The Property Risk Insurance Specialist (PRIS) designation is an intensive, three-day program covering all areas of commercial property insurance. Completion of this program positions you to be the property insurance expert for your clients; gives you the confidence to go after more complex accounts; and the PRIS indicates a commitment to excellence lacking among your competition.

Unlike other Academy of Insurance courses, this is a live class being held at the Tempe Mission Palms Hotel in Tempe, Arizona. The class begins on January 25, 2012 and runs through January 28, 2012. The class is not being recorded, so don’t miss the opportunity to gain some amazing insight and knowledge.

The usual investment for this course is $1,995, but for the next four days this PRIS class is being offered at a very special price - $997.50. This is a 50% savings for those who register before midnight on January 10, 2012.

You do not want to miss this opportunity to reserve your spot in this class at such an incredible discount. Go to http://www.ijacademy.com/property-risk-insurance-specialist-pris-course to find more information and register for this class.

We look forward to seeing you in Tempe.
 

Following is a list of gifts for the insurance professional (got it right that time) in your office. These gifts are guaranteed to be cherished and used by the receiver long after all other gifts are forgotten.

10.   Insurance book, “Wow! I Never Knew That! 12 of the Most Misunderstood and Misused P&C Insurance Coverages, Concepts and Exclusions”

9.     On-demand Webinar: “Preparing Your Clients for Vacation” 

8.     On-demand Webinar: “How to Read and Understand ANY Insurance Policy” 

7.     Insurance book: “The Insurance Professionals’ Practical Guide to Workers’ Compensation: From History through Audit – 2^nd Edition” 

6.     Executive training class for agency owners by Chris Burand

5.     Five-part on-demand Webinar series: “Business Income: It’s Easier than You Think”

4.     Insurance book: “Business Income Insurance Demystified: The Simplified Guide to Time Element Coverages” 

3.     On-demand Webinar: “7 Steps Towards Avoiding Bad Carrier Contracts” 

2.     Insurance book: “Insurance is NOT Risk Management: The Insurance Professional’s Guide to Risk Management and Insurance”

1.    Insurance book: “Property and Casualty Insurance Concepts Simplified: The Ultimate ‘How to’ Guide for Agents, Brokers, Underwriters and Adjusters"

Participants in the PRIS designation program learn the proper methods for insuring complex property accounts. Coverage, including the nuances of the policy language, is outlined in far more detail than in any other property-specific program taught today. In addition to in-depth coverage training, common service issues and their solutions are presented and discussed, as are the proper methods of managing the inevitable losses associated with difficult and challenging property exposures.

Following are some of the most frequently asked questions regarding the PRIS program and class.

How much experience do I need to take the class?

Whether you have been working in Property Insurance Management for many years or just started, this class will increase your knowledge and provide practical applications to use right away. 

Are there any prerequisite requirements for this course?

No. There are no prerequisites for this course, nor any advance preparation.

Who should attend this program?

Agents, brokers, underwriters, risk managers, insurance buyers, and others benefit from the program.

Can I use the Insurance Partners Academy logo and place PRIS after my name?

Yes, this program was designed to give recognition to a serious study and showcase the time and effort you have committed to becoming a Property Risk expert. 

Is there an exam?

Final passing of the course requires full attendance, participation in the course activities and successful completion of a case study. The case study must be completed within four weeks of attendance at the course.  You will receive your certificate after submission of the case study.

What is required to maintain my certification?

Presently there is no recertification required. However, several courses and studies will be strongly recommended to continue to deepen your knowledge and skill level in the Property Risk area.

Can I just do the case study without attending class?

No.  The interaction and discussion with colleagues is an important part to understanding the whole picture.

Can I purchase the course material without taking the class?

Can I just come for part of the program?

The course is designed to be taken in order.  The various components are interactive, dynamic and reciprocal.  Understanding one aspect has impact on the others making the learning experience more valuable.

Is the course filed for Continuing Education credits?

Yes, See Below

Insurance Licensing:

We are filed and approved for 15 credits in Michigan, Indiana, Ohio, Tennessee, Kentucky, Pennsylvania, Missouri, and Minnesota.  We will consider filing in other states if we have enough participants in that state and adequate time to complete the filings.

Real Estate Brokers:

We are filed and approved for 20 hours in Michigan.  We will consider filing in other states if we have enough participants in that state and adequate time to complete the filings.

NASBA (National Association of State Boards of Accountancy):

We are approved with the NASBA under the Management Advisory Services – Risk Management field of study for 25.5 credits.

Is this a “National course”?

Yes, certain general principles apply universally; however, we address many state specific issues.  We will emphasize the issues relative to the states represented in the class. 

What is the dress for the class?

Dress is business casual. 

What else should I know about the program?

• Overnight accommodations are not included in the seminar fee
  
• Continental breakfast and lunch are included in the course fee
• Enrollment is limited to 35 participants

Register today to reserve your space at this cutting-edge property program. For more information on the topics covered in this three-day program, click here.

• The Players
• Property Insurance Realities 
• Maureen’s Musts
• How to read a Property Policy
• Overview of the ISO Policy and Key Issues

• Valuing Property
• Excess Limits
• Priority of Payments
• Subscription Policies

• Outdoor Fixture Problems
• 100’ of the Describe Premises Issues
• Excluded Property you WANT Insured
• Margin Clause
• Vacancy Provision
• Blanket Named Insured
• ISO RCP Code and Sprinkler Reports
• Pair and Set Problems

• Errors and Omissions
• Utility Service Interruption
• Debris Removal
• Ordinance or Law
• Equipment Breakdown
• Leasehold Interest Coverage
• Ingress & Egress
• Civil Authority
• Environmental Coverage
• Earthquake
• Collapse

• How to Choose a Deductible
• Deductible Application with Sub-Limits
• Deductible Buy-Downs

• What is it?
• Typical Features
• How to Arrange
• When you Need One
• Layered DIC

• ISO Mandatory Water Exclusion Endorsement
• Sewer Back-Up or Overflow Issues
• SFHA Issues
• Flood Mapping
• NFIP  Overview

• What are They?
• Key Coverage Features

• The Need for Inland Marine
• Non-filed Coverage Lines
• Filed Coverage Lines
• Selecting Limits
• What is Written under Inland Marine

• Non-admitted Issues
• Premium Rates and Taxes
• State Control
• Global Insurers
• Arranging Coverage Overseas

• Advantages of HPR Treatment
• Possible Disadvantages

• Four Key Business Income Concepts
• Defining and Calculating the Period of Restoration
• Business Income Coinsurance – Don’t Let it Scare You

• Two Main Questions to Correctly Construct Condominium Property Coverage
• Three Levels of Associational Responsibility
• Four Real Property Definitions Relevant to Condominium Property Coverage
• Defined Levels of Associational Responsibility
• How the Flood Policy Relates to the Condominium Risk
• Statutes and Coverage Responsibility
• Values Assignable to Condominium Property
• The Information Required to Provide Proper Protection for the Association and the Unit Owner

• What does it take to insure Contractor’s Property?
• Builders Risk Policies
• Installation Floaters
• Contractors Equipment Floaters

• Property Risk Management
• Service Issues
• Lease Problems
• Lenders
• Certificate of Insurance / Evidence of Property Insurance
• Golden Triangle of Success
• Give to Get – The Economics of Reciprocity and Fairness
• Being of Service
• Top Performer Summary
• How to break down an account to determine your real opportunity
• Presentations
• Powerful Proposals
• Submissions
• Presenting Coverage not Currently Purchased
• Success Factors

When the potentially liable parties are mutual beneficiaries and users/occupiers of the same location, the need for each party to be properly insured is of paramount importance. Residential condominium associations and individual unit owners are prime examples of this need to close all gaps in liability protection.

Essentially there are three legal liability possibilities following bodily injury or property damage at a residential condominium property. Legal liability is placed on: 1) the condominium association; 2) the unit owner; or 3) jointly on the association and the unit owner.

When legal liability is assigned to only one party, whether it be the association or the unit owner, defining coverage is easy. The cost of the bodily injury or property damage is covered, subject to policy limits, by the at-fault party’s insurance policy:

• The association’s commercial general liability (CGL) coverage pays if the association is found to be solely negligent; or
• The unit owner’s HO-6 pays if legal liability is solely placed on the owner.

The unit owner’s liability coverage (most commonly provided by the HO-6) is generally first dollar protection. Likewise, the association’s CGL may be written providing first dollar protection; however, many associations utilize a deductible or self-insured retention (SIR). If the association’s deductible is high, or there are several liability claims against the association, the unit owner(s) may suffer an out-of-pocket expense because of the association’s decision to use a deductible or SIR.

Unit Owner Assessments

When the association is subject to a deductible or SIR, it generally collects the resulting out-of-pocket expense by assessing all the unit owners a share of the deductible/SIR (however such division is calculated). The unendorsed HO-6 provides the insured with $1,000 for such assessment with two main requirements: 1) the loss must be one that would have been covered under the HO-6; and 2) $1,000 is all the policy will pay for assessment in aggregate (regardless of the number of assessments for losses occurring during that policy period).

Obviously, the association’s choice of a deductible/SIR can be detrimental to the unit owner. But, the unit owner does have the opportunity to increase the coverage for assessment by purchase of the HO 04 35 (Supplemental Loss Assessment Coverage). However, the attachment of this endorsement may not solve the unit owner’s deductible/SIR assessment problem – depending on the endorsement’s edition date approved and used in the unit owner’s state.

Attaching Insurance Services Office’s (ISO’s) HO 04 35 allows the insured unit owner to incrementally increase the loss assessment limit up to $50,000 (relatively inexpensively). But the limit of coverage for an assessment related to the association’s use of a deductible/SIR has been historically limited to $1,000 – even when the HO 04 35 endorsement was attached. This limitation was removed in ISO’s 05/11 edition of the endorsement. The HO 04 35 05 11 extends the full amount of loss assessment coverage purchased to all assessments, including those resulting from the association’s use of a deductible/SIR.

However, the new endorsement may not yet be approved in the insured unit owner’s state (and may not be for some time), or the insurance carrier providing coverage may not be using the new wording (depending on the rules of the state). Agents cannot make assumptions, the insured’s policy must be reviewed to confirm which loss assessment wording is in use or available. The difference between the old and new endorsement language can mean hundreds or even thousands of dollars to the properly insured unit owner’s bank account.

Joint Liability

If both the association and unit owner are held jointly liable for the injury or damage, court involvement will likely be required. The first problem to be addressed is the amount of liability assignable to each party. Once liability has been assigned, the second question to be considered is - what happens when liability limits differ (which they most likely will)?

Both questions can and might be governed by the legal concept of joint-and-several liability, along with how each state applies this concept. Losses are shared equally or unequally among tortfeasors based on the facts of the case, each tortfeasor’s level of “fault,” and statute. The concept of joint-and-several liability is designed to assure that the victim is fully compensation for their injury or loss.

Joint means that any one tortfeasor can be held responsible for the entire amount (each tortfeasor is responsible for all others). Several means that each is responsible only for its share of the fault. Each state applies the joint-and-several liability differently:

·         9 states apply pure joint-and-several laws: Each defendant is responsible for the entire amount regardless of its amount of fault;

·         27 states utilize modified joint-and-several laws: One specific tortfeasor is potentially responsible for the entire only if they are judged at-fault beyond a specific level or amount. Additionally some of these states bar recovery if the injured party is found to be a certain percentage liable; and

·         14 states employ pure several laws: Each party shares the financial consequences based on its amount of fault. 

Generally there is a wide gap between the association’s CGL limits and the unit owner’s HO-6 liability limits; maybe as much as $900,000 ($1 million in the CGL vs. $100,000 in the HO-6). Because of this gap, the association may be called upon to cover more than their share of damages in pure and modified joint-and-several liability states. To avoid this potential gap, the association may decide to require each unit owner to carry relatively high limits of liability coverage (maybe even an umbrella).

Many state laws related to condominium ownership prevent an association from subrogating against the unit owner if the unit owner’s negligence leads to a liability loss. Again, this could be very costly for the association from an insurance perspective; and it’s even more costly if the association does not have enough protection to cover the cost of the injury or damage.

Deciding Which Party is Legally Liable

Disclaimer: This section shall not and cannot be construed as legal advice. Any ruling of negligence and legal liability must be made in a court of competent jurisdiction. The following is simply a guideline that may be useful in determining which party and therefore policy may be called upon to cover the cost of injury or damage suffered by a third party.

Where did the Injury/Damage Occur?

Arriving at the more correct answer to the question, which party (the association or the unit owner) may be ultimately responsible for paying the cost of injury or damage suffered by a third party, first requires the answer to this question. Knowing where the injury occurred provides clues as to who is most likely going to be held financially responsible.

Like analysis of the property coverage, analysis of the liability coverage requires knowledge of and a deep understanding of three definitions: common elements, limited common elements, and unit property. The definition of each indicates which party (the association or the unit owner) is responsible for the care and upkeep of the property; and also who is responsible for any injury or damage suffered on the property.

