When Kitty Hawk’s newly hired director of risk management, Bob Buchanan, met with his insurer’s representative days after taking the job in 2003—and was bluntly told in no uncertain terms that his company was one of the worst risks the carrier covered for workers’ compensation—he knew he had his work cut out for him.
Taking the insurer’s assessment to heart, Mr. Buchanan launched a dramatic restructuring plan that would turn the company’s loss control and safety situation around in less than six months. His firm’s efforts earned Kitty Hawk an Honorable Mention in the inaugural National Underwriter “Award for Excellence in Workers’ Compensation Risk Management.”
Kitty Hawk—a publicly traded airline cargo holding company based in Dallas/Fort Worth, with subsidiary businesses in air and ground cargo transportation—does the type of work that would make most risk managers cringe. With over 940 employees, the firm transports about 150,000 pounds of diverse cargo a day—everything from plasma televisions to sharks and zoo animals, to jewelry and fine arts.
Kitty Hawk owns 100 forklifts and tugs—also known as pushback tractors, which steer planes into certain positions—along with other heavy machinery.
Thus, with such massive machinery and cargo, it would seem as if Kitty Hawk’s risks would be high. Yet, the only thing that has been on high is the company’s workers’ comp risk management performance, which has improved dramatically since its lowly days in 2003.
Upon Mr. Buchanan’s arrival in January 2003, Kitty Hawk’s premium was a bloated $1.23 million, with retrospective ratings of 100 percent minimum and 200 percent maximum. Kitty Hawk’s loss history exceeded $1 million on an annual basis. The company also had 44 open claims.
Mr. Buchanan identified a number of problems right off the bat, from something obvious (that prior to his hiring, the company lacked a risk manager to coordinate loss control and return-to-work efforts) to more subtle gaps (such as the fact that Kitty Hawk did not require pre-appointment physicals when hiring new employees to determine if they were fit for the physical labor involved in their jobs).
“We just didn’t do our job correctly,” said Mr. Buchanan. “[Our insurer] was clearly aggravated with our [risk] status when I met with them. But I told them I would be back in six months with changes that I would implement” to improve the firm’s risk profile.