This week I’m taking a break from posting my notes on the Jim Collins book Good to Great to share an idea I had yesterday. The idea is Do The Right Thing Insurance (DTRT for short). I came up with this while thinking of an accident I was involved in last year.
Last September I was asked to speak at a retreat. I was having lunch with the participants in the facility’s buffet hall when my chair collapsed from beneath me. I wish I could find a picture of the chair online so I could show it. Most folding chairs are designed so the seat rises as you fold the chair, but the ones at this establishment had a weird mechanism where you lift the seat a bit and then push down. The chair folds flat as the seat folds downwards.
When I was done with lunch I picked myself up slightly and pushed the chair back with my legs. The chair’s rubber feet caught on the rug, and instead of pushing the chair back it caused me to lose my balance. I fell into the chair and it started to lean backwards. I wanted to get my point of balance leaning forward again so I twisted my body. I grabbed the back of the chair with my right hand and leaned forward with my left shoulder. Or, I should say, that’s what I tried to do.
Instead, as I tilted back the front legs of the chair and my feet lifted off the ground, and by leaning forward I gave the chair enough of a move that the seat started to fold down. Suddenly I had zero support. The chair collapsed flat and I fell, straight down. Due to my position my right wrist took the brunt of my weight.
I’m a big guy, six feet tall and 230 pounds. My wrist hurt. The facility staff asked if I wanted ice but I declined. The pain went away after rubbing my wrist for a few minutes. I did decide to file a report with the establishment though – as I told the manager, if the same accident were to happen to an elderly person their fragile bones could’ve easily fractured or broken. I recalled this yesterday, wondering if they ever replaced the chairs.
I doubt it. There were at least 200 chairs in that dining room. Replacing them probably would’ve meant selling them for less than they bought them for, and maybe paying for shipping. They’d also have to buy new chairs and pay for them to be delivered. Added up this could’ve cost hundreds, maybe even over a thousand dollars. From the point of view of a CEO, that might not be worth the potential risk. After all, the organization surely has insurance to cover them in case a visitor falls and gets hurt. The deductible might be $1,000 or $2,000, and they might never pay that because an accident might never happen.
As a citizen, this strikes me as one of the downsides of capitalism. Every day companies make decisions that balance money versus risk, even life and death. Sometimes these decisions make the news. I thought, “Isn’t there some way we could make this better?” And so it came to me: Do The Right Thing insurance. Here’s how it would work:
A business will have their regular property liability coverage (say $100,000 with a $2000 deductible) to protect them in case someone gets hurt on their property. Then they can also buy a DTRT policy that covers $10,000 or $20,000 (with a deductible of $500). The DTRT policy would cover any expense that the business owner can show needs to be done to make their business safer. In the case above, they would be replacing poorly designed folding chairs that could cause a serious injury. (We would exclude regular maintenance costs, though. It’s not meant to cover the cost of fixing the brakes on your company car.)
Insurance companies will save money because it’s better to pay $10,000 to help a company become safer instead of paying a $100,000 claim for medical bills and legal fees. Businesses would save money by paying a smaller deductible – small enough that it’s in the company’s best interest to spend that money – as well as knowing that they’re making their company safer. Hurting your customers is bad for business. Conversely, showing that you care about your customers can be good for business. Also, rather than typical coverages where claims will raise your rates, filing a claim on this kind of coverage could be used to trigger a more complex algorithm. Excessive claims could cause your rates to go up, but responsible use of the policy could trigger discounts on other coverages – because your business will be safer.
There’s been a lot of talk in the media lately about how expensive medical costs are in the USA. The best way to bring down your exposure to medical costs is to not get hurt in the first place. DTRT coverage could be a very useful product by combining the invisible hand of the market with achieving things our society actually wants.