·         Common elements are owned by and benefit, to some extent, all members of the association. Land (including trees, shrubs, plants, etc.), parking lots, association roads, and the building’s structural foundations and load-bearing walls are examples of common elements. Also included in this definition are club houses, pool houses, pools, fences, gates, playground equipment, tennis courts, and other property owned by and allocated to all unit owners.

·         Limited common elements are beneficial to more than one but fewer than all unit owners. Common hallways or corridors providing access to several units, walls and columns containing electrical wiring or sprinkler piping serving or protecting multiple units, or a plenum enclosure providing heating and cooling to multiple units are examples. Doorsteps, stoops, decks, porches, balconies, patios, exterior doors and windows, or other fixtures designed to serve a single unit but located outside the unit's boundaries are often categorized as limited common elements because the appearance and safety of these fixtures directly affects multiple unit owners although connected to just one unit.  

·         Unit property is defined by the association’s declarations or statute and is limited to and benefits only the unit owner. The inside of the exterior walls, interior partition walls, counter tops, cabinetry, plumbing fixtures, appliances, and any other real property confined to the unit are examples. The definition of unit property can vary widely with no universal designation.

Injury or Damage on or Caused by a ‘Common Element’

Because a common element benefits all unit owners, the association is nearly always going to be ultimately responsible for covering the cost of any bodily injury or property damage that occurs on a common element. This is true even if a unit owner in some way contributed to the injury or damage.

When written correctly, and depending on the state, condominium liability policies generally include unit owners as insureds or name them as additional insureds using the CG 20 04 (Additional Insured – Condominium Unit Owners). This endorsement grants all unit owners additional insured status for liability arising out of any portion of the premises not reserved for the unit owner’s exclusive use or occupancy. This means that the unit owner is an insured for any injury or damage on or caused by a common element. Further, as an insured, the insurance carrier cannot seek recovery from the unit owner if he/she is somehow responsible for causing the injury or damage on the common element.

Injury or Damage on or Caused by a ‘Limited Common Element’

Assigning financial responsibility for an injury or accident occurring on a limited common element is a little more complicated. Largely, the rules that apply to common element apply to limited common elements (meaning the association will most commonly be held financially responsible); however, there are gray areas.

Of particular interest and problem are those defined limited common elements that benefit only one unit owner, such as stairs, stoops, balconies, decks, etc. Although these elements benefit one unit owner, often the association is responsible for the care and maintenance of these features.  Might there be joint negligence or liability assignable to both parties?

Picture a unit owner and his guests sitting on the deck enjoying the evening. They decide to move the party inside nearer the food. As one of the guests crosses the threshold from the deck into the unit he trips on “something” and breaks his arm in the fall. Which party will be held responsible?

The injury occurred leaving a limited common element and moving into unit property. Based on statute, the associations bylaws, and policy wording, who knows? Some situations may require court involvement.

As stated previously, most situations involving limited common elements will follow the rules for common elements. But some may end up in a court of competent jurisdiction to decide if one or both parties will be held responsible for the injury or damage.

Injury or Damage on or Caused by Unit Property

Like assigning responsibility for injuries that occur on or caused by common elements, it is pretty simple to assign financial responsibility for injury occurring within a unit or caused by unit property. The unit owner will be held responsible and his HO-6 will be called upon to pay for any injury or damage within the unit or caused by defined unit property.

Concluding Points

When working with a residential condominium association or the unit owner, each party’s potential legal liability must be considered, not just the property exposure. As detailed in this article, the agent must review certain key points when considering liability protection, such as:

• Where did the injury or damage occur?
• Coverage limits
  • Does the association require unit owners to carry relatively high limits of liability coverage?
  • How great is the difference between the association’s and unit owner’s liability limits?
• Does the unit owner carry additional loss assessment coverage? What version of the endorsement is being used?

How does the state in which the association is located apply the concept of joint and several liability?

How the Insured sees his house!

How the Agent describes it!

How the Underwriter imagines the house!

Bottom line, program business is good business. The right program offers the smallest agency an opportunity to be a “big” player. Technology is a great equalizer, creating a new landscape in program business – and you can be part of it!

• Loss of an eye – 100 pieces of eight (Spanish dollar);
• Loss of a finger – 100 pieces of eight;
• Loss of left arm – 500 pieces of eight;
• Loss of right arm – 600 pieces of eight;
• Loss of left leg – 400 pieces of eight; and
• Loss of right leg – 500 pieces of eight.

• Assumption of Risk: Proving negligence requires evidence that a duty of care is owed. When an employee assumes the risk of an inherently dangerous or recognizably potentially dangerous activity, the duty of care is lifted off the employer. With no required duty of care, there can be no negligence. Employees in hazardous occupations were believed to understand the hazards and assumed the risk of injury;
• Contributory Negligence: Doctrine of defense stating that if the injured person was even partially culpable in causing or aggravating his own injury he is barred from any recovery from the other party. This is an absolute defense; and
• Fellow Servant Rule: Defense against employer negligence asserting that an employee’s injury was caused by a fellow employee not by the acts of the employer. If proven, negligence was not asserted against the employer and recovery could be severely limited or barred.

• 1908 - President Taft signed the first viable workers’ compensation statute into law with the creation of the Federal Employers Liability Act designed to protect railroad workers involved in interstate commerce (the program is still in existence today);
• 1908-1909 – Various states set up commissions to study the merits and drawbacks of a social system of injured employee compensation. Overwhelmingly these commissions reported that business, industry and employees supported such a system (the basis of study was the German law);
• 1910 – Crystal Eastman compiled and penned “Work Accidents and the Law.” This document presented the problems inherent in the then-current system of negligence-based compensation in light of the cost to human capital. It also highlighted the benefits of a workers’ compensation program as preventative in nature (employer’s would be more willing to invest in safety if the cost of injury was ultimately on them). This work is credited with changing business’ and labor groups’ attitudes towards workers’ compensation and employee safety;
• 1911 – Triangle Waist Company fire (detailed above); and
• 1911 – “The Great Tradeoff” debate. Before any plan could move forward, an agreement between labor and industry had to be reached; both had to be willing to give up something for a workers’ compensation system to function properly. The employer agreed to pay medical bills and lost wages, regardless of fault; and the employee agreed to give up the right to sue.  

• Personal injury attorneys – bad. Insurance defense attorneys – good.
• Never argue with crazy people, especially those who know everything yet only have a limited view of the world. The problem is they don’t know they’re crazy or know-it-alls.
• Some people just hate and drip hatred from their tongue and keyboard - you can hear it in their voice and sense it when they type; not for any particular reason, just because they are miserable and think everyone should be subject to their feelings.
• Some people are just genuinely kind; wanting the best for everyone and proud of other's accomplishments.
• No insurance carrier is guaranteed to survive, even if they have are A-rated by Best.
• Insurance people who understand insurance no longer run the insurance business; lawyers, accounts and MBA’s with no line experience do.
• Only good lawyers realize they don’t know everything about the law.
• Only the best lawyers realize they don’t know much about insurance.
• Contracts, especially used in construction, have not kept pace with the changes in insurance coverage options.
• No one knows what “primary and non-contributory” really means, but everyone wants it.
• When the general contractor says, “You’re the only one who won’t provide us with that wording on the certificate;” the correct reply is, “I may be the only one who won’t, but I’m not the only one who can’t.”
• An insurance consultant is only good if they can combine risk control and better coverage with premium savings. If all they focus on is premium savings, they aren’t really that good.
• Someone who truly understands insurance can explain its concepts in simple language. The person with no idea how it works masks their ignorance with $10 words and legalese.
• There is ALWAYS more than one possible answer to a coverage question. One is just more correct than the others based on the particular situation.
• Only “newbies” know everything about insurance.
• “Newbies” don’t know what it is they don’t know. Worse, they don’t seem to care.
• The graveyard is full of irreplaceable people (producers, underwriters, consultants, etc.)
• Regardless of how much I know (or think I know) about insurance, there is always MUCH more to learn.
• When you stop learning, you stop improving.
• If it’s not in the manual, it ain’t gonna get written by the carrier.
• There is not a section in underwriting manuals titled, “Exceptions.”
• Ignorance and apathy are rampant in the insurance business. Ignorance can be fixed; apathy is fatal.
• Without insurance, our country does not and cannot enjoy the standard of living we do.
• If you are not fascinated by and passionate about insurance, do something else (please).
• Training and mentoring are lacking in the modern day insurance industry.
• One good storm can wipe out years of profits.
• Insurance is a business, not a charity.
• Insurance is not a commodity, necessary evil or “racket.” It’s necessary and highly individual.
• Fifty states, hundreds of courts, thousands of differing opinions and interpretations. You can be right in some states and wrong in others.
• States pay closer attention to their regulatory duties than does the Federal government.
• The last truly great generation of insurance professionals is nearing retirement.
• Clients rarely prize technical knowledge.
• I don't know everything; but then neither does anyone else.
• It doesn’t matter what the statistical chances are that something is going to happen, if it happens to my client it’s 100%.
• -It’s perfectly acceptable to say, “I don’t know.” As long as you follow it up with, “But I’ll find out and get right back to you.”
• It’s NEVER ok to guess at the answer to a coverage question.
• Knowingly putting false information on a Certificate of Insurance is an intentional act; E&O carriers will soon begin applying the exclusion that applies to such claims.
• In E&O cases, the one with the best documentation of irrefutable facts usually wins.
• No client has had a ticket or accident in the last three to five years. Well, until the MVR is pulled.
• Any client that searches you out probably has problems you really don’t want to deal with.
• Truly good risks/clients must be hunted down.
• Don’t ever give quotes over the phone.
• Thoroughly qualified prospects are best. I don’t need practice filling out applications.
• The best client is the one who has experienced a loss. They don’t ever want to go through one again and will do what’s necessary to avoid it.
• Learn how to fire a client; and be willing to do it.
• If “stupidity” were an acceptable exclusion, few claims would ever be paid.
• Top line for vanity; bottom line for sanity.
• Begin with the exposures and build the coverage around them.

• “The Insurance Professional’s Practical Guide to Workers’ Compensation: From History through Audit;”
• “Business Income Insurance Demystified: The Simplified Guide to Time Element Coverages;” and
• “Property and Casualty Insurance Concepts Simplified: The Ultimate ‘How to’ Insurance Guide for Agents, Brokers, Underwriters and Adjusters.”

• “The Insurance Professionals’ Practical Guide to Workers’ Compensation” - #27
• “Business Income Insurance Demystified” - #56
• “Property and Casualty Insurance Concepts Simplified” - #58

Keep in mind – this is also an opportunity to politely (very politely) and in fun “roast” the other professions in the industry. In short, let’s show people that insurance professionals can actually have a little bit of fun and have a sense of humor.

Now this is obviously going to require your involvement. Provide your own opinion and send this list to others to provide their opinion. We would really like to get your thoughts.

Anyway, here is the list of “jobs;” tell us what each does (or provide an alternative name). But remember, be nice.

• Underwriter
• Actuary
• Claims Adjuster
• Marketing
• Loss Control
• Premium Auditors
• Agent
• Broker
• Risk Managers (including Consultants)
• Policy and Product Development
• Public Adjusters
• Attorney/Legal Counsel

We, and everyone else, look forward to your thoughts and opinions on each of these. Again, remember to play nice (or at least not be cruel).

1. Lloyd’s of London. Although the first informal gatherings of shippers and investors in 1688 were not intended to produce an insurance mechanism; Edward Lloyd’s coffeehouse on London’s Tower Street witnessed the first days of what has become the world’s best known insurance underwriting society. The first official committee of subscribers did not meet until 1771. The first 100 years of Lloyd’s were somewhat “unofficial,” operating on trust among the insureds and the underwriters. Lloyd’s of London is a pilgrimage site for all insurance geeks.

2. The Philadelphia Contributionship for the Insurance of Houses from Loss by Fire. Founded by Benjamin Franklin and several prominent business associates in 1752, The Contributorship, as it is now commonly called, was a proactive insurance carrier refusing to provide coverage to houses and other structures that were not constructed according to strict building standards. During the British occupation of Philadelphia in 1777, The Contributorship hired a chimney sweep to maintain the chimneys of insured houses that were still occupied. This was one of the first insurance carriers to enact loss control standards.

3. Workers’ Compensation. Prior to workers’ compensation laws, workers injured on the job had to seek recovery through the court system. To gain recovery, they had to prove their employer was negligent in causing the injury. Many did not have the funds to wage this fight leaving injured workers without income and somewhat destitute. America did not attempt to enjoin the workers' compensation social revolution in the early 1900s. Maryland (1902), Massachusetts (1908), Montana (1909) and New York (1910) each introduced workers’ compensation statutes. All four laws were struck down under constitutional challenge as violating "due process."

