24%. The reasons for these changes will be explained in later sections.
Of perhaps greater interest is how these numbers impacted our costs. The second graph reflects the costs associated with these three areas. All three areas decreased, with liability costs decreasing the most dramatically. This is encouraging. But, keep in mind that claims have long tails and FY 10/11 is still green enough that the cost will grow as the claims mature.
Our focus should continue to be on risk identification, prevention and mitigation. Prevention is the most effective measure in eliminating costs.
Claims data reflects that from FY 09/10 to FY 10/11 costs changed by the following:
- Liability down 95%
- Workers’ Compensation down 28%.
- Vehicle down 8%.
The OSHA Incidence Rate graph shows how we have done in preventing injuries. The OSHA incidence rate has increased each year since 2008 with a 33% increase between CY 2009 and CY 2010 (OSHA statistics are calculated on a calendar year basis). The 19% decrease in FY 10/11 is a welcome reversal of that trend (the current year is noted as fiscal year because it has not concluded yet and in order to have a full 12 months of data we need to use fiscal year data). We are still higher than any calendar year since 2007, except for 2010. Therefore, the challenge is to put into place those actions (e.g. heightened awareness of the risks associated with a certain task) that will focus on prevention.
Claims brought against the County comprise a significant portion of the annual expenditures from the self insurance fund. We contract with a third-party administrator to effectively manage general liability, employment and vehicle claims. The following graphs show the pertinent data related to these exposures.
This report reflects a 95% decrease in liability costs from FY 09/10 to FY 10/11, making it the most dramatic decrease from one year to the next in recent memory. However, as mentioned earlier, FY 10/11 is still maturing and the claims filed in that year still have the potential to generate significant costs as we saw reflected in the increase of costs paid last fiscal year for older claims.
More importantly, the number of liability claims also decreased by 17%, boding well for future costs.
Property damage continues to be the area of highest claim frequency. The majority of these were from vehicle damage incidents. The next highest area was false arrest. (This does not indicate that CCSO is at fault, just that allegations have been made).
So far, in terms of FY 10/11, claims costs are relatively minor. It is still too early to predict where these claims will ultimately close out at.
Continued attention and emphasis on safe driving habits is needed in order to reduce the number of property damage claims. (Please see the data in the Vehicle section for details related to the cause of these claims).
The relativity between departments remained much the same as last year. As one would probably expect because of their level of risk, the departments with the highest number and cost of claims were the Sheriff’s Office and Department of Transportation and Development.
Workers’ Compensation Claims
Workers' compensation claims generated from employee injuries usually account for the highest cost amongst risk exposures (unemployment costs were higher but are not typically considered a traditional risk exposure). This past year, however, liability paid costs were higher in part because of two large liability settlements but also because, overall, the paid cost of workers' compensation claims filed during FY 10/11 decreased by 28% from the prior year.
The number of claims per employee decreased by 20%, with the actual number of claims decreasing by 24%. One possible reason for this decrease was because, last year, there was a chemical exposure incident that resulted in multiple people seeking medical treatment and filing claims.
Each of the “types” categories of claims decreased (except Fractures). There were enough occupational disease claims this past year to make the top 5 list. These are claims that result from activities that occur/accumulate over longer periods of time as opposed to an injury that occurs as the result of one incident.
Strains and sprains continue to generate the greatest number of claims each year, more than double the next highest category. This is also true for each of the five highest departmental claim generators, except for Business and Community Services, where “Lacerations” was higher.
The difference in the cost of strains and sprains is even more glaring than the difference in the number of claims. Strains and sprains resulted in 48% more cost than all other categories combined. Efforts to address this costly type of injury will be discussed in the conclusion.
Employee injuries can generate considerable cost volatility. However, we can control these costs if we are diligent in identifying potential exposures and address the components that might give rise to a claim. Also, the time spent investigating and making changes will help to minimize the number of injuries.
County personnel drove in excess of 6.7 million miles during FY 10/11. Miles driven decreased by about 9%. While the number of damage claims increased by 10% (9 claims), there was an 8% decrease in the cost of those accidents reported during the fiscal period when compared to the prior fiscal period (just under $10,000). However the cost per 100,000 miles driven increased due to the decrease in miles driven.
