American Oil and Gas Reporter - December 2015 - 81

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SpecialReport: Insurance Update
experienced employees.
A far as injury trends, we find that the
nature of the accidents hasn't changed very
much. We continue to see vehicle accidents as the leading cause of loss, followed
closely by the manual handling of materials.
Most observers of the workers' compensation industry expect pricing to trend
downward over the next 12-24 months.
There are two principle driving forces in
play. First, the underlying loss costs approved by regulators are trending down,
following several years of improving loss
frequency and moderating medical cost inflation. Since these loss costs are the building blocks of premium rates, lower loss
costs will mean lower rates.
Second, the contraction of the workforce coincides with an increase of available capital in the workers' comp industry. It is a straightforward case of excess
supply and limited demand.
Partially offsetting these downward
pressures are two factors. First, insurance
companies are very dependent on investment income. Low interest rates put pressure on carriers' financial resources. Second, underwriters may be hesitant to
write policies in a sector of the economy
that is experiencing reduced employment, fearing an increase in claims duration as in the recent recession.

Q: By the nature of its operations, the

location of its work sites, and the numbers
of contracting parties on site, the oil and
gas industry presents unique insurance
risks. How are workers' comp risk profiles
changing? What specific industry activities present the highest general risks? How
do relatively new practices such as multiwell pad drilling and completion impact
the risk profile?

LAGNEAUX: In order to be competitive and remain a preferred vendor with
an acceptable experience modifier for
operators, service companies have put
more emphasis on training their workers
and changing their safety cultures to increase employee involvement and ownership in the safety process. Supervisors
must be better trained to recognize at-risk
behaviors that can cause accidents, and be
held more accountable for the results at the
crew level. Companies should allocate
more in their budgets for safety training
and give safety directors more decisionmaking authority.

While all this is positive, accidents still
happen. We often find that accidents
happen when employees are performing
tasks that bring them out of their "comfort
zone." An example would be rigging
down and up, and moving the equipment.
Multiwell pad drilling not only makes
the operator more efficient by reducing
many costs associated with drilling, but
also reduces the exposures found in rigging down and moving. Employee
turnover is decreased as roughnecks often
decline to follow a rig to a new location
when distance is an issue. Service companies can perform the well site work with
fewer employees, since they are not as
spread out.

The service sector certainly is feeling the impact of low oil prices. What advice would you offer service companies
with regard to their workers' comp programs in the prevailing business environment? What can the operator and his allied service companies do both individually and collectively to optimize safety on
the well site?

LAGNEAUX: As service companies
struggle to remain profitable, it is inevitable that cost containment becomes a
priority. Unfortunately, companies that
choose to cut their safety budgets will pay
heavily for that decision down the road.
My advice would be to recognize safety
as an inherent value and cost saver rather
than an expense.
Any downtime should be used to provide refresher training and equipment inspections. Companies should make sure
their decision makers are visibly supporting their safety efforts so that all employees understand their importance. Any incentive program should be structured to
prevent accidents and their causes from being purposely unreported in order to win
a prize.

The influx of new hires into the industry obviously has slowed in step with
activity levels, but U.S. Department of Labor statistics show that oil and gas employment expanded by 40 percent between
2005 and 2015. What do the data indicate
about the correlation between workers'
comp claims and employee experience?
How can companies ensure that new
hires can perform their duties safely and
effectively?

LAGNEAUX: Our records clearly
show that new hires in their first year of
employment have more injuries that those
with more tenure. In fact, most of the firstyear injuries occur in the first three
months of employment.
I think companies not only need to emphasize and review their new-hire orientation processes, but also should set up
"buddy systems" that pair new workers
with more experienced employees for
several months to ensure the new hires are
familiar with their job tasks and can perform them safely. Most accidents happen
because of at-risk behavior, rather than a
dangerous condition. Watching a safety
film and being released unsupervised to
perform dangerous work is clearly not
enough.

Safety &
Competency Training

BILL MAHLER
Wild Well Control

Q: The industry has put forth consid-

erable effort to develop and standardize
rig and well site safety training programs. What major lessons have been
learned through this process, and what are
the trends and challenges in equipping the
next generation of oil and gas operating
personnel with the knowledge and skills
they need to safely handle situations encountered in the field?

MAHLER: All of us together are
smarter than one of us alone. By creating a synergy of thought, concept, practice, protocol and training, the industry
is working diligently to develop a more
comprehensive training matrix that produces a student who is better prepared
and skilled to resolve a well control problem.
The new and improved WellSHARP™
well control certification program from the
International Association of Drilling Contractors is an example of the efforts being
made to enhance the learning/training
experience. In addition to educating students, the goal is more importantly to gain
proficiency in job skills as they relate to
well control and other safety aspects at the
well site.
DECEMBER 2015 81

American Oil and Gas Reporter - December 2015

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