Wisconsin in May 1911 became the first state to effectuate an ongoing workers' compensation program that survived legal challenges. Nine more states adopted workers' compensation laws before the close of 1911. By the end of 1920, 42 states plus Alaska and Hawaii (even though statehood didn't come for either until 1959) enacted workers' compensation statutes. Mississippi was the last state to implement a workers' compensation statute, waiting until 1948.

(Taken from, “The Insurance Professional’s Practical Guide to Workers’ Compensation: From History through Audit”)

4. The New York Standard Fire Policy. This 165-line document became the basis for nearly all modern property insurance contracts and in many (approximately 26) states it is still attached or referenced in all property policies or statute. Although first adopted in 1918, any current mention of this policy is a reference to the 1943 edition.

5. National Flood Insurance Program. Federal flood insurance was proposed as early as the mid-to-late 1930’s, when private insurers ceased offering flood coverage; but it wasn’t until the National Flood Insurance Act of 1968 was signed into law that federal flood insurance became a reality in the form of the National Flood Insurance Program (NFIP). Although signed into law in 1968, necessary funding was not provided to carry out the mandates of the program until the early 1970’s. Although troubled by charges of inadequate or incorrect rating information and heavily subsidized rates, creation of the flood policy was an important milestone in insurance history.

6. Creation of Insurance Services Office (ISO) and American Association of Insurance Services (AAIS). Insurance Services Office (ISO) was founded and created in 1971 by a merger between the Mutual Insurance Rating Bureau and the Insurance Rating Bureau (known as the National Bureau of Casualty Underwriters until 1968). ISO provides statistical and actuarial services, rating information, claims data, standardized policy language and other relevant industry data. It has one of the largest databases in the world and by far the largest insurance-related databases.

American Association of Insurance Services (AAIS) was organized in 1975 as a multiline property/ casualty advisory organization and as a licensed statistical agent. AAIS is the successor organization of the former Transportation Insurance Rating Bureau, a Chicago-based inland marine rating bureau formed from the merger of two smaller bureaus founded in the 1930s. AAIS promulgates, files and maintains on behalf of its more than 600 member companies forms, rules and rating information for more than 20 lines of personal and commercial insurance.

These two organizations are largely responsible for the standardization enjoyed in the industry today. Although their forms and rates (loss costs) may be considered advisory, they are considered the standards on which proprietary forms and rates are based.

7. The Businessowners’ Policy (BOP). First introduced in 1976, this was the first time commercial risks were offered property and liability coverage in the same form without the need to piece-mill the parts together in a package.

Not much innovation has occurred within the standard insurance market since the mid-1970’s. Most of the changes since the introduction of the BOP have simply been updates to the coverages and forms currently available. There has been some innovation in captives, delivery systems and other minor areas, but nothing that has altered the way most agents do business or the business itself.

As mentioned in the first paragraph, this is one person’s opinion; if there are other modern insurance history milestones you feel should be considered as one of the top seven, please submit them. The list may be altered once all opinions are heard.
 

Today the influence of the internet continues to grow and transform the way we do business. Whether you work for a multi-billion-dollar international Insurance Company, or run a local, family-owned agency, your company's website competes for the attention of millions of potential customers each day. So if you're 'one of the little guys', how do you compete?

Smaller companies can compete by ensuring that their websites turn up when potential customers search for "local" listings. "Local web listings have grown into something far more important than just being in the yellow pages," said Chris Dixon Boggs, Director of Search Engine Optimization at Rosetta, a technology focused consulting firm. "Now that search engines like Google, Bing, and Yahoo incorporate local results into their main search engines' returns – not handling the way that your agencies are represented in local listings can mean hundreds and even thousands of lost potential leads."

Owners and web developers can take advantage of many tools to help their websites stand out locally, when relevant web-searches are conducted in the geographic location in which they do business. From local, online yellow-page listings to becoming listed on "Google Maps" to optimizing your website in order to rank higher in the organic search results, all of these help smaller companies compete on the crowded internet playing field.

Boggs, who is teaching an online class entitled, Making Sure Your Agency Gets a Local Web Listing, says, "this class is really for anyone that has a website that they hope people will come to in search of specific products that are locally searched for." The online class, offered by the Insurance Journal Academy of Insurance is scheduled for Wednesday, October 6^th at 1:30pm (Eastern) and will later also be available as a download.

The Insurance Journal Academy of Insurance, a division of Insurance Journal, provides specialized online training for the P/C insurance industry, in the form of live webinars and recorded, streaming, "on demand" classes. Classes are taught by leading experts in their fields and are grouped within one of five disciplines: Sales Training, Agency Management, Coverage Analysis, Human Resources and Executive Training.

Visit the Academy of Insurance website for a list of all upcoming live classes or for a list of the recorded streaming on demand classes also available.

When it becomes necessary to write a letter that talks about coverage, there are three guidelines (I hesitate to call them “rules”) to consider before, during and after the letter is written. Following are the three:

1. The reader does not know what you are thinking when you wrote the letter. Remember, a letter is not necessarily a conversation; it is a one-sided attempt to get the desired point across and answer unasked questions. The reader cannot ask you questions to gain clarity, this forces them to guess what you mean or possibly make incorrect assumptions. This is an easy trap to fall in because you know what you are thinking and what you mean; you must look at it from the receiver’s point of view because they are not present inside your head to hear your personal discussion or thought process. You must be explicit and clear in the explanations you put on paper. Assume the reader has never been part of the discussion and the letter is completely new territory.
    
2. Discuss insurance coverages and concepts in a manner that a reasonably intelligent non-insurance person will understand. Stay away from “insuranceeze” and “legalese;” using such language makes you look self-important. It can also indicate that you don’t understand the coverage or concept well enough to explain it in simple language. You might have to use the term, “subrogation,” but don’t stop there, explain its meaning. Your job here is to make new concepts familiar to the reader.
    
3. You must be willing to “let go” of what you have written and be willing to delete that which does not improve the message or comprehension of the concept. The hardest of the three guidelines to follow is this one. You may spend 10 minutes, 15 minutes or even an hour trying to get a paragraph just right; willingly deleting it is very hard. It feels like wasted time if it is not used. However, stubbornly holding on to a part of the letter that does not accomplish the overall goal of that letter is, well, childish. “I spent too much time writing that part, there is no way I’m not going to use it.” Never mind that leaving it in the letter might make a good letter a bad one. I heard a story about the musical artist Prince and his 80’s hit, “When Doves Cry.” According to the person being interviewed, Prince had originally composed the song with a bass line, but removed it before recording the final version. Certainly he had spent hours arranging the base line, but his willingness to remove it because it didn’t add to the song resulted in “When Doves Cry” becoming Prince’s first number one song. If a phenomenal artist is willing to delete something that took him hours to plan, why should we be so unwilling to remove a paragraph that does not accomplish the overall goal of the letter?

Obviously this short post does not get into the proper greetings or endings that should be used, nor is it focused on proper grammar or sentence structure; these concepts and rules should be self-evident. The goal of this post is to remind us that the client is not an insurance expert and we must be able to give them ALL the information they need in a non-threatening yet technically correct manner. Following these guidelines takes effort and practice.

It’s Required

Banks, contracts and statutes are an agent’s friends. Much of the coverage that is purchased is done so because another entity or force is pushing the insurance buying decision. Prime examples of forced insurance purchases include:

• Homeowners’ coverage being required by a mortgagee;
• Automobile Physical Damage being required by the finance company or lessor;
• Flood coverage being required under federal guidelines before a loan is granted (when applicable);
• Automobile Liability (and sometimes UM and/or UIM) being required by statute;
• Workers’ Compensation as required by statute or contract;
• General Liability being required by contract;
• Performance Bonds; and
• Directors & Officers coverage being required by corporate documents.

While agents should be thankful that many kinds of insurance are forced purchases, the danger of required purchase is the idea that price is or should be the deciding factor. GEICO, Allstate, Progressive, State Farm and others continually and effectively play to this mistaken belief as it relates to personal auto coverage in particular.

Even producers fall victim to the idea it’s about price, especially in the early years of their careers. It’s amazing how many of us made phone calls that sounded something like, “Hi, Mr. Prospect; my name is Joe Agent and I’d like to see if I can save you some money on your insurance.”

Don’t give me that pious, “I have never…” look. You may not have ever used those words; but have you ever asked to “quote?” Same effect in the client’s mind; “Insurance is a commodity, everyone is the same and price is the best guide for making a decision since I have to buy the coverage anyway.”

An agent’s duty is to educate the client and explain that not all insurance coverage forms are created equal, even those designed to fulfill insurance purchase requirements. Part of this responsibility is clarifying for the insured that “standard” forms are designed for the “average insured.” The problem is, there is no such thing as an “average insured;” each insured has individual loss exposures that must be addressed on the same individual basis with endorsements and additional coverages.

Moving the client from buying only the “required” insurance coverage to investing in the “necessary” insurance protection requires tapping into the second reason clients purchase insurance – fear. Don’t misunderstand, this use of the term “fear” does not constitute the knee-knocking, butterflies in your stomach type of fear. “Respect” may be a better term; respect for what could happen and the financial consequences of the event.

Fear (or Respect)

Fear or respect for the possibilities and realities of injury or loss occurring is why clients purchase higher liability coverage than the minimum limits required by statute. The possibility of major financial hardship is also why clients continue to purchase a homeowners’ or commercial property policy long after the mortgage debt is paid.

Other examples of client “fear” broadening the insurance buying decision includes, among others:

• Umbrella/Excess coverage (although may be required by contract in some commercial situations);
• Life Insurance;
• Health Insurance;
• Personal Articles Floaters or Inland Marine Coverage (may be subject to contract);
• Crime coverage;
• Employment Practices Liability;
• Equipment Breakdown (Boiler & Machinery); and
• Business Income coverage.

None of these is required by law (although some may be subject to a contract); so why do clients purchase these and other such “voluntary” coverages? Fear of the consequences of a loss. Essentially, clients want to be able to sleep at night; insurance protection can allow some rest (I won’t say “peace” as that does not come from insurance or anything external).

How is such fear/respect created? Agents who know policy language, coverage gaps, exposure analysis and how to fix gaps in protection create the necessary respect for loss possibilities.

Lest you misconstrue my point, this is not fear mongering; it is telling clients the truth about their situation. Agents who fail to point out the client’s exposures, coverage gaps and fixes are doing a huge disservice to their clients (and creating an errors and omissions exposure for themselves). The agent’s responsibility is to create some fear, some discomfort in the client so they can make an informed decision about coverage.

Clients must be allowed to make the insurance buying decision with all the necessary information. If some of that information creates discomfort or “fear” on their part that is not a bad thing. The other end of the spectrum is the insured who thinks everything is just fine because the agent was the one who was afraid; afraid to provide all the pertinent information. This is the insured who makes the buying decision based on price and is very upset when they have an uncovered claim.

Don’t be afraid of the line, “You’re just trying to sell me more insurance.” No, you’re not; and a proper response might be, “No, I just want you to know the realities of your situation. Protecting yourself against the financial consequences of what could happen is a business decision. Please initial here that we discussed this exposure.”

It takes guts to be an insurance professional. First you have to become proficient in policy language and then you have to be willing to use that information to help your client make a buying decision. Even if they don’t purchase the protection, you have done all you could; it’s nothing personal just a business decision on the client’s behalf. And if they refuse and have an uncovered loss, you’ve done all you could.

Don’t be afraid of “fear” in the insurance buying process. The information that creates this fear allows an informed business decision. But, above all, be honest about the realities.

Really Only One Reason

Regardless the underlying reason, requirement or fear, clients buy insurance protection to get claims paid at the time of a loss. Although they don’t necessarily know or verbalize this need, this really is the only reason insurance is purchased. The agent’s job is to make sure that need is satisfied by knowing policy language, understanding the breadth of coverage and knowing how to cover any gaps in protection.

When I stop trying to force an idea or answer, a good plan usually seems to appear “out of nowhere.” I also find that most good ideas come from conversations with and just listening to others. One comment in the midst of a conversation can lead to amazing ideas and even more amazing results.

Focused thought, “accidental” brilliance and brainstorming are all necessary when designing educational and training programs. But to effectively and fully reach the Academy’s goal of providing you with high quality, immediately useful information, we need and truly value your feedback. Your ideas and opinions allow us to develop programs that meet your needs, desires and wants. After all, you are our client.

Tell us what you want. What topics do you want taught? What skills would you like to learn? In short, what training do you feel is necessary to allow you to improve professionally during 2011?

We are in the midst of planning for 2011 and want to make sure we are on the right track and that your needs are being met. So tell us what you want, what you really, really want (yes, I know that’s a poorly veiled reference to a 90’s pop tune – but it gets the point across). Your opinions are absolutely necessary.

Do we really need so many people telling us how to run our business? Aren’t there scores of books that pretty much give us the same information? Let’s be honest, we pretty much have the option to ignore either the books or the consultants (and in some cases both).

