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Bill McIntyre's lecture:

Insurance, safety and risk management in the construction industry lecture

During his visit to Israel, Mr. Bill McIntyre was invited as our guest of honor to discuss about one of the most important issues on worksites all across the globe – SAFETY; here are the things he said:


American Contractors insurance Company (ACIG), who celebrated its 40th year anniversary last year, is an insurance company that is owned by forty U. S. contractors who perform about $30 billion year in construction work.  About 80% of the work is performed as general contractors while 20% is performed as trade contractors.  The type of construction is split equally over projects involving vertical buildings, industrial, and infrastructure.  I am one of the founders of ACIG, served as the managing director, and was the lead underwriter for 29 years.


Over the years, the group has reduced injuries to employees by around 75%, while improving quality and reducing property damage claims using the ways and means I will be discussing.  I wish that I could say that we have some magic dust to sprinkle on you to achieve lower losses, but that’s not the case.  It took, and still takes, a lot of hard work to control and reduce injury and property losses while improving quality.


Apparently, the Israeli construction market is in a state flux and can be described as a very tight market where coverage is hard to place and premiums have skyrocketed, coverages reduced, deductibles increased.  With some underwriters withdrawing from the marketplace, brokers are scrambling to find coverage at reasonable terms.  A part of the process is to submit business to a great number of underwriters, who may or may not respond.  As a result, the cost of placing and underwriting business has substantially increased.


The NII is subrogating certain claims, in others words, suing contractors for the  NII’s payments to injured employees.  As a result, there is a perceived need to improve safety practices to reduce injuries. The overall process is probably more hurtful for small contractors than large contractors.  In short, the ecosystem of construction insurance and construction is being damage.  This does not bode well for the country of Israel and its citizens.


We have seen similar cycles in the U. S.  What’s the solution?  We came to the conclusion that the best answer was to reduce injuries and improve quality  of our construction product.  Each of our countries have unique issues but, perhaps there are lessons to be earned from others.  The following ways, processes, and best practices, which can be used by any size contractor, are some of the top solutions we pursued.  Hopefully, they will give the underwriters and contractors some guidance.


My comments will be mainly addressed to contractors.  However, this will give underwriters some ideas how they might help contractors improve their risks.


THE RIGHT CULTURE- Perhaps the first step to take, is to evaluate the current culture of the construction company and how safety and quality fits into the contractor’s culture.  Is more emphasis being put on production, schedule and construction costs and less on safety and quality?  Safety and quality is not adverse to production.  We’ve found it has actually enhanced it.


The next step is to be sure that the contractor’s managing director, what we call the CEO, and the senior management team is fully supportive of the safety and quality process.  If fact, with our contractor members, the CEO is the chief safety officer.  When senior leadership are all on the same page, it is easier to push the desired culture down through the ranks to middle management and the field.  Accountability is also a big part of the desired culture.  No one is gets lamb’s blood painted over their door.

FINANANCIAL CONSEQUENCES-  The construction team needs to be educated on the financial consequences of accidents and that insurance premiums are driven by losses.  There are no free lunches!  Safety and quality results should be considered when calculating the bonuses of construction project managers.


Part of the education process is for the construction team to understand, and realize, that for every shekel that the insurance underwriter pays, the construction company will incur additional indirect costs of at least two shekels.  Here is an iceberg example that we use to explain the concept for both safety and quality. (review slides).  The insurance payments are above the waterline while indirect costs are below the water line.  The indirect costs can then be calculated.  The required amount of work that is needed to cover these indirect cost can then be calculated.  It drives home the point that it is best work hard AND smarter.  There is a heavy correlation between stellar financial results and great safety/quality results.


DEVELOP GOOD DATA AND METRICS-  An important step in developing a good plan to reduce losses is to develop a good data base to determine what activities are causing the most incidents.  With this information, one can determine where the low hanging fruit is and develop goals to achieve.  This process also develops metrics to track your progress and enables the contractor to hold teammates accountable.  Another benefit is the ability to benchmark between divisions and projects of the contractor as well as with other contractors.  Underwriters are in a good position to facilitate this process.


