Inspection & Loss Inspection & Loss Control ConsiderationsControl ConsiderationsControl ConsiderationsControl Considerations

Presented by Larry GallagherDirector Corporate Loss Control

Grinnell Mutual Reinsurance CompanyG e utua e su a ce Co pa yOctober 21, 2010

INSPECTIONINSPECTIONINSPECTIONINSPECTION

• A survey to obtain information on the property and operations p p y pof the policyholder and to gain insights into the probability of g p yloss based on safety controls present at the time of your visit.p y

Why Set Up An Inspection Why Set Up An Inspection ProgramProgram

b k f b i• Know your book of businessType of Operations

• Crop only• Crop only• Livestock farm and crop• Other

Type of StructuresOn/off premise operationsQ lit f b k f b iQuality of your book of businessMix of your business

• farm vs. residentialfarm vs. residential

Purpose of Inspection Purpose of Inspection ProgramProgram

• Proper Risk Selection• RiskRisk

– identification– reductionreduction– improvement

• Proper Valuation of • Proper Valuation of Buildings/Equipment

Essential Elements of an Essential Elements of an Inspection ProgramInspection Program

• Underwriting Guidelines on what IS or IS NOT acceptable

• Establish procedure to handle risks that DO • Establish procedure to handle risks that DO NOT meet Underwriting Guidelines

• Establish procedure for follow-up (Reinspection)(Reinspection)

• Trained/Knowledgeable personnel• Method of notifying policyholder of programy g p y p g• Establish how success of program will be

measured

Risk Surveyor/Inspector Risk Surveyor/Inspector y py pWears Many HatsWears Many Hats

• Reporter

• Technical Consultant

• Salesman

• GREAT Listener

Implementing Inspection Implementing Inspection ProgramProgram

• Establish authority and • Establish authority and responsibility of inspector

• Establish inspection program procedures

• Inform farm mutual personnel, agents & policyholders of program agents & policyholders of program implementation

Implementing Inspection Implementing Inspection p g pp g pProgramProgram

• Hire Inspector

• Train Inspector

• Other

Inspector TrainingInspector TrainingInspector TrainingInspector Training

• State Insurance Association• Reinsurance CarrierReinsurance Carrier• Local Technical Schools or Adult

Education ClassesEducation Classes• NAMIC – Agricultural Risk

Inspection SchoolInspection School

NAMICNAMICNAMICNAMIC

3601 Vincennes RoadI di li IN 46268Indianapolis, IN 46268

(317) 875-5250

iwww.namic.org

Agricultural Risk Agricultural Risk i S h li S h lInspection SchoolInspection School

Typical agenda for school includes:Typical agenda for school includes: The Inspection Process Basic Electricity Basic Electricity LP Gas Installations Solid Fuel (Heating Devices)o d ue ( ea g e ces) Farm Liabilities Farm Machinery Safety ACV for Farm Buildings Students Will Inspect a Farm

J l 2011July 2011Location to be announced

Inspection ProcedureInspection ProcedureInspection ProcedureInspection Procedure

1. Contact Insured Schedule appointment

2. Inspector Introduction2. Inspector Introduction

3 I ti P3. Inspection Purpose Use of inspection disclaimer

Inspection Procedure Inspection Procedure (Continued)(Continued)

C t t I d Contact Insured Inspector Introduction Inspection Purpose

• Inspect Property

Inspection Purpose– Use of Inspection Disclaimer

• Discuss Hazardous Conditions with InsuredC l t I ti F• Complete Inspection Forms

• Forward Inspection Report to UnderwriterUnderwriter

• Follow-Up with Insured

Risk Survey Behavior Risk Survey Behavior Risk Survey Behavior Risk Survey Behavior

• Remember….. policyholders are “our” customers Treat them as you would want to be

treated

Be polite, dress professionally, l h hcompliment them on their operation

Risk Survey Behavior Risk Survey Behavior

’ k h b

Risk Survey Behavior Risk Survey Behavior

Don’t smoke, chew tobacco, etc.during visit

Conduct home inspection first thenlivestock buildingslivestock buildings

R i f i l t ll ti Remain professional at all times,don’t allow them to make you angry

What to Look at During What to Look at During ggInspection ProcessInspection Process

• Scope of Operation• Identify Structurally Unsound Identify Structurally Unsound

Buildings• Identify Physical Hazards• Identify Physical Hazards• Evaluate Building Condition and

Establish Building Insurance Establish Building Insurance Value

Items to Consider When Items to Consider When Insuring a BuildingInsuring a Building

B ildi I l i Structural Design

C H d

Building Insulation Materials

Common Hazards (electrical system, heating, housekeeping, careless smoking)

Management’s Commitment to

smoking)

Exposure (distance from other buildings)

Safety

Othersfrom other buildings) Others

GMRC’s Hazard Grading of GMRC’s Hazard Grading of InspectionsInspections

Ri k b d d h di i • Risks are to be graded on the conditions that are present while the inspector is there. They are not to be graded on how the risk y gwill be if hazards are corrected.