Don’t misunderstand, I’m not suggesting that hiring a consultant is a bad thing; in fact bringing in an outside expert with a broader view can be very helpful to any business. But to be useful, the consultant must be the right fit for the right purpose to identify the real problems so they can offer the right solutions to the business that hired them. This leads me to the hypothesis of this post:

Agents and brokers are NOT hiring the right kind of outside expertise.

Let’s be honest, the purposes of any insurance agency are pretty simple: find suspects; convert suspects into prospects; analyze insurable risk exposures; formulate the correct insurance coverages; and service the business to the highest level. That’s it!

This simple process is often complicated by agency management systems, regulations, processes and humans having bad hair days; but the core (main) purpose of any insurance agency is TO PROVIDE THE CORRECT INSURANCE PROTECTION. The true purpose and job of any agency really is as simple as this.

Think about it, if you properly analyze the insured’s risk exposures, design the correct insurance plan and manage the program well – the potential for an errors and omissions claim is greatly reduced. Additionally, morale among the staff improves because the correct job was done up front and there is not as much time spent patching and repairing a poorly designed program. Also producers and the agency can become known as trusted advisors rather than just a peddler of insurance (which seems to be the direction most agencies are going).

So, if constructing the proper protection is so important and has so many positive effects, why don’t agencies hire coverage consultants to help them accomplish their core purpose? Could it be that many agents mistakenly believe they don’t need this kind of help because they think they already have a strong handle on coverage?

Every insurance professional must admit that even the most technically proficient agent misses exposures and overlooks coverage gaps. And any failure to ferret out these exposures and find the gaps means that the agent has failed at his or her core purpose. Failing at the core purpose up front creates a lot of problems on the back end.

Proper insurance program development improves efficiency; and greater efficiency means more time to work on what matters - like finding new business. New business means growth (even in today’s market); growth leads to greater rewards for the agency and its staff. All this from a properly designed insurance program.

What’s better for the agency AND its clients: training and coaching towards learning how to designing a proper insurance protection program (with all its advantages); or training on how to better and more fully utilize the agency management system? Clients don’t care if you know how to input information into the system, but they do care if they have a loss that is not covered by the insurance policy they paid good money to purchase. Get the coverage right, then worry how to input it in the system; don’t major on the minor – focus on the agency’s core purpose.

Remember, insurance protection is vitally important. If the agent poorly designs the protection, he could ruin the life and/or business of the insured. This is not hyperbole, insurance protection is that important.

Where, then, can such expertise be found or developed. I’ve already mentioned one possibility – an independent insurance consultant working with and on behalf of the agency to help them develop a technically sound insurance protection program. Agencies can also work to develop such competency in house, but they must be willing to invest a lot of time in this process; or they can buy the talent by hiring a person specifically for this role.

Sadly, such technical expertise is not going to come from simply attending required continuing education (CE) classes. In fact, many of the classes being offered for CE have been dumbed down so much that little real learning occurs (especially when it’s a self-study online CE course). Such technical expertise only comes from training programs that go deeper than the surface of a policy, digging into the finer details, giving the student a view of the depth of coverage issues. (I’m not going to self-promote here.)

Hiring outside expertise is a blow to any agency owner’s ego; it means admitting that they don’t know everything or that there is a weakness within their agency (their baby). But once the true weakness is identified, the agency should do what’s best for itself and clients and get the needed help – in spite of the ego. But again, make sure it’s the core needs that are addressed by the consultant, not the symptoms.

Once the agency is an expert at performing its core purpose (providing correct protection), then it can focus on the processes and human interactions that surround and support that main, core function. But until it is an expert at designing proper coverage and protection programs, the agency should consider bringing in outside expertise.

Sometimes agents simply have to resort to unusual methods and “arguments” to convince clients to do what is best for them; especially in light of the objections raised. To get the ball rolling I am including three of my own stories. The first is one a good friend of mine has used on several occasions and the last two are from my personal experience.

“I’ve been paying for insurance for ___ years and I’ve never had a loss.” This client obviously thinks that he is being cheated and that the promise of protection has no value – now or in the past - and is useless.

An agent friend is known to say, “OK, we can arrange for a loss so that you can get your money back plus a very healthy return on your investment.” The client will undoubtedly look shocked and puzzled by this statement. After a short pause, the agent continues, “I have a cousin that will do nearly anything to finance his ‘habit;’ I will have him burn down your house this weekend. Make sure to get some of your valuables out.”

At this point, the insured will be disgusted by your family connections and the idea that “his agent” would so willingly destroy his possessions. The agent then explains that he is only trying to point out that “getting your money out of the insurance company” is no “victory” when compared to the devastation to the person’s life caused by such a catastrophe. If handled correctly, the insured will understand that it’s better to pay and never have a loss than to have the loss and “get your money back.” The goal is to have the insured understand the value of insurance as an investment in the promised protection of his greatest asset(s) rather than as merely an expense that must be borne.

“You’re just trying to make more money off me.” This objection usually follows a coverage recommendation arising out of the unique exposures to which the insured is subject. No reason for the agent to argue or try to convince the insured otherwise; the best response might be, “You know you are absolutely right. The $10 (or whatever the commission would be) additional commission I would have made if you purchased this necessary coverage was going to pay for my son’s/daughter’s first semester of law school. Your $500,000 (or more) loss exposure was of no concern to me.” Then have them read and sign a rejection form. This helps the prospect/client understand that not all recommendations are tied to huge amounts of income and that the agent might actually be trying to look out for their best interest.

“This is just a racket. The government is making me buy coverage whether I want to or not; what a rip off.” I had this one when going over an insured’s workers’ compensation renewal. Like the first agent (“I’ve been paying…”) I did not argue. To this contractor I said, “OK, let’s cancel your workers’ compensation policy. But if you have an employee fall off a ladder, this is what you will have to pay out of your own pocket” (as I showed him the state compensation schedule). He agreed that the premium wasn’t so bad after all. The goal here, teaching the client that the protection was necessary not just to satisfy the law, but to protect the financial future of the business.

If you notice none of these is an attempt to argue with the prospect/client; they simply redirect the client’s desire to argue back to the real issue and purpose of insurance – financial protection. Facetiously agreeing then showing the insured the reality of the situation can be a powerful tool for making your point – if handled correctly.

As I mentioned up front, send in your stories and accounts; one you send may help another agent. Forward, post, tweet, whatever you want to do to get this out there would be great so that we can get a hold of all the stories possible. Plus it might actually be fun to see what other agents have done.

What, exactly, is enterprise risk management? ERM is a powerful tool integrating: 1) Risk; 2) Contingency; and 3) Business resiliency planning. Definitions of ERM and the generally awful diagrams used to describe it differ widely, but I like to keep things simple.

Look at enterprise risk management like a toolbox full of important tools – all are necessary to ensure that any business or organization maintains a solid infrastructure and has easily implementable plans to deal with whatever emergency or crisis comes along. Each tool relates to every other tool; and no tool is more important than any other. All of them have to be in place and in operational condition for the organization to have an effective Enterprise Risk Management system. That’s it!

Frankly, the mind-numbing diagrams and convoluted discussions have served to obliterate the benefits of ERM. Enterprise risk management is an essential means of protecting your business because:

• ERM establishes a system and ongoing practice for assessing – and dealing with - risk areas within your organization.
• ERM planning includes a solid crisis management component. When an organization is dealing with a disaster or crisis, having a plan in place is vital to managing the crisis in a manner that inspires confidence. 
• ERM helps you to identify important systems that must be in place and operational to resume operations in a timely fashion following a disaster or crisis. 
• ERM planning is essential in helping the entire organization understand how to manage risks related to fuzzy (but crucial) issues such as brand and reputation. When clients/customers no longer have confidence in your organization, they will go elsewhere - immediately. If you don’t believe this, consider how fast Arthur Andersen and ACORN imploded. 
• A good ERM plan is worth its weight in gold for you as an insurance professional. As you know, the more documentation you can present to an underwriter, the better able you are to negotiate higher limits and broader coverage for your client – and at competitive premiums.

In the two-part enterprise risk management Webinar for the Insurance Journal Academy of Insurance, I will provide participants with an overview of enterprise risk management as a streamlined, efficient method for managing risk, preparing for business interruptions, managing crises confidently and resuming normal operations in a timely manner. The webinar series is structured to present a user-friendly discussion of the nature of enterprise risk management and the approach for implementing ERM in an organization. Yes, there will be simple diagrams – and a hands-on methodology. You’ll come away with a vital system in place – no aspirin needed!

Non-property and casualty-related topics constitute the greatest number of these programs; more than half are focused on financial planning, life, health and benefits. The remaining designations are split among P&C, risk management, actuarial, regulation, licensing and safety courses.

“With all the available designations, is there need for (or even room for) another designation?” was a question I fielded just a few days ago. Looking at the list and range of designations, YES, as strange as it sounds, there may be more than just room for another designation; there might actually be a NEED for one or a few more.

Review the 210-plus designation descriptions and it becomes quickly evident that each was created to fill a particular perceived educational gap. Each has a specific focus and completers of any in the long list of programs gain a much deeper understanding of that narrow focus. Yet such education often is gained to the exclusion of the entire insurance mechanism inside which the particular course of study operates. Note that the course creators/providers do not overtly intend for the materials to exclude the broader insurance mechanism, such result is a matter of “necessity.” Students become so focused on the specific subject matter that they lose sight of where and how the information fits within the entirety of the mechanism.

At the risk of angering some insurance designation providers and some designation holders, the current system creates a false sense of competency. Some designation completers, like many new college graduates, think the piece of paper signifies the end rather than just one step towards the ultimate goal of professionalism. As the holder of eight insurance designations (and working on a ninth), I am obviously a full supporter of continuing professional development through study when done for the right reasons and in the right context.

So what’s missing; what education, course of study, program or new designation will fill the gaps and tie the information from all the other programs together in a practical way? The only course that could accomplish this goal is one that imparts information learned from the schools of “hard knocks” and “experience.” Experience takes the theoretical concepts learned in a class and from books and makes them practical within the insurance mechanism. The problem, experience has to be gained over time, it cannot be taught; and “experience” is often the polite term for a “mistake” (“he really gained some experience today”).

Boiled down, any new designation MUST be imbued with experience and practical application. Very little coverage or theory should be taught, rather the chosen course needs to focus on the principles surrounding coverage and form interpretation. Following are two examples of the preferred training program:

• Learning how to read an insurance policy (any insurance policy) is far more beneficial than knowing what the commercial property, commercial general liability, homeowners or any other policy says. The mechanics of reading an insurance policy helps the student understand and effectively interpret ANY policy, even one they have not previously seen.
• Most insurance professionals do not remember every exclusion in every policy. In fact trying to depend on memory is quite dangerous from an errors and omissions perspective. It is far better for the professional to know why the excluded losses or hazards are excluded. Knowing the six major reasons for exclusions allow the professional to better understand the coverage and take care of the client far better than simply knowing what the exclusions are.

Education must combine experience, errors and omissions training (either experientially or by attending class) and practical application if it is to be useful. Lack any of these and the practicality and usability of the training is lost.

What is lacking within the industry, but which is sorely needed, is training leading to a designation that can be used immediately upon the completers return to the office. But any new designation must also be very rigorous and hard to obtain if it is to mean anything. Its goal should be increased knowledge and professionalism, not simply a bunch of letters.

A “profession” is a calling that requires specialized knowledge, has legal and/or educational barriers to entry, requires the practitioner to be dedicated to the vocation itself and necessitates a commitment to continual study and the increase in applied knowledge with the goal of protecting and/or bettering society. This intimates focused attention on the profession’s depth and details; a passion to be better tomorrow than today; and surrendering to the fact that the well of knowledge is infinitely deep and its waters are not adequately explored shy of ongoing, personal study. Receiving a paycheck is not a requirement of a profession, only the result of being a member of a profession.

True professionals accept the challenges of their calling, dedicating themselves to studying and understanding the industry, the client and the mechanism. An insurance professional is always researching, reading, observing and asking questions toward the goal of doing and being their best.

Insurance as a Profession

First, is insurance a profession when compared against the above criteria? Each requirement made of a profession is compared to the vocation of insurance:

• Is specialized knowledge required? Yes. There is a body of concepts, knowledge and language unique to insurance. Understanding it and applying it requires study and experience;
• Are there legal and/or educational barriers to entry? Yes. To legally practice, agents and brokers must attain enough knowledge to pass required licensing exams. Effective underwriting requires enough training to understand the basic concepts of insurance. Claims people must have a basic understanding of the policy language and how to interpret policy language; and
• Does insurance protect and/or better society? Yes. Without insurance America would not be able to be what we are or have what we have. Insurance allows for creativity, innovation and the pursuit of the American dream. Without insurance: you could not get a home mortgage, get a loan for or drive a car (in most states), create any new products (self-insuring liability would be too expensive), start a business, hire employees nor do or have anything to which we are accustomed. This is not hyperbole; insurance is integral to this nation and its economy (unless we want to be a state-run, communist country).

