What Are Loss Exposures?
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.
PROPERTY 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.
LIABILITY LOSS EXPOSURE
A liability loss exposure means the motor carrier is legally responsible, or liable, for the injury or damage suffered by another person or organization. An example of a liability loss exposure is when a tractor-trailer hits another person’s vehicle in a parking lot.
PERSONNEL LOSS EXPOSURE
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 LOSS EXPOSURE
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.
CALL TO ACTION
- 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.
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The information in this article is provided as a courtesy of Great West Casualty Company and is part of the Value-Driven® Company program. Value-Driven Company was created to help educate and inform insureds so they can make better decisions, build a culture that values safety, and manage risk more effectively. To see what additional resources Great West Casualty Company can provide for its insureds, please contact your safety representative, or click below to find an agent.