Ninety-Five Percent of Organizations Increase or Maintain Loss Control Spending
Disaster Preparedness and Catastrophe Management Experience Largest Growth, Survey Finds
HONOLULU, April 25, 2006 - Spending for loss control services increased or remained flat for a vast majority of organizations in the past year, and
the greatest spending increases were in areas such as disaster preparedness and catastrophe management. These are among the
major findings of Chubb's 2006 Loss Control Spending Survey released today by the Chubb Group of Insurance Companies at the Risk & Insurance Management Society's annual conference.
More than a half (52%) of the survey respondents indicated that loss control spending remained the same in the past year,
and 43% said spending increased. Five percent said spending decreased. Overall, spending for loss control services rose an
average of 7% in the past year.
The survey results are in line with the findings of a similar survey that Chubb conducted in 2003. The 2003 survey indicated
that 53% of organizations increased their loss control spending in the prior year, and 41% kept flat loss control budgets.
"It is noteworthy that after years of overall budget cutting, most organizations continue to increase or maintain funding
for loss control services," said Steven D. Hernandez, senior vice president of Chubb & Son and worldwide loss control services
manager for Chubb Commercial Insurance. "Most organizations apparently share Chubb's view that loss control methodologies,
when properly implemented, can be effective in reducing the frequency and severity of losses."
The areas that most often experienced increased loss control spending were disaster preparedness planning (59%), catastrophe
management (51%), security (47%), corporate governance (47%) and business continuation services (46%). Areas in which loss
control spending remained mostly flat included employment practices liability (83%), product liability (79%) and workers compensation
(61%).
This continues a trend noted in the 2003 survey, when it appeared that many organizations were shifting funds away from traditional
areas of loss control and toward emerging loss control risks. "Organizations need to strike a balance between what has happened
in the past with what may emerge in the future," Hernandez said. "They should be careful not to neglect traditional areas
such as workers compensation and product liability, which represent significant long-term exposures."
The threat of natural disasters was cited by 15% of the respondents as a reason for changing their loss control spending in
the past year. In 2003, nearly a quarter (24%) cited the threat of terrorism as a factor; this year, 5% cited terrorism.
"Many organizations have adopted a reactionary attitude when it comes to loss control spending. This is apparent in the increased
spending for disaster preparedness and catastrophe management, which, based on the impact of hurricanes Katrina, Rita and
Wilma and predictions for a severe hurricane season in 2006, was anticipated," Hernandez said. "In 2003, risk managers were
implementing loss control strategies in the wake of the 9-11 terrorist attacks, so security and disaster preparedness were
at the top of their agendas."
In addition, 17% cited legal/regulatory compliance as a factor for changing loss control spending in the past year, which
may explain why 47% of those surveyed increased spending for loss control services related to corporate governance. "It's
clear that Sarbanes-Oxley and recent corporate scandals are having an impact on how organizations budget their loss control
funds," Hernandez said.
"Together, the 2003 and 2006 surveys highlight the challenges faced by risk managers-compounding risks with increased complexity,"
Hernandez said. "The primary goal for organizations today should be to balance the myriad critical risks facing them."
Chubb's survey was conducted over the Internet in April 2006. More than 125 risk management professionals, primarily from
the United States, responded to the survey. The respondents answered 29 multi-part questions. Respondents represented both
publicly and privately held companies in all types of industries, government institutions and nonprofit organizations.
Chubb Commercial Insurance's Loss Control Services provides loss prevention and premium audit services to more than 100,000
customers annually. With more than 400 risk engineers around the world, Loss Control Services offers Chubb customers specialized
assistance in disaster planning; fire prevention, detection and suppression; employee health and safety; security; preventive-maintenance
planning; and asset protection.
The member insurers of the Chubb Group of Insurance Companies form a multi-billion dollar organization providing property
and casualty insurance for personal and commercial customers worldwide through 8,000 independent agents and brokers. Chubb's
global network includes branches and affiliates in North America, Europe, Latin America, Asia and Australia.
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