Insurance Professionals and Education

Don’t confuse ignorance (lack of knowledge) with lack of professionalism. No one knows it all when he enters the world of insurance, nor will he know it all when he leaves. Professionalism is evidenced by desire and passion. Professionals desire to discover what they don’t know and passionately pursue the information necessary to fill that knowledge gap; not just for the short run, but as a building block for the future.

Neither should a lot of education and/or designations be equated with professionalism. A “CPCU” without the passion to immerse herself in continual study is little better, and maybe not as good as, the newbie who desires to learn what they don’t know, pursue the knowledge and apply it to their client’s needs. Designations will never put a dime in your pocket; but your desire to continually learn so that you can do the best for your client will.

Lest you be confused by the last paragraph, clarification may be in order. Insurance education leading to a designation is absolutely essential or exceptionally useless based on the desire and passion of the participant. Pursuit of a CPCU, ARM, CIC or any other designation or advanced degree is admirable if the reason is the desire to advance yourself as a professional and the profession itself with the ultimate goal of increasing knowledge and helping your clients. Otherwise it’s just fluff that looks good on a resume.

Insurance education for professionals comes in many forms: reading industry magazines, attending forums and association meetings, knowing how to use the Internet for research (i.e.. which sites provide the best information), building a reference library, developing a group of like-minded insurance professionals with whom you can converse and debate on a regular basis and even pursuing designations - with the right motive. Professionals do not ask how many continuing education hours are involved; they don’t care. The question professionals ask when attending a class, lecture or On-line study is, “Will this make me better at what I do?” If the answer is “yes,” then CE is just a bonus; but if there is no CE credit, the professional doesn’t care – it’s about the desire to be the best. Professionals make their good, better; and their better the best through dedicated study.

The Current State of Continuing Education

Continuing insurance education today is passionless and lacking in desire. Many attend only because the law requires it; they have no desire to learn anything new; the completion certificate and the credit hours are the goal. Rare, too, is the continuing education provider who teaches with passion or creativity (they do exist).

Insurance continuing education, as an industry, has pooled at the bottom of the proverbial barrel with low cost providers offering low quality material to non-professionals. This is particularly true of Online CE providers who promise cheap and quick CE credit.

My neighbor and I were discussing online continuing education. She told me her boss earned 12 hours of CE credit in less than an hour. He downloaded the material, went straight to the test and did a key word search to answer the questions. Tell me how this can teach anything. Is this really the direction we want to go?

Professionals make education a priority. Hacks go because it is required.

The Questions of the Day

If required continuing education laws were repealed, would you make it a PRIORITY to attend educational classes every year? If you own the business, would you make it a priority for your employees?

So what, if anything, can be done to return to professionalism, rid the industry of non-professionals and improve education? Please share your thoughts and ideas.

All kidding aside, this is a problem because the current largest and soon-to-be largest generations have no one to act as a go-between - a conduit to understanding. Baby Boomers (born between 1946 and 1964) are about 41 percent of the current workforce. Gen “Y” (born between 1977 and 1997) currently represents approximately 25 percent of the workers in the US. And stuck right in the middle is Gen “X” (1965 to 1976) with a paltry 29 percent. The remaining 5 percent represent the pre-Baby Boomers (born before 1946) who are still working. (Statistics presented by Bruce Tulgen, author of “Not Everyone Gets a Trophy” and several other management books.)

Baby Boomers are on the way out and Gen “Y” is on its way up. It is unlikely the number of Gen “X’ers” is going to change; thus, the percentage they represent in the workforce is going to decline from its current place.

Estimates are that by 2014 (just four years from now), Gen “Y” will make up 50 percent (that’s half folks) of the estimated 162 million workers in the US. Using simple math and making some assumptions, the generational breakdown might look like this at the beginning of 2015:

• Pre-Baby Boomers: 2%
• Baby Boomers: 22%
• Gen “X”: 26%
• Gen “Y”: 50%

Although the two oldest generations combined will constitute the smallest percentage of the total workforce, they will most likely hold the most senior positions within an organization. The few might garner the greatest power.

But again I ask: why does the lack of a Generation X make any difference? Communication is the reason. Baby Boomers (and pre-Baby Boomers) just don’t understand Gen Y; how they communicate, how they think (or don’t think) or even what their values are. Historically, the generation between the older and younger generations (Gen “X” in this case) has always been there to help the two diverse generations communicate with and better understand each other - because the intervening generation has a foot in and understands both camps. This conduit of communication is missing now (with little consequence), and will certainly be absent in just a few years (with even greater consequences).

Without this communication - this conduit of understanding - two distinct corporate cultures and personalities may develop. An “us versus them” mentality might erupt that tears down successful businesses or operations.

As the Baby Boomers retire, a lot of intellectual capital is going to disappear. This is not just knowledge regarding insurance coverage and risk management theory, it goes deeper. Passion, connection to the industry and important historical memory will walk out the door and Gen Y won’t realize what is gone until it’s too late to do anything about the gaps or without having to recreate the wheel.

What can we do to fix the problem? There is no way to go back and add more people to Gen X (unless time travel can be created and perfected; but then we have that whole space-time continuum problem Doc. Brown talked about in Back to the Future).

Since we can’t increase the size of Gen X, maybe we can capture the knowledge, wisdom and institutional memory held inside the minds of the Baby Boomers. Maybe we can capture it in a way that Gen “Y’ers” understand and find useful and fascinating (which will encourage them to use it). That’s what we can do with the Baby Boomers intellectual capital for the benefit of Gen Y.

On the other side, what can we do to or for Gen Y to help them? Maybe we can teach them to respect and understand what has gone before. They may have different ways of doing things, but I feel sure if they understand the true brilliance of the past – they may find even better ways to get things done. But it starts with respect.

Since this communication conduit can’t be filled with people (Gen “X”); employers must find ways to effectively use technology to connect these disparate generations.

A faulty belief can cause a serious crack in an otherwise solid leadership foundation. I find that many leaders who struggle to build influence and trust are operating with flawed beliefs about what it is to be a good leader, and these beliefs, or myths, get in the way of their success. The solution lies in identifying these myths and replacing them with empowering beliefs that are based on the realities of successful leadership.

In my latest podcast, I expose five of the most common leadership myths and the reality behind each of them. I identify many of the ways these myths show up in the workplace and the problems they often present for the leaders who hold them.

If you are managing according to any of these beliefs, eliminate them immediately as they will limit your effectiveness and your ability to reach your full potential as a leader. The most successful leaders understand they are never done learning and growing. Make sure your values and beliefs support, rather than hinder you, on your leadership journey.

Well, how should I relax? Maybe I’ll take a cue from other insurance professionals I know.

Golf: Many of my professional insurance friends choose golf for relaxation; I played with one of these guys a few months ago. His chip shot didn’t land as close to the cup as he wanted (just landing on the green would have been nice). I have never seen a club thrown so perfectly (landing far closer to the pin than his shot). Now that’s what I call relaxing. Golf, according to Mark Twain, is just a good walk ruined.

The last time I played golf was just that – the last time; until I get the itch again. Golf is a sickness, but certainly no way to relax.

Running: I know many insurance professionals swear running is a good way to relax. Our CEO, Mitch Dunford, is a runner; in fact, he’ll even run a marathon from time to time. He equates running a marathon to a man’s understanding of childbirth – you forget the pain and run another – remembering about 15 miles into the run. My dad was a runner, running five miles a day for about 10 years until injury and intelligence required him to quit.

When I was playing ball in school (baseball and soccer), running was the punishment incurred if the coach thought you messed up or weren’t giving your best effort. For me, it will always be a punishment so it is not my idea of “relaxing;” only a generator of flashbacks. For sake of comparison, I feel the same way about biking.

Working out, weightlifting, etc.: I used to work out quite a bit, at least four days a week. One day I was in the midst of my workout and I experienced “total consciousness” (think, Bill Murray and Caddyshack) leading to an epiphany (reality became clear in that moment) – to stay in that shape, I would have to do this…for the rest of my life. That was the last time I did any serious training.

Drinking: Bill Cosby, back in the early 1980’s, described what “having a good time” looked like. It ended with a guy on the floor of the bathroom hugging the “porcelain god” and thanking it for being so cool (temperature wise). I fail to see the relaxation or leisure factor.

Boating: Two phrases encompass why I don’t own a boat. Break Out Another Thousand (BOAT); and a boat is defined as: “a hole in the water into which you pour money.” Spending money only ups the blood pressure and I already have two daughters that cost me money.

Fishing: Requires a boat (‘nuf said).

Vacationing anywhere: I already said I have two daughters, how’s that a vacation?

Taking a cruise: I love them, my wife gets sea sick.

Playing with the kids: To say this is NOT relaxing would be to infer that my kids can get on my last, frail overexposed nerve; so… we have a great time together and they really bring calm into my life (insert smiley face here).

Working in the yard: Are you kidding? I’ve been trying to kill my grass for years. I think Astroturf would be a great substitute.

Reading: Now we are getting somewhere. While many prefer mysteries, adventures, romance or biographies, my preferred genre is business and finance. I can totally relax to books detailing the history of probability theory (i.e. “Against the Gods” by Peter Bernstein) or focused on risk management. When no one is looking, I’ll even read an insurance policy.

Writing: This may be the most fun to me. I love to write, which is why I do it for a living. In fact, my most recent adventure in writing, “Property and Casualty Insurance Concepts Simplified” became available just a few months ago.

Insurance geeks are boring people who know how to relax.

You can no longer rely on the company you work for to provide you with all the training you need for you to become an outstanding leader, nor should you. This is especially true during these difficult economic times when organizations are being forced to cut back on many of the internal training and management development programs they once offered. Just because your company can’t afford to train you doesn’t mean your personal growth and development must come to a halt.

In order take control of your own development, here are three surprisingly simple ways for you to grow your leadership skills:

1. Ask for feedback – Most people don’t like to do this because they are afraid of what they might hear, but trust me, there is gold in that feedback. Many leadership training programs now include 360° feedback as a part of their offering because of the value of that type of feedback. You should routinely solicit feedback from individuals who report directly to you, from peers, and from your boss. It is critical that you make it as comfortable as possible for people to share their honest feelings with you, or the information you receive is useless to your growth and development.

2. Become a perpetual student – Never stop learning! The world is moving forward every minute and you need to constantly expose your mind to new ideas and acquire new skills just to stay even. Technology today makes it easy for you to access books and training courses, even if you don’t have time to sit and read. Listen to an audio book on your commute, download a training course onto your iPod and listen to it while you eat your lunch. Your access to inspirational teachers and mentors is greater than ever so there is no excuse for not investing in yourself.

3. Improve your inner circle - If you want to know a little more about yourself, look at the people who you choose to have around you. We tend to attract those people who are most like us, so look at your inner circle of friends and colleagues. Are they positive? Do they challenge you to be more than you are? Are they living the kind of life you would like to live? If not, consider expanding your circle to include people who are where you want to be in your career and in your personal life and ask them to mentor you on your journey. Learn from their wisdom and experience.
 

No matter where you are with your leadership skills, there is always room for improvement. The good news is that you can follow the simple suggestions I outlined above to take control of your own growth and development and ensure that you become the kind of leader others will enthusiastically follow.
 

Want to be better prepared for agency management? Kathy Ryan begins a 12-week agency management program on August 3, 2010. The program is designed for anyone interested in developing or improving their management skills. Click here now for more information on this program.

The idea of “American Exceptionalism” is seldom heard in our public discourse. Sadly, it is missing from our public school curriculum, is not promoted in our popular culture and has seemingly been consciously removed from movies and television. Print and broadcast media often portray America as “the bad guy,” the bully on the block.

However, I still think (and hope) most “ordinary” Americans believe in America’s excellence and the “traditional” values that enabled its growth to greatness. Freedom, accountability, self reliance, hard work, ingenuity, selflessness, honesty, justice and mercy are among the values most Americans hold dear and are among the values that made and make America great.

Which leads me to insurance….

Insurance is to the economy what core values are to America. It is part of the bedrock upon which everything else is built. Just as our country was built upon a set of core values, so too our economy is built upon a foundational principle, that of risk taking –investing finite resources of labor, time and money in exchange for an unknown yet hoped-for return. Insurance reduces the risk of investing and enables additional/incremental investing. Without the protection of insurance, fewer individuals would risk investing their precious resources and our economy would decline. Insurance, therefore, is foundational to the welfare of our economy. Accordingly, activities that support and strengthen our industry also support and strengthen our economy and our country.

This year Insurance Journal launched the Academy of Insurance, an education platform dedicated to promoting excellence within the property/casualty insurance industry. Our mission is to provide insurance professionals with exceptional training and education and equip our students with the knowledge they need to succeed.