• Risks are “graded” in the Inspection Reports using a letter grading system. This system includes evaluating the risk based on gcoverages written.

GMRC’s Hazard Grading of GMRC’s Hazard Grading of ggInspectionsInspections

• A – Excellent Risk. No uncontrolled hazardous conditions which are likely to ycause injury or property damage

GMRC’s Hazard Grading of GMRC’s Hazard Grading of

bl i k hi i k h

ggInspectionsInspections

• B – Acceptable Risk. This risk has a few light to moderate non-causative hazards with nonstandard safety hazards with nonstandard safety controls (fire extinguishers need serviced, lightning surge arrestor serviced, lightning surge arrestor should be installed, etc.). Hazards are present that have potential for causing non-disabling injury or non-disruptive property damage.

GMRC’s Hazard Grading of GMRC’s Hazard Grading of ggInspectionsInspections

• C – Acceptable if corrected. This risk has hazards with nonstandard safety controls associated with it but is controls associated with it but is acceptable for coverage in its present condition if hazardous conditions are controlled or eliminated in a reasonable amount of time. The uncontrolled hazards have the uncontrolled hazards have the potential of causing serious injury or property damage.

GMRC’s Hazard Grading of GMRC’s Hazard Grading of ggInspectionsInspections

• D – Rejected. The risk is unacceptable in its present condition unacceptable in its present condition due to the hazards associated with the risk. Recommend cancellation or non-renewal until hazardous conditions are corrected.

Structural DesignStructural DesignStructural DesignStructural Design

h b ildi / d l• Is the building/structure adequately designed to withstand the snow load and wind load for the geographical and wind load for the geographical area?

• Have modifications been made to the • Have modifications been made to the building/structure since it was constructed?

• What is the current condition of the building/structure?g

Electrical SystemElectrical SystemElectrical SystemElectrical System

A i A h f El i l • Appropriate Attachment of Electrical Service Entrance Wires to the Building and Entrance into the Buildingg

• Ground Electrical Service Entrance Panel• Proper Fusing (Fuses/Breakers)

For Copper WireWire Size Fuse/Breaker SizeWire Size Fuse/Breaker SizeNo. 14 15 ampNo. 12 20 ampNo 10 30 ampNo. 10 30 amp

Electrical System Electrical System (Continued)(Continued)

Wi i T * d C diti• Wiring Type* and Condition• Electrical Boxes Type* and Condition

Grounding of Electrical Equipment• Grounding of Electrical Equipment- 3 Wire System

*If in a Livestock or Poultry building or an area damp, corrosive or dusty, the p, y,building/area should be wired in accordance with Article 547 of the National Electric Code.

Poor Condition of Electrical Poor Condition of Electrical System ComponentsSystem Components

Evidenced by:Evidenced by:• Wire conductors are not secured to

building support membersg pp• Electrical boxes/light fixtures not affixed

to the wall or ceilingO i li i • Open wire splicing

• Covers off electrical boxes• Corroded electrical boxes• Corroded electrical boxes• Exterior Insulation damaged exposing

energized wiresg

Heating SystemHeating SystemHeating SystemHeating System

Residential Heating Residential Heating SSSystemsSystems

(LP G N t l G F l Oil El t i W d)(LP Gas – Natural Gas – Fuel Oil – Electric – Wood)

What to look for:

• Listed by a Recognized Testing Agency(UL – AGA – CSA International – etc )(UL – AGA – CSA International – etc.)

• Clearance from Combustibles(Top – Sides – Bottom)(Will h l l )(Will show clearances on name plate)

• Proper Fuel Line

Residential Heating SystemsResidential Heating SystemsResidential Heating SystemsResidential Heating Systems

(LP G N t l G F l Oil El t i W d)(LP Gas – Natural Gas – Fuel Oil – Electric – Wood)

What to look for:What to look for:• Adequate Safety Control• Appropriate Venting/Chimneypp p g y

– Type – Clearance – Condition of Chimney – Chimney Connector Clearance)

– (Code that applies – NFPA #211 – “Chimneys, Fireplaces, Vents, and Solid Fuel Burning Appliances”)

Vent/Chimney Type Vent/Chimney Type Based on Type of Fuel Being UsedBased on Type of Fuel Being Used

FUEL CHIMNEY TYPEFUEL CHIMNEY TYPELP Gas* Class B Vent

Masonry Chimney w/LinerM t l All F l ChiMetal All-Fuel Chimney

Natural Gas* Class B VentMasonry Chimney w/Liner

l ll l hiMetal All-Fuel ChimneyFuel Oil Masonry Chimney w/Liner

Metal All-Fuel ChimneyWood Masonry Chimney w/Liner

Metal All-Fuel Chimney*High efficiency furnaces may not require a conventional vent or

himne A 2 3 in h PVC pipe m be pp op i te b ed on chimney. A 2-3 inch PVC pipe may be appropriate based on Manufacturer installation information.

