American Oil and Gas Reporter - December 2016 - 73

SpecialReport: Insurance And HS&E Update

What are the overall insurance pricing expectations for
2017? Are there any specific coverage areas where policy costs are expected to increase? What major factors outside
the industry could impact oil and gas insurance cost trends?
BOQUIST: Pricing is always a risk-by-risk conversation that
is based on the specific exposures of each account. Each oil and
gas company operates differently, and it is best served by taking
an individual approach to rating insurance costs. That means insurers must take a granular view of each line of coverage to adjust their thinking and approach according to each insured's risk
characteristics.
The line of insurance that continues to be impacted by increased
loss frequency and severity is commercial automotive. Motor vehicle crashes are the leading cause of work-related deaths in the
United States, accounting for 22,000 from 2003 to 2014, according to the CDC Foundation. In 2013, motor vehicle crashes cost
U.S. employers $25 billion, averaging $671,000 per death and
$65,000 per nonfatal injury.
As the economy improves, more vehicles are covering more
miles, pushing up the frequency of auto accidents, resulting in
large losses and increased damage awards. Some of the risks impacting commercial auto losses include:
* Escalating medical costs;
* Distracted driving;
* Personal auto usage for work; and
* Increasing attorney involvement.
The average motor vehicle accident-related workers' compensation claim is almost twice the cost of the average claim for other types of accidents, according to the National Safety Council.
Any employee who drives as part of his duties is exposed to getting injured in an auto-related accident, even if he drives only on
occasion.
Oil and gas companies can have many workers that drive sporadically for company purposes, and as a result, organizations may
underestimate the number of people who drive as part of their work
days. Claims may arise from a "nonidentified" driver who was
given the keys for a single trip only, sometimes not even leaving a work site.
Distracted driving is a growing problem generally on America's roads. We know the dangers of impaired driving, but how
many drivers realize the electronics they take for granted-entertainment systems, cell phones (even hands-free can be a distraction) and global positioning systems-are distractions that take not
only their eyes, but also their minds, off the road?
The appropriate non-owned auto coverage will help protect
oil and gas companies in the event an employee is involved in an
accident while driving his personal vehicle on company business.
This is a significant area of potential liability for operators that
often is overlooked because the lines between what is business
and personal use sometimes can be blurred.
Finally, claim costs are increasing as more lawyers get involved
in more aspects of driving-related incidents.

As operators set their 2017 drilling and development
schedules, what can they do to tailor their insurance programs to meet the timing and needs of their planned field activities? How can they work with their insurers to better manage
bottom-line costs while ensuring adequate coverage to mitigate
risk exposures and safeguard against unforeseen liabilities?
BOQUIST: Having their brokers and carriers involved in the
early stages of planning can help oil and gas companies identify potential problems, and can provide solutions in the event an incident
does occur. For example, companies should consider whether they
are carrying additional limits (excess coverage) above their primary
automotive policies. An oil- and gas-related auto claim can exhaust
primary limits and extend into an excess layer of coverage.
Operators and contractors also should institute rigorous inspection programs with written record keeping to note the frequency of
inspections, and have comprehensive equipment maintenance programs to help avoid breakdowns and potentially dangerous situations.
Access to spare or replacement parts for key machinery also
is recommended to limit possible business interruption. Proper
handling of equipment that may have been dormant for months
will be a critical component of managing costs. If equipment is
not well-maintained and regularly inspected, operators can lose
control easily, causing damage to other nearby equipment and injury to employees.
By working closely with their brokers and insurance carriers, oil
and gas companies can tap into a variety of resources, including risk
assessment services, best-practice guidance, and tools to make implementing training and safe procedures easier. One of our guiding principles is to make customers better for being associated with
us. Insurers should be committed to a dual obligation, and it is imperative they help make the oil and gas industry better.
❒

ERIC
BOQUIST

Eric Boquist is president of Travelers Oil & Gas. He has
more than 25 years of insurance industry experience. Boquist's
background includes managing a wide array of energy risks,
including U.S. and international exploration and production,
international power, and worldwide downstream risks. Travelers Oil & Gas provides specialized insurance for a diverse
range of customers of all sizes-including both onshore and
offshore operations-with a comprehensive focus on exploration and production, including customized products covering equipment, liability, property, and workers' compensation.
DECEMBER 2016 73

American Oil and Gas Reporter - December 2016

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