At the Insurance Journal Academy of Insurance we adhere to the philosophy that knowledge coupled with hard work and integrity leads to prosperity. As we mark the turning of another year of our great nation, we commit ourselves to promoting those values that will not only strengthen our industry but America as well.

To be successful in this role of agency manager or owner requires mastery of six skills.

1. The art of influencing others;
2. Hiring, training and retaining the best people;
3. Performance management;
4. Coaching;
5. Team motivation; and
6. Avoiding common leadership mistakes.

The Art of Influencing Others
To be an exceptional leader, agency owners and managers must understand the difference between leadership and mere management. Management is little more than positional; employees do what they are told because they have to. Leadership is relational; employees follow because they want to.

Simply being the owner or manager does not equate to being a leader. The opportunity to be a leader is learned and earned.

Sincere, practiced values lead to influence, and the ability to influence is directly proportional with the ability to lead people. Trust and credibility are absolutely essential to not only the ability to influence other, but also the opportunity to influence. And such influence leads to leadership.

Hiring, Training and Retaining the Best People
Finding people who are the "right fit" for your organization can be challenging. Adding talented people who will support your mission and can achieve outstanding results is essential to the success of your agency.

Agency owners and managers must learn how to hire, train and retain talent. “Learning” can be through experience or dedicated effort. “Experience” is something you don’t have until AFTER you need it, so dedicated effort will save time and many missteps. The cost to replace an agency employee is higher than imagined.

Owners and managers who opt for dedicated training must find programs that focus on analyzing staffing needs, conducting behavioral-based interviews, effective “onboarding,” and developing individual training plans.

Performance Management
Typically, organizations applying a formal process of initial goal setting and then reviewing performance against those goals will outperform those that don't. It just makes good business sense to have everyone moving in the same direction.

To make effective use of this truism, agency owners and managers must: 1) tie individual employee goals to the agency’s overall business plan; 2) learn how to develop and write effective goals; 3) make use of a focused annual review process related to goals; and 4) link compensation to performance.

Coaching
Positive feedback is an often underutilized tool for employee motivation. Honest feedback regarding performance issues can require having uncomfortable and difficult conversations. Both are essential to helping your employees excel and reach their full potential.

Team Motivation
Proof of great leadership is the willingness and desire of people to follow. Employees look to their leaders to set the direction, remove obstacles and inspire greatness. To motivate employees to follow also requires the ability to assess and influence morale.

Avoiding Common Leadership Mistakes
While there may seem to be people who are born with many of the qualities associated with being a good leader, the reality is that most need to continually develop those skills over the course of their careers. Leaders are bound to make mistakes.

Rather than waiting on this inevitability, great leaders learn from mistakes of others to avoid making the most common leadership mistakes themselves. But everyone makes mistakes; great leaders don’t wallow in them, they take steps to rehabilitate themselves.

Success as an Agency Owner or Manager
The ability to keep any agency growing and the employees satisfied is essential to success in this increasingly competitive environment. True leaders who embrace these challenges and implement strategies that motivate employees, develop their skills and hold them accountable for their performance increase the chances that they will successfully weather any storm and grow their agency.

Beginning August 3, 2010, and running through October 19, 2010, Kathy Ryan is conducting a 12-week training/coaching program on the art of leadership and agency management. Click here for more details.

Job versus Career: When you think about your place and duties within the insurance industry, do you consider what you do part of:
1. A job; or
2. A career

After Work: Which phrase best describes you at the end of the work day upon arriving home?
1. I drink heavily so I don’t have to think about insurance;
2. I completely forget about the day and don’t think about work until the next day;
3. I obsess over every minor detail of the day, keeping me up half the night until I fall asleep due simply to utter exhaustion; or
4. I enjoy my down time and my family, but I think through tough issues and problems until bed time.

Career Options: If given the option, I’d be:
1. In any other industry where I could get paid;
2. Right where I am, I don’t want to be in another industry.

Career Importance: Which of the following phrases best describes you and your opinion of the part insurance plays in the American economy?
1. I think the government should be the protector of all assets - personal and corporate.
2. Insurance is a necessary evil. People have to have it because the law and bankers say so. But it is not a major factor on the economy.
3. Insurance has its place and uses; but investment and economic growth is not dependent on insurance.
4. Without insurance, the economic engine of America will sputter to a halt. What the insurance industry provides is of utmost importance.

Customer Knowledge: My opinion about my customers and their insurance knowledge:
1. The customer is always right.
2. In regards to insurance, the customer may make the final decision, but it is my job to make sure they understand all the facets of insurance related to the decision (which requires me to know them). In short, the customer can’t be right unless they know all the facts.

Insurance Forms and Policy Language: Do you like reading and analyzing insurance policy form language?
1. No way. I’d rather be beaten.
2. Yes. I find the differences in policy forms fascinating

Insurance Education: Which of the following best describes your opinion of insurance education?
1. I absolutely despise insurance education. The only reason I take any courses is because the state or my boss requires my attendance.
2. Knowing that I have to take continuing education, I look for the cheapest and easiest way to complete my required hours. If I learn something, great; if I don’t, I really don’t care. I just want the hours.
3. I actually enjoy the opportunity to potentially learn something I didn’t know before. Since I have to go anyway, I try to listen and learn. But I will only take courses that provide continuing education credits.
4. Insurance is fascinating and complex. I look for every opportunity to learn whether personally or in a group setting. Continuing education credits don’t matter to me as long as after the training I am better prepared to meet the challenges of this industry than before I took the class. It’s the information I crave.

Grading the Test

Grading this test is easy. You will notice that each of the possible responses is assigned a point value (1, 2, 3 or 4). Total the points assigned to each answer you chose and multiply the total by five (5). The product will fall between 35 and 100. Following is a guide to score your opinion of the insurance career:

90 – 100: Truly the last of a dying breed. You are a true insurance professional who is always looking for ways to improve yourself for the benefit of you, your employer and your clients. You always feel there is more to learn and you want to learn as much as you can.

80 – 89: A potential difference maker. You border on having the passion it takes to be among those counted as true insurance professionals. Only one or two changes in ideology or practice and you will be among the greats of the industry who make a difference in this and to future generations.

70 – 79: Mr./Mrs. Average. You are just an average worker not trying or caring to make a difference and surely not looking to make waves. You don’t do any more than is required of you. Insurance may just be something you’re doing to pay the bills and you really don’t see this as a career. Unless something changes, your career will be unremarkable.

60 – 69: Time for a major attitude adjustment. How you are hanging on to your job is amazing. Maybe you know something about someone and have the pictures to prove it. You are likely miserable and are just hanging around until you find something else you’d like to try. Obviously, insurance is not the industry for you.

Below 60: Get out of insurance now, if not sooner. You’re not doing yourself, the industry or your clients any favors. In fact, you are probably miserable and doing more harm than good. The industry and you would be better off if you moved on to another field. If this is not an option – an attitude change of amazing proportions is necessary to salvage you from utter destruction (personally and professionally).

Non-Scientific

We said up front that this is not a scientifically created test. It is but a gage of your feelings toward and about the insurance industry and insurance as a career option. Feel free to disagree with the results and the methodology; but remember, the score is based on your answers.

Marketing is all about maximizing relationships – what makes social media marketing such a remarkable asset to organizations it’s ability to manage relationships and stay in touch for our personal and professional lives.

If you are on Facebook, you will likely update your photos, status and more. On LinkedIn, you will update your job status, position and email address. With Twitter, your contact base will grow and if you are part of the active tweepulation, then you’ll be able to connect forever. Your blog will store your expert content (I am writing this blog post by going back to my blog www.webmarketingtherapy.com/blog and repurposing some of my most popular posts!) **Think about it…are you more likely to update your Linkedin profile or send out snail mail with new business cards when your contact information changes? The same goes with YOUR contacts. You connect with them in social media, then they update their information and you can easily tap them!

Professional Diagnosis:
Too many insurance marketing pros suffer from business card/contact/followup overwhelm. Symptoms of overwhelm can include:
-Messy Desk
-Guilt for not sending follow up emails
-Memory Loss (forgetting what you did with that darn business card or “what’s that person’s name?” when you need it)

Business/Marketing Prescription:
Use social media as your business card storage tool. Think of social media as an “interactive rolodex“, storing your contacts in a way that is easy to access AND updates itself! Right after you get business cards, go to Linkedin.com and/or Facebook and/or Twitter and look their name up and connect. Once they are in your Rolodex, you can search them by name (first, last) or company or even job description, it’s a brilliant, quick and easy look-up.

It’s never about using one social media tool – it’s about using several social media tools to build your credibility, visibility and relate-ability. We call this multi-tasking marketing.

Your current and prospective insurance customers use social media differently (some like tweeting, some are big on reading blogs, some read blogs and don’t even know they are on a blog, the just like the “website”) so being in several places and keeping current so the people that are seeking you out can find you is a success step.

More people are using LinkedIn to reconnect with colleagues to get that next job or reach out to contractors since they are managing more work with fewer resources and to build their book of business. Business cards get recycled, put those contacts into social media and use the power of the web to serve as your online Rolodex to stay in touch (and get rid of those old-school biz card holders!)

It’s great to run a marketing agency and virtual marketing support system when you ARE your target market. I am a business owner AND an entrepreneur AND a marketing professional, so it is great to share wealthy web tips for Insurance Journal’s community that can help you, especially when my personal/professional “school of hard knocks” lessons can spare you time and headache!

Use the social web for more than sharing what you ate for breakfast. Social media allows us to:
-Connect
-Communicate
-Collaborate
-Enjoy (yes, it’s fun!) Make social media multi-talk – make social media your interactive rolodex and stop business card overwhelm today!

On Jun 16, 2010 at 10:30-11:30am PST / 1:30-2:30pm EST, I will teach an online course for the Insurance Academy sharing the “must-know” steps to blog success, easy ways to use assets you already have within your organization to support a successful blog and giving you ideas on how to make your blog build your credibility, visibility and sell-ability to boost your book of business.

You can learn more about the course by clicking this link and in the true intention of blogging, you are welcome to post questions here!

Blogging can boost your credibility, visibility and sell-ability, it’s just a matter of committing to learning how.

Lorrie Thomas, M.A. is The Marketing Therapist. She is a speaker, trainer, marketing expert and CEO of Web Marketing Therapy, a boutique web marketing agency and training company that diagnoses, prescribes and guides healthy marketing solutions. Her success-backed approach to web marketing empowers professionals to create scalable web solutions that brand, build and boost business. She teaches Social Media Marketing, Search Engine Marketing, Web Marketing Applications and Web Analytics workshops for corporate and small businesses through UCSB Extension and UC Berkeley Extension. She is an Academy of Insurance Faculty member. Ms. Thomas was on the founding team at ValueClick Media. She is currently authoring The 36-Hour Guide to Web Marketing for McGraw-Hill. She has a lot of healthy marketing advice on her blog at www.webmarketingtherapy.com/blog

I had, and have, a great industry mentor – Stuart Powell, MA, CPCU, CIC, CLU, ChFC, ARM, AMIM, AAI, ARe, CRIS (one of the reasons I have eight designations myself – I’m trying to catch him). Stuart modeled for me and instilled in me the passion for technical excellence largely missing from this industry. Beyond a mere passion for insurance, Stuart also models a passion for learning (how many other people do you know who study Greek - just for fun).

Stuart has always been willing to take the time to listen and give me advice, guidance and counsel when needed. Sometimes I listened and other times I didn’t (ultimately wishing I had). After 20 years in the insurance industry, it is still great to have someone there to offer direction that has seen and experienced more than I have.

But mentorship and mentorship programs are becoming rare. The role of “mentor,” whether formal or informal in its founding, seems today to be viewed as more of an imposition than an opportunity. The lack of experienced leadership and direction in the budding professional’s life could squelch the individual’s potential and may even trigger a desire to leave the industry.

According to generational difference experts, the Gen “X’ers” and Millenials are looking for continuing education and advancement opportunities in their chosen careers. Classroom education and CE classes will provide only minimal satisfaction for these employees. To keep the incoming talent, there must be someone willing to invest their time in this next generation; someone who is willing to look past the brash, unearned ego we all had at that age (don’t look at me so piously, you thought you knew everything just like they do).

Industries ultimately suffer when the “next generation” is left to their own devices and are allowed or expected to learn how to be “professionals” on their own. Bad habits are developed and proven practices are abandoned. Evidence of this end exists in the building trades; when apprenticeships were replaced with “schooling,” the quality of the finished product suffered. “Formal” education does not and cannot replace the iron fist in a velvet glove (to borrow form a classic rock tune) provided by a mentor who genuinely cares.

Having been mentored, I hope to be a mentor to someone at some point. I hope I am able to be as good as my mentor. What about you? Do you think enough of this industry and its future to be a mentor (or find a mentor if you are new)? How will the next generation know how to lead if they’ve never been led?

