IRMI Update—Issue #139
An E-mail Newsletter for Risk and Insurance Professionals
ISSN: 1530-7948
June 21, 2006
In This Issue
Colleague,
We have begun the registration process for the 26th IRMI Construction Risk
Conference, and more than 559 risk and insurance professionals have already
signed up. This year's conference will take place in San Diego on October 9–12,
and will feature keynote addresses from Willis Group Holdings Limited Chairman
and Chief Executive Officer Joe Plumeri and BE&K Chief Executive Officer Luther
Cochrane. Twenty-nine seminars and workshops covering everything construction
from additional insureds to wrap-ups will be presented by 58 speakers.
Last year we sold out, and we have limited capacity again in San Diego, so
sign up now if you plan to attend. Learn more or register.
I am also happy to announce that 418 risk management and insurance professionals
have earned the Construction Risk and Insurance Specialist designation through
the online CE program that we launched last year. Attendance at the Construction
Risk Conference will count toward the reaccreditation requirement that designation
holders must meet. Learn
more about the five core courses and three optional construction risk courses
of the CRIS program.
Thank you for choosing to be part of the IRMI subscriber family. We sincerely
appreciate your trust and friendship.
All the best,
Jack
Jack P. Gibson, CPCU, CRIS, ARM
President
IRMI
Require Contractors PL Insurance Only When Truly Needed—Over
the past few years, contractors professional liability insurance has become
a prominent insurance coverage for contractors. Many project owners have begun
requiring professional liability insurance not only for all design professionals
but for all of the contractors on the project as well. This presents a unique
problem for those contractors not performing true professional services, who
ask: "Why or how do I buy the coverage when I don't even have an exposure?"
Many times this, as well as cost, is argued to negotiate the requirement out
of the contract. In those instances where it cannot be negotiated out, contractors
will attempt to secure the coverage. If they can get it, they evidence coverage,
perform the work, get paid, and everyone is happy. However, it would be prudent
for all to understand that in the event of a claim against that policy, there
is a very good chance it will not be covered simply because the contractor's
work does not meet the definition of "professional services"—"those services
that the insured is legally qualified to perform as an architect, engineer,
surveyor, or construction manager."
It's ironic—by obtaining the insurance, the contractor essentially has no
coverage but benefits by getting the job. The owner's representative, thinking
he or she is doing good for the organization, inadvertently increases the cost
of the project with no added protection. Requiring professional liability coverage
only when it is truly needed will reduce the overall cost of insurance on the
project—and this could be significant, since professional liability insurance
is fairly expensive. In addition, doing so expands the owner's choice of qualified
construction firms for the project.
By: Jeff Slivka, ARM, Senior Vice President
New Day Underwriting
Bordentown, NJ
www.newdayunderwriting.com
Suggest a Risk Tip. Send us a practical tip (less than 300 words) for identifying and managing risks,
buying insurance, managing claims, or filling gaps in insurance coverages. Submit your tips. We'll
acknowledge your contribution as we did for Jeff.
There are now over 800 risk management and insurance articles on IRMI.com.
Below you'll find summaries of some recent additions with links to the articles.
You can now secure your spot at the 26th IRMI Construction Risk
Conference in San Diego, October 9-12. Register online and save $125 for
this premier symposium on construction insurance and risk management. Last year's
Conference sold out—so do not delay. The Gary E. Bird Horizon
Award will again be presented at the Conference, and now is the time to
make your nomination. It's easy to qualify you or your client's innovative technique
or process. Learn more and
be recognized as a leader in construction risk management!
In IRMI Update 138, Jack Gibson asked readers
what the insurance and risk management industry can do to compete with all other
industries for the shrinking American talent pool. As expected, the suggestions
were varied and constructive. Some of these responses are reprinted below.
