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ARA INSURANCE: WHY YOU BELONG issue of
Rental Management

Claim statistics help determine risk management needs
03/04/2012

The annual property and casualty claim statistics for ARA Insurance, Kansas City, Mo., are reviewed each year to identify trends, detect needed enhancements in coverage and fine-tune claim handling procedures.

The statistics also are utilized by the American Rental Association (ARA) and ARA Insurance Member Risk Management Committee to determine what services members need to better manage their business risks. The committee analyzes the statistics and sets priorities, which in years past has led to the development of risk management resources such as Business Management: Contracts and Legal Guidelines, the ARA Professional Driver Education Program and the Statements of Best Practices for Aerial Work Platform Equipment.

Rental dealers also can use these statistics to focus their own efforts on risk management. The charts reflect only the costs paid by the insurance company. They do not include costs incurred by the rental dealer, such as deductibles, lost rental income or staff time spent on claim investigations and settlement, which is why it’s in the rental dealer’s best interest to reduce risks of insurable accidents as well.

By understanding the most common and most expensive types of accidents in the rental industry, rental dealers will know which risk management efforts deserve the greatest allocation of their time, money and energy.

For example, the following are some observations about the 2011 claim statistics and suggestions from ARA Insurance for reducing those risks.

Observation: Auto accidents are by far the most frequent claims, which is not unusual given ever-increasing traffic and driver distractions. More specifically, auto liability claims — for accidents caused by insured vehicles — are the single most frequent type of claim. In 2011, the top three causes account for more than half of these accidents:

1) Striking the rear of another vehicle.

2) Backing up into a vehicle or object.

3) Accidents related to towing.

Suggestion: Driver selection and training can help reduce risks of auto accidents, as can company policies that limit the use of cell phones and other driving distractions. The ARA Professional Driver Education Program is a comprehensive course for drivers in general tool and construction rental. “Driver Delivery Operations” is an ARA Event Rental Training Course designed for drivers in the party and event segment of the industry. ARA Insurance customers also can take advantage of complimentary defensive driving courses and ReSource for assistance in driver selection and employment policies, such as a statement on the use of cell phones.

Observation: The highest average cost for equipment claims results from theft of equipment from rental store premises. Not surprisingly, heavy equipment is most attractive to thieves.

Suggestion: Decrease the risk of theft and increase the chances of recovering stolen equipment by registering ownership with the National Equipment Register (NER). It’s free for ARA members. ARA Insurance customers also can consult ReSource for tools and tips for preventing theft, including the Theft Prevention & Recovery Resource List.

Observation: General liability claims for accidents involving aerial work platforms (AWPs) were both frequent and severe. The cost of AWP claims outpaces the frequency due to the severity of accidents from causes such as falls, crushing and electric shock.

Suggestion: Understanding the primary sources of liability for AWP accidents helps rental dealers implement procedures to prevent accidents and reduce liability when accidents occur. The Statement of Best Practices of General Training and Familiarization for Aerial Work Platform Equipment and Statement of Best Practices of Personal Fall Protection Systems for Aerial Work Platform Equipment address two sources of rental dealer liability for AWP accidents.

Observation: Fire is by far the most costly type of claim involving buildings and business personal property, with an average cost per occurrence approaching $400,000. Though infrequent, fires are detrimental, damaging both structures and equipment, and interrupting business operations.

Suggestion: Rental dealers can reduce the risk of fire by properly storing flammable materials, maintaining fire extinguishers and sprinkler systems, and limiting smoking to designated areas.


Key to 2011 claims charts

The categories for the 2011 ARA Insurance claims charts on this page have been streamlined from past years’ data to simplify analysis.

“Frequency”

Refers to the number of occurrences of each claim type.

“Severity”

Indicates the dollar value of each claim type.

AUTO

Refers to claims involving insured vehicles, such as accidents caused by insured vehicles or damage to insured vehicles.

GENERAL LIABILITY

Claims are for non-auto accidents resulting in property damage or personal injury for which insured rental stores are responsible.

EQUIPMENT

Claims are for loss or damage to rental or sales inventory.

PROPERTY

Claims are for loss or damage to insured buildings or business personal property that is not part of rental or sales inventory.

 

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