WHEN EXAMINING risks in the world around us, a seemingly unlikely cause for alarm is the local retail establishment. Going shopping is hardly perceived as a dangerous activity - by customers at least. Retail risk managers, however, can name a plethora of reasons why the opposite can be true. Slips and falls in the aisles, incorrectly stored merchandise, hurricanes, riots and even overzealous security guards are all dangers in retail risk management, a topic discussed at a recent College of Insurance seminar.
The retail environment is undergoing radical change; gone are the days of corner stores and even single outlet stores. The retail industry today comprises the superstore or conglomerate with many outlets in many countries. The fact that so many customers enter the store every day creates a huge liability. Since retail is a people-oriented and customer-service driven industry, not only must the customer always be right, but he or she must also be safe.
Retail risk managers must ensure not only the basic safety of stores, but also that all stores and outlets are in compliance with the Americans with Disabilities Act, that security personnel are trained in how to handle suspected shoplifters, and that the customers and employees are not in any danger in the event of a disaster. Of course, more so than any other industry, retail establishments must remain open - and selling - even when faced with a disaster.
Because of the large number of claims, some retailers have opted to self-insure. Bruce Hackerr, director of risk management for Toys "R" Us, noted that his company is somewhat unique in the retail industry in that it handles general liability claims inhouse. "We decided about six years ago that we could probably do a better job than the insurance companies with the type of claims we were experiencing in our stores." In his experience, insurers tended to focus on claims over $5,000, rather than on the smaller claims that could often be easily settled, noted Mr. Hackett. "We started with some of the property damage claims and grew to the point where we now have a significant self-insured primary layer," he said.
The emphasis - and in fact the key to the success - of this program is found in the immediate contact with the customer, which helps maintain control of the claim. The store where the incident occurred must notify the corporate risk management department by E-mail within 48 hours after an incident, and within 24 hours the risk management department then notifies the customer by telephone. Prompt personal contact develops good customer relations and shows concern. In addition, when the customer hears a Toys "R" Us representative on the phone, he or she is likely to be willing to settle for a smaller amount - often in the form of a gift certificate rather than cash - as opposed to the raised expectations that can develop when a customer hears an insurer on the line, said Mr. Hackett.
The company has a PC-LAN system to handle claims automatically, which has increased productivity. Conservative estimates indicate that "the company is saving approximately $500,000 per year by handling general liability claims in-house," said Mr. Hackett. The company has also set up its own code system for the stores, which is more exact than the codes for general liability used by insurance companies. These codes help identify variables such as where in the store an accident happened. Of approximately 10,000 incidents involving customers last year, most occurred in U.S. stores and only about 1,000 were paid.
Workers' Compensation Woes
IN ADDITION TO customer claims, there is also the problem of dealing with the workers' compensation system. Retail has a unique problem in that employee turnover is incredibly high - seasonal staff, students and those in-between career jobs are not likely to stick around long enough to learn extensive safety rules. Training must therefore be kept simple and based on common sense. …