1. Your web traffic patterns

2. What you need to communicate
3. Media relevancy (buzz)

4. Your audience

1 – Blog based on your individual web traffic patterns. My company, Web Marketing Therapy’s site traffic tends to decrease a lot on weekends, as we serve professionals who are working on their business (mostly Monday through Friday). I tend to blog more during the week because my Google Analytics web data tells me when people are on my site. As The Marketing Therapist, I have to listen, so I pay attention to patterns and action then act in line with my audience’s behavior (see point #4).

2 – Blog when you have something valuable to say. When you have something that you have to purge, BLOG IT. Don’t worry about the day, just get it out there. Content is king on the web. If the content serves and supports your readers (and has value), then post it. If you feel like you want to blog M-F, then you can always set the post to auto-launch during the week. It is easy to queue up blog posts so they launch at a later date.

3 – Blog around media relevancy. If there is industry news that is buzzing in your insurance industry, then it is PRIME TIME to blog about it. Piggyback on what is out there in the news and blog your point of view as the trends hit. Media relevancy can be holidays, media-popular news, seasonal stuff (tax time, renewals, high accident prone times, etc.)

4 – Blog based on your target audience’s needs. Who are you trying to serve? What content can you blog that will HELP them? Blog focusing on your audience and content that will serve them, not so much days of the week.

Answers to questions like “when is the best day to blog?” depends on the blog traffic, your target audience, and you have tools like Google Analytics to track that.

One last tip, see when comments are coming into your blog and LISTEN to the feedback you get off your site. You can learn SO much when you just open your eyes and see what feedback you are getting.

Making a blog is easy, knowing how care for the blog strategically to build your book of business requires education and effort, but it’s worth it!

On Jun 16, 2010 at 10:30-11:30am PST / 1:30-2:30pm EST, I will teach an online course for the Insurance Academy sharing the “must-know” steps to blog success, easy ways to use assets you already have within your organization to support a successful blog and giving you ideas on how to make your blog build your credibility, visibility and sell-ability to boost your book of business. I will answer any questions you have about blogging to help you grow you book of business.

You can learn more about the course by clicking this link and in the true intention of blogging, you are welcome to post questions here!

Lorrie Thomas, M.A. is The Marketing Therapist. She is a speaker, trainer, marketing expert and CEO of Web Marketing Therapy, a boutique web marketing agency and training company that diagnoses, prescribes and guides healthy marketing solutions. Her success-backed approach to web marketing empowers professionals to create scalable web solutions that brand, build and boost business. She teaches Social Media Marketing, Search Engine Marketing, Web Marketing Applications and Web Analytics workshops for corporate and small businesses through UCSB Extension and UC Berkeley Extension. She is an Academy of Insurance Faculty member. Ms. Thomas was on the founding team at ValueClick Media. She is currently authoring The 36-Hour Guide to Web Marketing for McGraw-Hill. She has a lot of healthy marketing advice on her blog at www.webmarketingtherapy.com/blog
 

Sally talked with Insurance Journal about the additional errors and omissions exposures created by the use, misuse and lack of use of current technology by agents; providing great insight into the exposures analyzed during the underwriting process related to insurance agency technology. Following is a recap of that conversation.

Q. Do you look for anything specific regarding an agency's use of technology?
A. "If the agency is writing significant amounts of health insurance, we are interested in the security provided for HIPAA (health insurance portability and accountability act) protected private information."

Q. Regarding agency management systems do underwriters prefer to see any particular system?
A. "We have no underwriting preferences regarding which agency management system is being used. All agency management systems can be effective if used consistently."

Q. Is the lack of an agency management system an underwriting "red flag?"
A. "The lack of an agency management system leads the underwriter to look more closely at how the agency is managing the basic transactions of an agency such as expiration lists, diary and suspense systems, etc."

Q. Are an agency's back-up procedures reviewed and have there been any/many suits related to or lost due to the lack of or poor back-up?
A. "We do not review the back-up procedures and systems utilized by agents; however, the lack of back-up systems or poor back-up systems does come into play in claims. The heart of agency E&O defense is documentation. If an agency has no back-up system, or a system that is not functioning properly, the agency could well be faced with the inability to produce the documentation that would support their defense against a claim. We have also seen where the agency kept the back-up onsite, only to have the back-up destroyed in a natural disaster along with the main system, leaving the agency with no records at all."

Q. Should an agent ever bind a risk based on an email request to bind?
A. "A fax request to bind is preferable to email as the fax machine provides date and time stamping of the incoming document. Email should be treated the same as voice mail, and contain a disclaimer advising that coverage cannot be bound or changed via voice mail or email."

Q. So, is an e-mail disclaimer "essential" or merely recommended? How should such a disclaimer be structured?
A. "Email disclaimers are essential. At minimum, the disclaimer should contain a statement that coverage cannot be bound or changed without receiving formal acknowledgement from the agency."

Q. Are facsimile signatures acceptable?
A. "Most states allow for the use of electronic signatures and electronic records as means to satisfy the legal requirements of contracts and signatures, but NOT a facsimile signature. Each state determines the level of consent regarding the ratification of the signature and the electronic record.

Keep in mind that facsimile signatures are not quite the same as electronic signatures and do not, themselves, satisfy legal requirements in the same way as an electronic signature. However, a facsimile signature could be attached to an electronic record to evidence the insured's intent to sign the electronic document."

Q. Historically, the rules of evidence stated that the agent could use the electronic or paper file but not both; is this still the case?
A. "One file, whether electronic or paper, is still the rule." (As Sally stated, only one type of file will be allowed in court; if the paper file and electronic file are necessary to document the full story, the agent is likely to lose in court. Other fatal errors and omissions miscues related to electronic versus paper files include the inability to produce a document because the back-up system failed; emails are not automatically attaching or are not being attached to the electronic file and the agency management system (making such documentation unavailable in a dispute); or agents not using the full capabilities of the diary system to follow up on a customer or endorsement request.)

Q. Which have proven to be better in court - the paper file or the computer file (which one do juries seem to believe more; and which do prosecuting attorneys have a harder time discrediting)?
A. "We are not seeing courts or juries having reluctance to understand or accept electronic files. With the demographics of the population being that anyone under the age of 40 has grown up with computers, the Internet, texting, etc., any original concern around this issue has rapidly disappeared. One comment on this is the new federal rules around evidence that is creating some concern on how far carriers may have to go in helping an insured (the agent) recreate electronic evidence. Rule 26 of the Federal Rules of Civil Procedure was amended Dec. 1, 2006, to address the disclosure and discovery of electronically stored information (ESI). No one is quite sure yet of the impact of this, however, there is speculation it may have an effect on the cost of producing documents." (A copy of these rules can be found at http://www.uscourts.gov/rules/EDiscovery_w_Notes.pdf)

Q. Agents that choose to go "paperless," must move all client information into an electronic file; scanning may be utilized as the means to accomplish this conversion. Do you have any recommendations on the proper use of scanning?
A. "If an agency is converting to electronic files, the issue of existing paper files must be addressed. Questions to consider include the cost and space needed to continue storing paper files, versus the cost of scanning the existing paper files into electronic files. What we hear most often is that agencies find it less costly and more space efficient to scan historical files. The agency should establish a procedure that addresses when documents should be scanned, how the documents are indexed into the electronic file, how long should the paper document be kept -a set time period that allows for quality control on the scanning process, then the paper document should be destroyed. The key is to have only one file, the electronic file. One word on destroying the paper document: shredding. Engaging a commercial shredding service to collect and shred the agency documents helps protect against the misuse of confidential information."

Q. If an agent sends a virus to someone is that an E&O issue or an Internet liability coverage problem?
A. "If an agency is negligent in sending a virus to someone, the agency E&O policy may have a duty to defend. Coverage for any ensuing loss would depend on the damages being claimed and the terms and conditions of the particular E&O policy."

Q. If hackers access client's personal information, is that an E&O or Internet liability coverage issue (is the protection of information, in general, an E&O issue)?
A. "The issue of hacking again centers around negligence. Was the agency negligent in the level of system security? Again, the E&O policy could well have a duty to defend, with coverage for any loss dependent on the alleged damages. There is not yet complete clarity around where coverage would fall between and E&O policy and Internet liability. The discussion continues in insurance circles."

Technology has allowed agencies to accomplish more, faster. But with such benefit comes added responsibility. Additional errors and omissions exposures are the product of technology's intrinsic benefits. Protecting the agency from these added errors and omissions exposures necessitates the agents full (as necessary) and proper use of the chosen agency management system's capabilities coupled with the installation and use of proper virus protection systems and firewalls to protect the agency's system and computer systems outside the agency. Improper use or underuse of the available technology has the potential to create errors and omissions exposures and losses that did not exist just a few years ago. Agents should make full use of the advantages of technology to avoid and even defend against errors and omissions suits.

Blogs are a meaningful marketing tool for three main reasons:

1. It is an easy communication tool. Blog technology allows insurance professionals to easily post information, educate current and prospective customers, distribute news and get their messages out in a way at little to no cost.

2. Blogging works because it allows for a two-way conversation. Collaboration is the heart of social media’s success. The old-school ways of big brands pushing propaganda no longer work. Whether you are a B2B insurance professional or B2C insurance professionals, today’s new rules of marketing are about embracing P2P (People2 People) marketing.

3. Blogs are entertaining to read. Social media sticks because it is fast, easy and fun. Your customers are busy, they want to search, learn and act quickly, easily and enjoyably. Insurance pros don’t have to be comedians to be successful bloggers, just know that blogging’s conversational tone makes content more digestible and enjoyable to take in …and that is entertainment!

 People do not plan to fail at blogging, but failing to plan the who, what, when, where, why and how -- and who cares -- of blogging will result in a blog that will not have a lot of business being in cyberspace. Making a place for yourself in the blogosphere is critical to learn and having a clear theme for your blog will also help the content ideas to flow faster.

I never thought that I would be a professor of social media marketing (or that a subject like that would ever exist!). I will be teaching an upcoming webinar to share in one hour what I have learned over the last 11 years to help you grow your book of business with blogging.

 Making a blog is easy, knowing how care for the blog strategically to build your book of business requires education and effort, but it’s worth it!

On Jun 16, 2010 at 10:30-11:30am PST / 1:30-2:30pm EST, I till teach an online course for the Insurance Academy sharing the “must-know” steps to blog success, easy ways to use assets you already have within your organization to support a successful blog and giving you ideas on how to make your blog build your credibility, visibility and sell-ability to boost your book of business.

You can learn more about the course by clicking this link and in the true intention of blogging, you are welcome to post questions here!

Blogging can boost your credibility, visibility and sell-ability, it’s just a matter of committing to learning how.

Lorrie Thomas, M.A. is The Marketing Therapist. She is a speaker, trainer, marketing expert and CEO of Web Marketing Therapy, a boutique web marketing agency and training company that diagnoses, prescribes and guides healthy marketing solutions. Her success-backed approach to web marketing empowers professionals to create scalable web solutions that brand, build and boost business. She teaches Social Media Marketing, Search Engine Marketing, Web Marketing Applications and Web Analytics workshops for corporate and small businesses through UCSB Extension and UC Berkeley Extension. She is an Academy of Insurance Faculty member. Ms. Thomas was on the founding team at ValueClick Media. She is currently authoring The 36-Hour Guide to Web Marketing for McGraw-Hill. She has a lot of healthy marketing advice on her blog at www.webmarketingtherapy.com/blog

Most people adopt a "no news is good news" attitude when it comes to performance feedback. Thus, no feedback is interpreted as a positive. But sometimes this really is not the case. Because managers are uncomfortable sharing negative feedback, performance issues and behavior problems often go unaddressed.

Truthfully, most people would rather receive the honest feedback, no matter how difficult it is to hear, than continue being an underachiever and ignorant of any problems. I believe that people losing their jobs over problems they could have corrected had their manager only told them about the issue earlier in the process is one of the greatest failures in leadership.

Believe me, I understand why managers are hesitant to address issues when they see them. During my human resources career I have taken part in hundreds of counseling conversations, so I know firsthand how incredibly uncomfortable and awkward it can feel, and how there may be times when you wish you could just indefinitely avoid giving the feedback. Sometimes managers believe that if they don't make a big deal out of an issue, the situation will correct and resolve itself – given enough time.

Unfortunately, the opposite is usually true. Tolerating or avoiding an issue or behavior just makes it that much harder to address and correct it in the future. The passing of time typically exacerbate issues leaving you with a bigger problem to deal with in the end. In reality, people rarely resolve their performance and behavior issues on their own without coaching or managerial intervention.

Here's the deal. If you manage people you absolutely need to provide your team with direct and honest feedback regarding their performance. It is your responsibility as their leader. By addressing issues in a timely manner you allow people the opportunity to correct behaviors and improve performance before it gets to the point that it detracts from the team's success and becomes job threatening. It is also one of the skills that will help to distinguish you as an exceptional leader.