SERIOUS INJURIES AND FATALITIES VERSUS NON-SERIOUS ACCIDENTS-  While the ACIG members had substantially, up to 2010,  reduced our overall loss rates, we had not reduced the serious injuries and fatalities (SIFs) to our employees nor our subcontractor’s employees.  We determined that a different approach was required to reduce our SIFs.  We developed what we call the “Twelve Lifesaving Commitments” and developed training around these areas.  We also back tested our SIFs and determined that 95% of our SIF’s fell into these twelve buckets.  This initiative has been supported by a good “root cause” analysis as well as a great “near miss/good catch” process.


FLEET SAFETY-  One of the toughest issues to address has been fleet safety for our cars, light trucks, and heavy trucks.  Strangely enough, the lighter vehicles have been the biggest problem.  However, we have developed some best practices, supported by some useful technology to reduce accidents in this area.


QUALITY AND SAFETY- You may have noticed that I have connected safety and quality together.  In the early 2000s, we were experiencing a large number of construction defect claims arising from quality issues and lack of documentation.  We also determined that some of our SIFs were arising out of the correction of improper work which was out of schedule and improperly planned. 

Basically, our quality process was twenty years behind the sophistication of our safety process. That caused our members to formalize and ramp up their quality process. We also realized that the same management skills that it took to manage quality, were similar to the same skills to manage safety.  In other words, by combining the two, and coordinating the efforts, we could get a bigger bang for our shekel!  And, a much improved bottom-line.  This is an easy sell to smart contractors.


TRAINING- All the above has to be supported by appropriate training, both compliance based and qualitative training.  In compliance based training, there is a lot of, what we call, “pencil whipping”.  Simply training to check the box.  Qualitative training is where some real learning occurs and there is a real buy-in by the person being trained.  


Pick a number, but there may be 500 ways to be injured on a jobsite.  If you try to train a person with rules and regulations, by the time they get to the end of the overall training, they have forgotten what was taught in the beginning.  We think a better approach is to develop “situation awareness” which helps a worker deal with the risks at hand and “in the moment”.  This is what the military does.  Why shouldn’t the construction industry do the same.

In the early 1950’s, an U. S. Air Force Colonel, John Boyd, codified the OODA LOOP, which stands for Observe, Orient, Decide, and Act.  Look it up on the internet.  This was later adopted by other military branches, especially special forces units.  I am sure the Israeli army has something similar, but by a different name.  IRMI’s subsidiary, MindForge, has developed training around this concept and the twelve lifesaving commitments mentioned earlier.

TECHNOLOGY- There is an explosion of technology that can foster great safety, quality, and training for the construction industry. 


The trouble is determining which use cases of the various technology meets the needs of a particular contractor. 

Careful selection and implementation needs to be done.  You will hear about some technology tools from later speakers.


CONSIDER A BOOTCAMP (STRATEGIC PLANNING)-  So, if some, or all, of the ideas above sound good to you, how do you get started to go to the next level?  You might consider going through a risk management bootcamp which is nothing more than engaging in a strategic and tactical planning process.  With every new ACIG member, or a change in CEO, or an acquisition, a Boot Camp is facilitated by ACIG to review losses, safety, quality, and contract management to develop specific action items.  The participants include senior leadership and supporting personnel for the areas to be discussed.  This is an excellent process for insurance brokers and underwriters to encourage and facilitate.  This has been a very large component of ACIG’s success.


Most Israeli contractors maybe doing some, if not all, the processes and best practices I have mentioned.  I have simply wanted to discuss what has worked for us and maybe it will help contractors and underwriters to take a fresh look at what is being done to see if something can be improved.  I have furnished Itzick the list of best practice that ACIG and its members use and you can review them to see if any items are of interest to you.  I will say that this is not an overnight or short term project.  It generally takes two to four years to fully implement and build the culture that is world class.  Afterwards, it is continuous improvement and maintenance.


Here is a slide that discusses the three levels of safety and quality.


As an outsider looking in, the market, safety, and quality problems are big enough that all the stakeholders need to get together to develop initiatives to address the problems and work toward improving results.  At a minimum, the various stakeholders would include construction associations, construction brokers, insurance underwriters, the Israeli government, and owners.  In some form or fashion, contractors and owners, who employ or encourage best practices, should be rewarded with lower costs.  If not, it’s highly unlikely that investments will be made to reduce accidents.  That is simple economics.


Lastly, I will leave you with these words.

Some people make things happen

Some people watch things happen

And some people wake up and say “What the hell just happened”


You want to be in that first category.  Be Proactive!  Save a life and reduce life altering injuries. 


Thank you having me and thank you for listening. 
Be safe!

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