Agricultural HeatersAgricultural HeatersAgricultural HeatersAgricultural Heaters

Wh t t l k fWhat to look for:• Newer Units should be Listed by a Recognized

Testing Agency, such as AGA or CSA InternationalP Cl f C b tibl• Proper Clearance from Combustibles

(Top – Sides – Bottom)(Check Name Plate or Manufacturer’s Literature)

f bl Sh ld b l S d• If Portable – Should be Properly Supported(By Bracket, Fine Cable, or Chain)

• Needs Proper Fuel Supply Line• Needs Gas Safety Control

(All need a 100% Automatic Shut-off Device)• Keep Dust to a Minimum on Unit

Heat LampHeat LampppUnsafe ConditionsUnsafe Conditions

Building MaterialsBuilding MaterialsBuilding MaterialsBuilding Materials

• In farm buildings, if insulated, the insulation should be installed in accordance with the manufacturer’s recommendations.

Building MaterialsBuilding MaterialsBuilding MaterialsBuilding Materials

• The majority of polystyrene and polyurethane insulations should not be left exposed. It is recommended by insulation manufacturers that they be covered by a 15-minute thermal b ibarrier.

Basic Problems with Polystyrene Basic Problems with Polystyrene and Polyurethane Insulationsand Polyurethane Insulations

1 Fi1. Fire Once insulation is ignited from

e en a small fi e mate ials even a small fire, materials allow for very rapid fire spread across the face of materials. across the face of materials. For this reason, most of these insulations are required to be covered as opposed to being left exposed within a structure.

Basic Problems with Polystyrene Basic Problems with Polystyrene y yy yand Polyurethane Insulationsand Polyurethane Insulations

2. Toxic Gases Some give off toxic gases that

could kill, if in a high enoughconcentration – majority ofli l i fi dlives lost in fire are due toCarbon Monoxide or CarbonDi id i h l ti Dioxide inhalation

Basic Problems with Polystyrene Basic Problems with Polystyrene y yy yand Polyurethane Insulationsand Polyurethane Insulations

3. Smoke Concentration Because these insulations are a

form of plastic, they give off dense black smoke and will

b i i ki i diffi lobscure vision making it difficultto locate exists in the event of afifire.

Exposed InsulationExposed InsulationExposed InsulationExposed Insulation

Exposure Distance Between Exposure Distance Between ppBuildings for Fire PurposesBuildings for Fire Purposes

Minimum of 50 feet Recommended for Farm

Buildings

Management Attitude & Management Attitude & Commitment to Safety/Loss Control Commitment to Safety/Loss Control

• Receptive to suggestions to decrease hazards?

• Take pride in their property and properly maintain it or is this what you see….

Open Combustible Liquid Open Combustible Liquid p qp qContainersContainers

Fire ProtectionFire ProtectionFire ProtectionFire Protection

• Portable Fire Extinguishers(Multi-Purpose Dry Chemical ABC)(Multi Purpose Dry Chemical ABC)

• Invite Fire Department to SiteU P d L i R l • Use Pond or Lagoon in Rural Areas

• Dry Hydrants in Rural Areas

Enhancing Existing Enhancing Existing Inspection Program Inspection Program

Alter perception of what we do from a policing

S th S f t

Alter perception of what we do from a policing force to a Loss Control Consultative approach.

Hector the Inspector

Sam the Safety Consultant

Change/Improvements Change/Improvements S HS HStart at HomeStart at Home

• In order to improve perception, start with terminology used within your office

From “inspector” to “Loss Control Specialist” From inspector to Loss Control Specialist From “inspection” to “Loss Control Survey” Change verbal and written use of these

terms When calling policyholder make reference to

survey of your property for insurance purposessurvey of your property for insurance purposes Documents sent to policyholder following Loss

Control Survey should not include the wordsinspection or inspectorinspection or inspector

Primary BenefitPrimary BenefitPrimary BenefitPrimary Benefit

• Eliminating perception you are at his/her property to inspect it to find deficiencies to you are there to review/discuss safety with them, frequently eliminates the adversarial frequently eliminates the adversarial position the property owner may have from the time you set the from the time you set the appointment.

Primary BenefitPrimary BenefitPrimary BenefitPrimary Benefit

• Discussing why current situation is hazardous and give alternatives to gimproving safety controls as opposed to stating “this is what our insurance

i ” h l i company requires” can help improve compliance with recommendations.

Customize Recommendation Customize Recommendation Document sent to PolicyholderDocument sent to Policyholder

Customize Recommendation Customize Recommendation Document sent to PolicyholderDocument sent to Policyholder

• Positive feedback received from agents/policyholders when we agents/policyholders when we made this change several years ago for our commercial lines loss ago for our commercial lines loss control customers.

SummarySummarySummarySummary

1) Develop an inspection/loss control 1) Develop an inspection/loss control program to identify what you have on the books.

2) Develop the process/procedures to hire, train and implement , pinspection/loss control program, if such a program doesn’t currently

iexist.3) Enhance your existing program by

h i ti f f t /l changing perception of safety/loss control process.