ARE THE INSURANCE LIMITS AND COVERAGE YOU REQUIRE DRIVING SHIPPERS AWAY?
CASE STUDY – ARE THE INSURANCE LIMITS AND COVERAGE YOU REQUIRE DRIVING SHIPPERS AWAY? Each time a railroad was asked to ship hazardous material questions arose among its legal, marketing, and risk management team. The question? How can the railroad balance the DOT requirement to accept shipments of hazardous materials and its need to avoid the risk of loss associated with shipping hazardous material? Complicating the balancing issue is that the exposure to risk of loss varies depending on a wide variety of factors, not just the commodity and volume shipped. Requiring insurance limits and coverage that would assure protection to the railroad seemed like the only safe course of action. However, that course of action resulted in very poor customer relations and the loss of significant revenue. Why? Because shippers felt that the railroad was unnecessarily protecting themselves at their expense. What was needed is a decision-making tool that could reliably help identify the insurance limits and coverage needed to balance each shipment exposure to risk of loss.
CRT Consulting, LLC was retained to provide the needed decision-making tool. Working with the railroad’s leadership team, CRT Consulting, LLC customized its CRTC10TN RAIL Form Model (Railroad Assessment and Insurance Limits Model). The CRTC10TN RAIL Form Model is a tool that helps identify and value Key Risk Indicator’s (KRI’s). It then assigns values to each KRI, and when the values are summed identifies insurance limits and coverage consistent with each specific shipments exposure to risk of loss. A KRI is a measure used to indicate how risky a process or activity is. A few of the KRI’s considered in this railroad’s model were: duration of the movement, route of the travel, environmental liability, special handling requirements, first responder capability, customer compliance with DOT 49 CFR, customer and railroad loss history, and others.
The customized CRTC10TN RAIL Form Model solved this railroad’s balance problem. Using the CRTC10TN RAIL Form Model the railroad can establish insurance limits and coverage consistent with the risk of loss specific to each shipment which helps to protect the railroad’s financial health and also helps lower costs for shippers.
As a result of employing the CRTC10TN RAIL Form, the railroad lowered its total cost of risk, improved customer relations, increased its revenue, and released time for each department to focus on its core activities.
I created the CRTC10TN Risk Assessment and Insurance Limits model over 20 years ago as a general business risk assessment tool. In the last 12 years the model has undergone continuous improvement and validation at railroads. Today the CRTC10TN RAIL Form Model is the only predictive risk assessment model that has consistently helped railroads to reduce their total cost of risk associated with transferring risk by contract. The CRTC10TN RAIL Form Model is the railroad industry’s benchmark.
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