President’s Commentary

I would like to begin this commentary by sharing that for the first time in our nearly 130-year history, our policyholder surplus has surpassed the $200 million mark! So, you are wondering, why is this a big deal? These are funds that we hold “in reserve” for the benefit of our policyholders. These funds are not committed to specific claims, but rather can be thought of as our policyholder’s equity in PLM.

While it seems like a huge number, in reality it really isn’t when considering an insurance company of our size and the severity losses (multimillion dollar losses) that we see every week. Policyholder surplus needs to grow as an insurance company and the exposures that the company insures grows. Our plans call for us to reach $500 million in premium this year, so it’s essential that we grow our policyholder surplus in order to support our premium growth.

A Look at our Results

Our premium growth has been strong this year with 91% of our policyholders choosing to renew with PLM. Likewise, new business has been very strong as potential customers come to understand the value of a PLM relationship when it comes to avoiding losses or handling them when they occur. In fact, depending on how September wraps up, we may achieve our year-end goal for new business. That’s not to say that we don’t have an underwriting loss through the end of eight months, because we do, and it is substantial. However, I feel comfortable that we are within reach of producing a fine year from both a premium and underwriting perspective, while strengthening PLM for the future!

At the time of this report, our weather-related losses are down year-over-year. Most of our weather-related losses are due to wind, hail and tornadoes which we see throughout the entire country. Saying that, I would note that Hurricane Beryl generated about $2.4 million of losses while Hurricane Debby generated less than $100,000 in losses. We are still waiting to see what Hurricane Francine might look like, but at this time, it appears it will be relatively minor in nature. And with most recently, Hurricane Helene, we have reached out to all our insureds in the affected areas and are waiting to hear back from many of them. We will see how things develop over the next few weeks but are ready to be there for our customers in their time of need.

So, where are we seeing losses?

After several years of abnormally quiet activity, fire losses have come roaring back. Through the end of last month, we’ve had 41 fires that have generated $53,000,000 in losses. The number of events is up 5% which is concerning, while the loss dollars are up 141%. These are not sawmill or pallet fires, which for years had been a regular problem for us, rather these are light wood manufacturing and retail/wholesale lumber dealers that are burning down.

Why is this happening?

Too often we see many of our insureds continue to believe that on top of being strong wood-related businesses, they’re also electricians! You’re not!

Further, we are seeing some slipping in basic safety practices, with finishing operations not using the appropriate containers for their used rags. The most recent loss involving an oily rag fire, which is not accounted for in the number outlined above, will add around $15 million more in loss. You can read more on this topic in an article found in this issue.

Looking at our auto line, we’ve seen a significant drop in auto claims. We believe this is a direct result of our insureds getting serious about who they let drive their vehicles and the training that is required in order to drive. The vast majority of auto-related losses we see are in fact the result of poor driving by our insureds’ drivers. While the standard comment made by our insureds’ drivers usually includes the line “It was not our fault”, at the end of the day, only 25% of our losses we investigate are not your drivers’ fault. Our data shows that 16% of the losses are a result of our insureds’ vehicles rear-ending someone. 14% are due to improper lane changes, another 14% involve our insureds’ vehicles backing up, 12% come from our vehicle hitting a fixed object, 6% are single vehicle accidents, and 3% are related to activity in and around intersections. We could always debate the intersection issue, but it’s a little tough to state that the rest of these causes of loss are the fault of someone other than the driver.

The fact of the matter is more training is necessary on everyone’s part when it comes to drivers. You must hold them accountable! You must make sure that only people that are properly trained with good driving records are getting behind the wheel of your trucks. I know how difficult it is to hire drivers today. Believe me, the last place you want to be is on a witness stand having to explain why you put someone in the driver’s seat that had a lousy driving record or was not properly trained, let alone was knowingly impaired in some manner. The last thing you want to do is use the reason that it’s tough to hire drivers! The verdicts we’re seeing in these situations are huge, let alone the reputational damage that is done to your business and YOU!

In the commercial general liability area, our losses are also rising. There’s nothing new here when we look at the causes of loss. 14% are generated by loading and unloading, 13% occur as a result of forklift operations, 9% are slip and fall claims, and 21% are construction defect claims.

A Commitment to Safer Operations

So, what can we do to help you. Well not much if you do not recognize the need to create a safe operating environment at your business. One of the issues that has become abundantly clear to PLM and to the insurance industry as a whole is that successful risk management takes committed owners and leaders in the client’s operation.  The commitment cannot simply be a verbal one on a once-a-year basis. It has to be a commitment where the owner or leaders express it via their actions.

With that commitment in hand, PLM can be a very effective partner in helping you build a comprehensive risk management plan that will, over time, reduce loss frequency and severity as well as the cost of your overall risk management program, including your insurance.  We’ve got a great program to control loading and unloading operations that just needs to be focused on and implemented. Did I talk about forklift training? Again, we have good training program that our loss control representatives can partner with you on. When it comes to slip and falls, a lot of them come from ice and snow, parking lots not properly maintained, and spills not being cleaned up in public areas. Occasionally, we see one where someone has been allowed to venture into manufacturing areas without appropriate protective equipment. We can help you address all of these issues.

From a construction defect standpoint, it’s all about the contracts that you are signing, the records being kept of who the contractors and subcontractors are on particularly jobs, and who the insurance companies were as indicated by certificates of insurance that you should be obtaining. We started to provide more loss control information in this area to help better protect yourselves.

When it comes to fleet safety, we have more programs to offer than you can imagine. In some cases, we are sharing the costs with insureds that implement certain driver safety programs. Things like continuous MVR monitoring helps provide protection from negligent entrustment and gives you an overview of driver records which indicates drivers that may need more focused training. Telematics with forward and driver facing cameras helps improve driver behavior to prevent accidents before they happen. There is a cellphone app that helps to prevent distracted driving. We also offer 58 online training courses aimed at drivers and fleet managers available at no cost to PLM insureds to support your training needs.

Safe driving is more important than ever. Costs are rising, which raises obvious concerns, but we’re also seeing drivers themselves targeted for fines and even jail time in significant auto accidents. Litigation is surging and verdicts are rising dramatically even when you’re not at fault! We are working diligently with our trade groups to support efforts to gain control of the causes of litigation abuse that are occurring and resulting in the inflation of damages that are dramatic in nature. We suggest you do the same through your trade associations and organizations.

The fact of the matter is that the best way to control a loss is to avoid it completely. Our loss control team are unique professionals not only seasoned experts in all aspects of risk management, but also have in-depth knowledge of the wood industry to help our customers with any risks that may impact their business. So, invite them into your business for an open exchange of ideas before the loss occurs. Then support their efforts while at the same time recognizing that the safety of your operation is in large part dependent on your commitment to operating a safe work environment and to protecting your employees and assets!

Want more information on how we can help, visit our website at www.plmins.com/loss-control/ to check out the Loss Control Center.

To us, it’s critical that at the end of the day, your employees, customers, and the public that you come in contact with all go home safely.

As always, I stand ready to assist you in any way possible. I’m only an email (jsmith@plmins.com) or phone call (267-825-9246) away.