Lockton serves several large food processing firms. Processors are facing an extraordinary profit squeeze from rising grain and raw material prices and intense price competition.

A client asked Lockton to review its product recall and contamination insurance program which was handled by another broker. The company’s wanted to maintain price stability.

So Lockton’s global team—with members based in London, Kansas City and Atlanta—conducted an audit of the existing program, held intensive discussions with insurance carriers worldwide and developed a unique approach.

Our client generated big benefits from Lockton's work:

     • Despite the company’s revenue growth, the program was secured with a 14% price reduction (“apples to apples” comparison)

     • Secured an program alternative that removed the potential cost of a multi-million dollar “large loss surcharge” following a recall

     • Identified and developed new market capacity for product recall to reduce reliance on a single carrier

FM Global submitted a recommendation that a fire-alarm system be installed throughout a multi-building, five-acre food-processing site. The system, as required by FM, would have cost the client over $65,000.

Lockton’s involvement was to review the client’s process and the FM recommendation and determine what measures should be taken. After our review of the process, we identified one critical area that housed finished goods. All other areas had minimal fire loading and were wet-vegetable processing.

Lockton negotiated the recommendation with FM to install a single horn system in the finished goods area at a cost of $5,000. FM found the alternative acceptable, and we saved the client $60,000.

We assisted a major food processing and distribution client in establishing a “Best Practices” Safety and Loss Control program utilizing the best of what each of the regions had in place along with our own additions. This client recently made a very large acquisition and it was determined that the average worker’s compensation claim cost of our client was 20+% below that of the acquired company, which equated to several million dollars.

During a furnace repair, asbestos dust was released into our insured’s baking plant. State and Local officials intervened, the plant was closed, and a recall was ordered. As a result, the insured estimated damages to be approximately $5 million dollars for loss of product and production. The carrier denied coverage and refused to make any contribution to the loss.

After attempting to negotiate with the carrier, we conducted our own legal research. With limited assistance from outside counsel, and the client’s corporate attorney, we drafted a strong coverage letter, outlining possible coverage. As a result of our position letter, the carrier made a substantial contribution to the loss and the client was able to recover their losses.

A national food processing company faced challenges with an upcoming plant closing. Prior to Lockton’s involvement, the company experienced a negative financial impact while shutting down a California plant, when 100% of workers filed workers’ compensation claims. Lockton Loss Control developed and implemented a Risk Control Service Plan for the second California closing. Through upfront research of local jurisdiction, unemployment statistics and job placement resources Lockton created a detailed plan. The plan integrated resources from the community, plant management, corporate finance, human resources claims and safety. Before Lockton’s involvement, the client projected that 50% of the plants 560 employees would file claims. By adopting Lockton’s plan, the company announced the shutdown in mid 2006 and only 3 claims have been filed as of October 2007 totaling $31,800. The original projected loss was $3.7 million to $7 million dollars.

One of the world’s largest marketers and distributors of dairy products struggled with the changing economy and an ineffective benefit program. The program, which was experiencing spiraling costs, suffered from a decentralized administration and a lack of communication with employees. The program was expensive and the employee’s did not understand what was available to them, which devalued the program. Lockton helped restructure the administrative side of the program, using a more centralized approach. Lockton also built a national road show with employees to better explain what was available to them. A new carrier was also found, resulting in a savings of more than $3 million dollars for 2009. The new plan and initiatives put in place have garnered high praise from both management and employees alike.

Lockton has served a nationally recognized food company for several years now, and has helped the client through many changes.  In 2003, after the company was sold to a private equity firm, Lockton attacked a massive backlog of workers’ compensation claims, closing more than 200 open claims.  In the process, about $4.5 million was freed up for the client.  The client was sold to another private equity firm a few years later, which saw the company scale back its operations.  Lockton helped them through a staff downsizing, showing the company how to properly handle exit interviews.  This training kept fraudulent workers’ compensation claims to a minimum.  In addition, Lockton’s assistance during the past several years has seen a $530,000 reduction in a letter of credit for the client.  The client’s total cost of risk for 2007-2008 dropped more than $2 million from 2005-2006.

 A Fortune 200 consumer goods company contacted the two largest publicly-held brokers for a required collateral estimate as part of a plan renewal. When the brokers presented estimates of $70 and $65 million increases, the company sought an opinion from Lockton. Unlike the other two brokers, Lockton used the company’s past loss data as the primary diagnostic, and made an initial estimate of a $10 million increase. After being given the broker of record and, thus, being privy to even more of the company’s information and documents, Lockton secured a $5 million collateral increase for the company.

A large food processor and distributor faced lending restrictions that prevented it from using certain assets in its captive. After renewing the lender’s contract, Lockton investigated ways to put the assets to work. The bank agreed to Lockton’s proposal, but with a high lender’s fee and a letter of credit for far less than the assets’ face value. Lockton identified an alternative bank with a much lower lender’s fee and a letter of credit much closer to the assets’ value. This maximized the company’s borrowing capacity by $61 million while lowering its annual lender’s fees by $2.2 million.

One of the leading producers and distributors of fresh-shell eggs in the United States lacked competitive pricing with its longtime broker's insurance carriers and faced high risks with its primary asset – egg production. Lockton’s experienced agriculture team collected volumes of data on the company’s properties and performed wind-risk modeling to prepare a detailed risk analysis. By aggressively marketing the company’s program, Lockton expanded its limits by $5 million per occurrence, reduced its premium by more than $150,000, cut deductibles by 50 percent and broadened the program’s terms, conditions and sublimits.

A Fortune 500 food distributor faced a spike in auto liability claims after three losses exceeding $5 million during a 10-year period. This caused the carrier to seek an increase in collateral. One actuary estimated a $40-50 million increase in collateral compared to previous estimates. Unsatisfied with the result, the company, with additional Lockton support and input, partnered with an actuary who had a better understanding of their risk profile and saw the opportunity for a decrease in collateral. At the time of renewal, the carrier’s actuary requested an increase of $20 million in collateral, despite Lockton and company actuaries seeing a need for a $3-5 million decrease. Lockton facilitated negotiations among the three parties, which led to the decision of no additional collateral needing to be posted.

Lockton helped a major consumer products manufacturer and marketer properly re-set its claims reserves when the company thought it was over-reserving its excess casualty program. The existing broker served simultaneously as a consulting actuary, and the company faced a balance sheet with a large liability. Lockton’s Risk Management Analytics Team’s reserve reviews confirmed millions in surplus reserves. Following an audit and negotiations, the client released $8 million in reserve surplus to the bottom line.

Bolthouse Farms needed an independent review of alternatives for their employee benefits program. Lockton provided the insight and tools needed to restructure their program. Lockton used predictive modeling tools to estimate appropriate stop loss levels, saving the company $373,000. A pharmacy study and RFP was conducted, amounting to a savings of $90,000 within the first year. Lockton's support of Bolthouse provides vast resources and insight that continues to benefit the company and provide savings.