There are several key risk management terms to understand when it comes to loss exposures. “Loss exposures are the possibilities of accidental losses with measurable financial consequences," according to Warren T. Hope, author of Introduction to Risk Management. There are four types of loss exposures that motor carriers must account for: property, liability, personnel, and net income. Below is a summary of each type of loss exposure.
A property loss exposure involves the potential damage to property in which a person or organization has a financial interest. Property loss exposures include real property and personal property. Real property refers to land, buildings, and other structures attached to the land. Personal property includes everything but real property, like furnishings, tractors, trailers, tools, etc.
A property loss exposure involves the potential damage to property in which a person or organization has a financial interest. Property loss exposures include real property and personal property. Real property refers to land, buildings, and other structures attached to the land. Personal property includes everything but real property, like furnishings, tractors, trailers, tools, etc.
A personnel loss exposure involves the possible injury, disability, death, or departure of an employee. Two examples of personnel loss exposure are when an employee is injured when slipping on a wet floor in the restroom or when a key employee retires.
Net income is the amount of revenue over expenses generated in a specific accounting period such as a calendar year. A net income loss exposure involves an increase in expenses or decrease in revenue that can result in a financial loss. An example of a net income loss exposure is losing a large customer. The loss of revenue represents a substantial impact to the company.
Understanding these four types of loss exposures allows motor carriers to manage risks more effectively. Start by identifying and analyzing your company’s loss exposures. Next, examine options to best manage the risk, select the appropriate technique, and implement it. Finally, monitor the results to determine if your solution worked or needs refining. For more information on loss exposures and risk management techniques, please consult your Great West agent or safety representative.
Identify the four types of loss exposures in your company.
Identify all loss exposures and address the highest-risk exposures first.
Consider alternative risk control techniques to reduce the chances of a loss.
Monitor your risk management efforts and measure their effectiveness.
This material is intended to be a broad overview of the subject matter and is provided for informational purposes only. Joe Morten & Son, Inc. does not provide legal advice to its insureds or other parties, nor does it advise insureds or other parties on employment-related issues, therefore the subject matter is not intended to serve as legal or employment advice for any issue(s) that may arise in the operations of its insureds or other parties. Legal advice should always be sought from legal counsel. Joe Morten & Son, Inc. shall have neither liability nor responsibility to any person or entity with respect to any loss, action, or inaction alleged to be caused directly or indirectly as a result of the information contained herein. Reprinted with permission from Great West Casualty Company.