Because vehicles present such an enormous exposure and the number of claims increased we must focus on consistent ways of encouraging safe driving habits.
From the two preceding graphs you will see that driver error is still the major cause of vehicle accidents. From an analysis of the data, distractions and inattention were the primary reasons for driver error (such as glancing away, backing without checking behind, not being aware of surroundings, and misjudgment).
The number of claims per miles driven is the best way to compare Clackamas County with other jurisdictions. For example, Multnomah County’s rate of 2.45 per 100,000 miles shows how our two jurisdictions compare.
It is clear from the graph that unemployment costs continue to increase dramatically. The slow economic recovery continues to generate claims that last through the maximum period allowed.
The unemployment system is very liberal in its view of what denotes a claim where benefits will be paid. Good documentation of employment actions taken, consistent application of County policies, and involvement of the Department of Employee Services and County Counsel as early as possible will, to the extent possible, help to limit avoidable costs.
Premiums for purchased insurance are sensitive, to a large extent, to the demands placed on reinsurers due to natural disasters. They are also driven by changes in exposures, such as new buildings versus old and things like the protection systems that are in place.
The property insurance market is impacted the most from the effect natural disasters have on the global economy. While we do not have control of natural disasters, there are areas where we can impact a reduction in the premiums. One of these areas is finding the insurance company with the most competitive rates and the willingness to consider an insured’s commitment to protect its assets. The County’s recent change to Affiliated FM as its property insurer will give us the opportunity to work together with an insurer in the global marketplace to add protections and processes that will ensure that our buildings are as safe as possible and, consequently, reduce premiums in the process.
The slight decrease shown in the graph for FY 10/11 was due primarily to some good negotiating by our insurance broker at policy renewal time. For the most part policies were renewed at existing limits.
Clackamas County purchases insurance in the following areas: property, boiler and machinery, excess liability, excess workers' compensation, volunteer and van liability, and marine and aviation liability.
Achieving our mission - The goal of any risk management effort should be to help the organization achieve its mission. At the beginning of this report we stated that with resources shrinking, risk management is affected as well. In light of this, we should question how we are doing relative to those efforts. Hopefully, the data presented in this report can help answer that question.
Increasing resources – It has been suggested that managing our risk effectively can be seen as a way to increase resources. Here are a couple of ways this can happen.
In terms of workers’ compensation, employees who are at work because they have not been injured on the job avoids the need to back-fill, avoids overtime, promotes higher quality work because the person whose job it is, is doing the work, promotes positive morale and eliminates claim costs.
On the liability side, attention to how an action may bring liability upon the County improves County-citizen relations by avoiding contentious claims. This attention often improves the efficiency of the service as well since time is not spent investigating and managing the result of a bad decision.
Risk Assessment Tool – We are continuing to promote the identification, reduction and management of the risks we face. This is being done using the risk assessment tool we discussed in last year’s annual report. This tool is very comprehensive and, consequently, requires a large time commitment, one we are hopeful departments will be willing to dedicate as it will have a positive lasting impact.
This Department Risk Assessment will be used by our Risk and Loss Control Analysts to work with each department to identify and evaluate a number of risk management criteria. The areas where there is room for improvement will be identified and we will assist in developing a plan to address the needs. Our goal is to help you achieve your mission.
Driver training – The cost of vehicle claims per 100,000 miles driven increased in FY 10/11. We have begun using an excellent web-based driver training tool called Alert Driving. We encourage departments with driving risk to contact us to learn how this tool can help them. Also, because vans constitute a large exposure base we have developed a required van driver training that includes behind-the-wheel instruction.
Stretching – In collaboration with the County’s Wellness program, the Risk team has begun assisting departments with daily stretching regimens. Whether it is useful as a benefit for warming up the muscles prior to physical work or limbering up muscles that get stiff from sitting for extended periods, stretching is something we support as an important part of the County’s safety culture.
Our goal in all of this is to assist County departments to together preserve and protect the assets of Clackamas County and its citizens.
Dwayne Kroening, CRM
Human Resources Assistant
Integrated Disability Analyst
Integrated Disability Analyst
Human Resources Assistant
Risk & Loss Control Analyst
Risk & Loss Control Analyst
Human Resources Assistant
Employee Services Director