I remember my first managerial position. At 22 and fresh out of a management training program, I was working for a large insurance company in their policy issuance department. I moved from being a trainee to instantly having 30 people report to me. Most were twice my age with a lot more experience and knowledge than I had and I was anxious about the prospects of having to give my team performance feedback.

I vividly recall the first time I gave an employee constructive feedback. She looked me dead in the eye and said, "I have a daughter your age and I don't let her criticize what I do, what makes you think I am going to accept it from you?" That was an excellent question, one they hadn't covered in my training. It took me some time to understand how essential the feedback process is and I'd like to share with you what I learned about the importance of giving people honest feedback.

Why Do It?

Providing your employees with feedback regarding their behavior and performance is truly one of the greatest gifts you, as a leader, can give them. Even though there may be times when they don't want to hear what you have to say, they will ultimately respect you for your honesty.

As a leader, you receive a number of important benefits by engaging in the feedback process.

>  It builds trust. When you provide honest feedback to someone you are showing them that they matter as a person, that you care about their success and that you have their best interest at heart. It is very hard to tell someone they are underperforming and if things don't change, they may lose their job. It’s even harder to hear it. But having been in hundreds of those conversations over the years I can tell you that 99 times out of 100, after the message has had a chance to sink in, the employee is grateful their manager had the courage to be honest with them. And that helps build deeper levels of trust.

>  The problem can be corrected. Seems obvious, but people can't correct a problem if they don't know they have one. Some manager's fall into the trap of thinking their people can read their minds. If you are unhappy with your employee's performance or their behavior, you absolutely have to verbally tell them. Don't be like one manager I worked with who said to me, "Oh, they know I am unhappy, I gave them a look." Don’t assume your people can accurately read your body language or can get your subtle messages buried in a joke or sarcastic comment. Address the issue directly so that they have an opportunity to correct the situation.

>  The more you do it, the better you will get. Like any other skill, practice will help to improve your delivery style and confidence level. There are definitely strategies and tools you can learn that will make it easier to have the tough conversations and you should take advantage of all the great resources out there. Your goal is to provide the feedback in a way that is honest and direct, while demonstrating tact, compassion and respect for the employee. It is not uncommon for employees to display emotions or try to distract you from your message during the conversation. The more you see people's defense systems at work, the better you will be at disarming them and keeping the conversation on track.

>  Your team is watching you. Co-workers generally identify performance issues well before a manager is aware of them. Once they know that you know, they will be watching to see what you do. If you do not address issues that are detracting from the team's success, you will begin to lose the trust and loyalty of the team, and they will resent you for making them carry a greater share of the workload. I am not suggesting that you make your conversations public as privacy is at the core of trust on your team, but they will know if you are actively coaching and counseling a member of the team. In fact, it is often the underperforming team member themselves who shares the information in an effort to process the situation or garner support.

>  Your boss is watching you. One of the most common reasons I see for managers being held back from promotional opportunities is their failure to effectively deal with performance or behavior issues. By allowing issues to continue, you are in essence saying to your boss that you are not in control of your team. People who are truly misbehaving will be empowered by your lack of action; and, like a disease that goes untreated, they will infect morale and eventually cause serious damage. Show your boss that you have the courage and discipline to lead your team by addressing issues “head on” and in a timely manner.

 If I had to name one quality that separated great leaders from average ones, it would be their attitude towards coaching and providing their team members with honest feedback. Great leaders constantly provide feedback and engage in ongoing coaching and development with their people. This also includes positive feedback, a powerful, often underutilized tool for reinforcing behaviors and motivating employees. If you are frequently proving lots of good praise and positive feedback, you will never need to worry about "beating someone up" when you have to address an issue.

So, I guess that leads me back to my original question, when was the last time you gave your people feedback? Hopefully, if there is a conversation you've been putting off, I've helped you to appreciate the value of working through any personal discomfort and addressing the issue head on. Not only is it the right thing to do by your employee, but you will become a better leader for it.

Kathy Ryan is President and founder of Pinnacle Coaching Group LLC, a coaching and consulting company committed to helping organizations and individuals in the insurance industry reach new heights in professional development.   PinnacleCoachingGroup.com

Belief in and dependence on the lie can financially harm the insured far more than the additional premium necessary to cover the exposure masked by the myth. But be warned, exposing these, or any, insurance lies will lead to charges like, “You’re only trying to make more money off me.” Or, “Well that’s not what ‘so-and-so’ told me.”

Remember, “so-and-so” is not the insurance professional; further, the mere fact that a multitude of people believe in a lie or myth does not change or alter reality. The agent’s job is twofold: 1) to ferret out and expose these lies to the client; and 2) be prepared with the factual data (policy language) and anecdotal evidence (court cases, etc.) necessary to convince the client of the truth. (Stories work best.)

Beyond the non-insurance “so-and-so’s” spreading these lies, there are also agents perpetuating some insurance myths. When insurance agents or other so-called “financial experts” put their seal on such harmful lies, correcting the problem is that much harder. Lack of knowledge or dependence on what the agent heard someone else say without checking the facts themselves are the two main causes an agent might pass along false information.

Following is a short list of myths, legends and lies told by and believed by insurance clients. Some of these are the result of just plain ignorance (not stupidity, just lack of understanding); some are the result of an “expert’s” faulty advice; and a few are actually promulgated and spread by insurance professionals. The list is far from all-inclusive.

“If I don’t have anything, they (the plaintiff, lawyers and court) can’t get anything; you can’t get blood out of a turnip.”
Want to bet? The belief that an at-fault individual cannot be financially harmed because they don’t have much is one of the most insidious lies conceived by its originator. Future wages can be attached; possessions can have liens placed against them, etc. Many states don’t allow the court to take someone’s house in settlement, but the at-fault party will be unable to amass much beyond the house until the debt is satisfied. A lot of what can be done might be subject to state law, but the pound of flesh will somehow be exacted.

“There is no need to purchase liability limits higher than my net worth.”
A slightly smarter version of the lie revealed above. A person’s net worth is the value of all they own minus all they owe; why should it be the magic number, that’s not all the attorney is going to ask the court to award. More than one individual with a net worth of $250,000 (for example) has lost a $1 million negligence suit. A rule of risk management is, “don’t risk a lot for a little.” Umbrella and excess policies are very inexpensive bordering on cheap compared to the limits that can be purchased – invest the money in the protection.

“That’s why I buy insurance.”
Context of this statement is the basis for its problem. If the insured has done all he can reasonably do to avoid a loss or injury (to the point of maximum benefit without undue burden), then there is nothing intrinsically wrong with this statement. However, if this statement is made because the insured is unwilling to take any or very few steps necessary to reduce the potential for injury or damage to persons or property, then his attitude has morphed into a moral hazard. While this may not be a limits or coverage myth, it is a statement that should make the agent question whether or not this is an insured with whom they want to do business. Additionally, claims submitted by such individuals may need to be viewed with an eye towards possible irregularities.

“Corporate status will protect me from liability; I’ll just declare bankruptcy and shut down.”
Courts can and do pierce the corporate veil in small, closely held corporations. Not being able to provide legal advice (which is a disclaimer agents should provide), this is not to be construed as legal advice; but do not let a statement such as this one go by unchallenged. Governance and tax considerations should drive the choice of a legal entity-type, not protection against personal liability. A one- or two-man corporation can very likely expect to see the veil of corporate protection removed if the injury or damage is severe enough. Many insureds use this myth to avoid purchasing an umbrella or excess policy. As stated above, don’t risk a lot for a little; find court cases where the veil has been pierced and the affect on the owners.

“Insurance is all the same.”
This myth may be the hardest to overcome. GEICO, Progressive, Allstate and others have effectively convinced our clients and the insurance-buying public that insurance is all about price. Even we insurance agents have contributed to this lie. My first phone calls to prospects began with, “I’d like to see if I can save you money on your insurance.”

Insurance should be about the protection provided not the cost. That is not to say the cost should not be considered, but we must remove the idea from our client’s minds that it is all about cost. Insurance not only protects the insured’s stuff, it also protects the insured’s revenue-generating capacity; and insured’s want to protect their revenue and their revenue-generating capacity.

Agents must, somehow, remove cost from the equation and replace it with value. I recently challenged an agent saying that I can ALWAYS build an insurance package at a lower price than anything he can offer; but my follow-up question was, “but will it provide all the necessary protection?” Overcoming this myth will require a similar challenge to our insureds; remember the fear of loss is often greater than the desire for gain. A poorly designed insurance program (i.e. the cheapest policy) can cause a major loss in the insured’s bottom line (the one looked at and depended on most heavily). Show the insured how the program protects the bottom line, not how it lowers expenses.
 

Access a list of all of Chris's "On Demand" classes here

Carriers such as GEICO, Progressive, Allstate and others are playing to the belief that insurance is all about the visible premium – the “price.” But is it the price or the cost of protection the insured needs to calculate? Insureds must understand – or be taught – that the premium (price) is only part of their “Total Cost of Risk.”

Every insured is subject, in varying degrees, to the “total cost of risk” concept, from the smallest personal lines client up to the largest Fortune 100 Corporation. Six “costs” in addition to the premium combine to develop the insured’s true total cost of risk: 1) Deductibles/Self-Insured Retentions; 2) The cost of uninsured and/or self-insured losses; 3) Legal costs; 4) Loss control and safety costs; 5) Claims management; and 6) Opportunity costs.

Deductibles and Self-Insured Retentions

Premium savings is often accomplished by increasing a deductible or self-insured retention (SIR). But any visible premium savings must be weighed against the invisible “out-of-pocket” cost directly related to the deductible or SIR. The Price:Cost comparison is easy with smaller clients that have relatively few losses. A small commercial client, for example, may enjoy a premium savings of $2,000 by increasing its property deductible to $5,000 from $1,000; but one loss could “cost” the insured $3,000 more than staying with the lower deductible.

The Price:Cost comparison is complicated when the premium difference is in the multiple-thousands of dollars range. Successfully calculating the true cost savings requires an analysis of the loss history and the development of loss projections. While there is no guarantee that what happened in the past is going to happen in the future, as all losses (past and future) are random events, it’s the only way to develop any comparison.

Larger corporations are major proponents of high deductible programs because there is the immediate premium savings (as seen on the balance sheet). But when compared to the actual cost of loss experience such a plan may be more expensive (but the cost may be spread over multiple accounting periods).

Basically, visible premium savings are eaten away by the “invisible” costs of deductibles and self-insured retentions.

Uninsured and Self-Insured Losses

In an effort to cut insurance costs, insureds may intentionally or, worse, unintentionally self-insure certain risks. Before implementing intentional self-insurance there must be careful study of loss frequency and, more importantly, loss severity. Unintentional self insurance is the result of coverages being chopped in an effort to lower the premium.

Any out-of-pocket expense related to self-insurance is part of the insured’s total cost of risk. Like the use of deductibles/SIR’s, these may push the cost of risk beyond the pre-change price of insurance.

Legal Costs

Defending uninsured or self-insured events or losses can be expensive. The cost of defense counsel can devour any premium savings enjoyed by self insuring. Legal cost as part of the total cost of risk is, on one side, a function of the two previous decisions.

On its other side are the legal costs incurred to avoid a financial loss. This includes the cost to develop proper contractual risk transfer mechanisms and employee manuals (just two examples).

Loss Control and Safety Costs

In an effort to avoid or reduce loss, some insureds may invest in loss control and safety. This includes safety devices such as sprinkler systems and safety equipment like safety glasses and fall protection. Granted, some of these are required by regulation, but such costs arise out of the inherent risk of the operation and are thus part of the “total cost of risk.”

Claims Management

Losses subject to a self-insured retention, self-insured losses and uninsured losses must be managed by someone. This someone may be an internal employee designated as the claims administrator or it may be an outside administrator – often know as a third party administrator (TPA).

Although the expense of the internal employee may be captured under a separate line item – payroll expense – the cost is still a part of the total cost of risk. TPA expense is also a part of the cost.

Without either of these individuals available, the cost of a single loss could escalate beyond what it should be (especially in workers’ compensation), catapulting the total cost of risk far above the price of traditional insurance.

Someone has to manage claims and the cost associated make up part of the total cost of risk.

Opportunity Cost

A somewhat subjective cost is the opportunity cost. In order to manage a non-traditional (or even traditional) insurance program requires that resources be taken from other areas of the operation. These are monetary and time resources.

The insured can choose to pay a higher premium and allow the insurance company’s personnel to do the work; or they can choose to do some parts of it themselves. This comes back to a price:cost analysis.

Payroll and time costs are a factor in the total cost of the insured’s risk.

Price vs. Cost

Insureds can ALWAYS find a lower price, but at what COST. Understanding the Total Cost of Risk concept is important to both insureds and agents. Being able to distinguish between the two can save insureds in the long run.

Don’t misunderstand, there is a place for alternative programs and even some price comparison among the less sophisticated coverages; but don’t ever let the insured, or yourself, be fooled into believing that insurance is all about price.