Reducing risk in a fuel delivery operation – and insurance premiums – means paying attention to a lot of different details.
Oil & Energy recently caught up with Bill Braley, Partner in The Braley Wellington Group, a Worcester, Mass.-based insurer that specializes in heating oil companies, for a far-ranging discussion of risk management.
Watch the Vendors
Braley explained that new risks emerge as companies diversify into selling propane and gas heat. “That requires learning and training in the best practices for those services,” he said. Another important area of risk for companies to watch is vendor selection: making sure the companies they do business with are adequately insured, and obtaining necessary documentation of their insured status.
On the delivery side of the business, it is vital to take care of the basics, like adhering to a no-whistle-no-fill policy, pumping fuel at a safe rate, and requiring pre-delivery inspections. One of the most effective ways to reduce risks related to delivery is to insist that drivers keep their eyes open for any signs of a problem and call the office first before they take any chances.
It Starts With Hiring
Another basic tenet of risk management is hiring well. “It all begins with hiring,” he added, “We think your risk management can start right there, and you can reduce a lot of problems by hiring the right person in the first place.”
The largest risk factor is the oil truck out on the road, and companies should require drivers to inspect their vehicles at the start of every shift and notify management of any issues they spot. Whenever there is an accident or a delivery incident, the company needs to investigate, learn from the experience and train to prevent a recurrence.
Another important consideration is how to handle homes that are seasonally unoccupied or otherwise become vacant. “This is a difficult issue. Equipment failure, unexpected usage and unexpected unoccupancy (unexpected from the standpoint of the oiheat dealer) are all problematic,” Braley said. “Low temperature alarms and electronic tank gauges are helpful, but somewhat uncommon – even on seasonal properties.
“Some loss prevention advisors recommend putting unoccupied properties on will-call, in an effort to require someone to monitor the property, and order oil when needed,” he added. “This comes with its own problems that need to be managed, such as last-minute emergency delivery orders. This is an instance where driver vigilance can protect the company. By reporting an unplowed driveway, accumulation of mail or newspapers, or other signs of unoccupancy, the driver can position the company to contact the owner and formulate a plan.”
While fuel delivery is a mature business, there are newer areas of risk that must be considered, such as theft of customer information and risky employee behavior. In the last five years, the market for information security insurance has developed, and companies will find more choices. “Some insurers are adding small sublimits for it as an enhancement to their property or general liability coverages, but retailers should consider the need for a separate policy with higher limits, which also entails a more detailed examination of their data security practices,” Braley explained.
To protect against risk associated with employment practices and employee behavior, companies are purchasing coverage against claims for sexual harassment, wrongful termination and discrimination in hiring. Companies can also buy third-party coverage that protects them in the event of employee misconduct, such as being inappropriate with a customer, Braley said.
Protecting the Bulk Plant
Another important risk management challenge for many companies is the bulk plant. “You need to ensure the safety of those facilities with fencing to prevent unauthorized access or at least by making sure the valves are locked so no one can vandalize and start draining product,” he said.
From an operational standpoint, the bulk plant should have instructions clearly posted as well as markings for lines and valves. Operators should have an inspection and monitoring program that looks for leaks and releases and also be sure to monitor drivers who are using the facility for the first time. It also pays to make firm arrangements with throughput customers.
With so many factors to consider, he advises that companies develop a system for monitoring insurance documents and keeping them up to date. They should also keep their agents informed about improvements they make that reduce risk.
“A recurring theme in risk management and insurance is that those who proactively take steps to avoid preventable losses will be in a strong position to present their company to insurers, and get the best out of prevailing insurance market conditions, compared to those who don’t manage their risk as effectively,” Braley said.