Risk mitigation may drive insurance premiums down
Tue December, 3rd 2019
Australia’s resources sector has an enviable record when it comes to health and safety performance.
That is in spite of the inherently high-risk environments to which workers are often exposed.
There are still isolated issues, but with a strong focus on continual improvement and a shift from reactive to proactive risk management, the industry is doing a good job at ensuring workers return home in the same state of health and wellbeing as when they left.
The industry has some of the strictest legislation and regulation around risk management when it comes to preventing harm to people.
But according to Dan O’Regan, director of mining specialist RiskCorp Insurance Brokers, there is far more to risk mitigation than protecting lives and preventing injuries.
“For insurers, health, safety and environment are generally accepted as well managed in the industry as those areas have been so tightly regulated over many years and the requirements for operators and contractors are clearly defined,” Dan said.
“Risk management practices with regards to property insurance are not as highly considered but the impact can be just as devastating to both the tangible property and consequential financial loss suffered by numerous parties.
“Insurance brokers and the insurer engineers have to take on the role of risk adviser to ensure operators are making informed decisions when it comes to protecting plant and equipment.”
According to a half-yearly report by Aon Risk Services, property losses accounted for a significant number of mining industry claims through 2018 and into the first quarter of 2019.
The report indicates that insurance premiums are likely to increase as a result of the growing number of claims and some insurers may even be prepared to walk away from the mining sector in favour of investing their financial capital elsewhere.
Dan says there are several steps operators can take to ensure risks are identified, assessed and then addressed to ensure insurance premiums remain as competitive as possible and relevant to the particular risk to be insured.
“Insurers look at recent engineering reports that identify risks and recommend mitigation, which quite often are only low cost improvements,” he said.
“They then consider any steps a company has taken to address those risks and implement meaningful changes in line with those recommendations.
“Other factors such as a company’s claims history, insurance market appetite and capacity also have an impact.
“You have to remember that in mining, property damage is often just the tip of the iceberg when it comes to loss. Consequential loss of revenue through production downtime can be the monster below the surface.”
With fire being one of the most commonly reported incidents in both surface and underground operations, Dan says any moves to prevent or inhibit the spread of fire are viewed favourably by insurers.
“There are some products that risk engineers will recommend and in this market the insurers will mandate these being implemented before providing coverage to an operator, such as fire suppression systems,” he said.
“But any additional measures not specifically defined by the engineers that will improve the risk should be reflective in the premium cost considered by the insurers, such as the use of fire retardant materials and other preventative and containment measures.”
It was the risk of fire that led Elastomers Australia to work with customers to develop fire retardant screen media for the iron ore industry.
General Manager of Business Solutions Pat Caputo said there were multiple potential sources of ignition and numerous flammable products around crushing and screening operations which posed fire hazards.
“There are a lot of moving parts, electrical components and areas subject to hot works such as cutting and welding,” Pat said.
“That can result in problems such as bearing failure, electrical arcing or hot materials not being contained.
“When they come into contact with fuel sources such as lubricants or rubber components including conveyer belts and screen media panels, and given iron ore screening is typically a hot, dry process, the combination makes for a potentially volatile environment.
“The first priority is to eliminate potential ignition sources or put steps in place to control the risks associated with them, then it’s a case of ensuring any flammable materials are limited or removed entirely.
“We worked with our clients to develop a fire retardant rubber and subsequent field trials have shown they perform equally as well as Elastomers Australia’s existing premium grade rubber panels in terms of wear life and overall screening performance.
“So we’re predicting a lot of our iron ore operators will start rolling them out over the coming months.
“The fact that doing so could lead to a reduction in insurance premiums is an added bonus and something for clients to consider alongside other benefits when it comes to total cost of ownership.”