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The insurance industry as a concept is lacking the "sexy" patina necessary
to recruit the best and brightest. The industry, which includes all facets,
agents, brokers, companies, and the other support disciplines, has a long
way to go to improve its image in the general public. After Spitzer's broad
and unnecessary attack on the industry, and after Katrina, I suspect that
insurance ranks with used car salesmen as a profession eagerly anticipated
as a career. Until the public understands the vital role insurance plays
in our economy and everyday lives, the best and brightest are sure to go
elsewhere.
—Stanley Lipshultz, Interisk, North Bethesda, MD
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The company I work for is experiencing this same problem. One solution
that has worked for us is letting retired underwriters help us with our
work on a part-time basis, even from their own homes through the Internet.
Personally, I think we should emphasize more education and promotion of
the staff we have. If someone chooses to work here, we should encourage
them to get involved in insurance education to better themselves and our
company. If properly motivated, someone who starts a job in our mailroom
today could be an underwriting manager before I reach retirement age.
—Patty Black, Commercial Underwriter,
Grange Mutual
Casualty Co., Columbus, OH
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Hiring and keeping young people is a major problem. One thing we are
doing is increasing our intern programs for college juniors. The real good
ones that think they like the insurance business are ones we want to hire
when they graduate. We are offering them full-time jobs at the end of their
intern period so they can go back to school knowing they have a job upon
graduation. We hope that improves our retention ratio of new college hires.
This is only one piece of the total package, but it's a new approach for
us.
—David Stewart, Manager,
St. Paul Travelers, Dallas, TX
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I have been preaching to deaf ears the need for the education and training
of insurer claims and underwriting staff since I started my own practice
in 1979 and before. I have also done so in my IRMI.com columns.
I am dumbfounded at the lack of interest of insurers to adequately train
their personnel even when compelled to do so by the state. For example,
California requires annual training of all claims personnel about the Fair
Claims Practices Regulations and fraud training of all integral anti-fraud
personnel. I created a computer based training program to comply with these
regulations, and the silence of the response has been deafening.
Insurers have closed down their claims training facilities and try to
do their training by osmosis. It doesn't work. It's time that insurers started
looking past quarterly reports and try to have long-term, well-trained,
and experienced employees. Everyone I talk to in the business is having
a difficult time finding competent people or those who are even willing
to learn.
—Barry Zalma, Lawyer,
Barry Zalma, Inc., Culver City,
CA
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You really touched a nerve on this one. As you know, I have an executive
search firm specializing in insurance. The talent pool is getting shallower
every day. Very few companies seem to have any interest in investing in
human capital. Unfortunately, the industry is largely comprised of a "me-too"
mentality. No one is willing to take the first step. I believe many industry
leaders have concluded that the people they potentially invest considerable
money in will simply be recruited by their competitors once the training
is complete. As they all sit on the sidelines and ponder the problem, no
one is willing to take the first step. I agree that the institutions that
have an insurance and risk management curriculum provide fertile territory.
The selection process should follow a thoughtful and deliberate evaluation
of the candidates. I hate to be a pessimist, but I don't see the industry
investing in the kind of management training that you suggest. I think we
will continue to see the industry keep its head in the sand for the foreseeable
future.
—Barney Mercer, Principal,
Mercer & Associates, Dallas, TX
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Don't forget the liberal arts majors when recruiting for new employees
to the industry!! I was one, and I've now been in insurance for 30 years
and still find ways to have fun with it. We know many things: we are curious,
resourceful, flexible, and know how to look things up if we don't know the
answer. One of the most amusing parts of pre-meeting chit chat among us
boomers was to hear about each others' college majors and how we ended up
in the industry. There were history, philosophy, anthropology, journalism,
English, and French majors—now underwriting, reinsuring, and risk managing
global accounts. Oddly enough, we all learned how to read balance sheets,
perform financial analysis for decision making, learned how to talk business
with CEOs, CFOs, and follow an engineering evaluation of a sprinkler system
plan. We are pretty versatile folks and tend to have a love for learning.
CPCU and ARM coursework was a good fast track to the bare essentials. The
rest was up to us. So please consider being more expansive in your description
of candidate sources. Some electronic resume screening programs will only
recognize business major buzz words—so many very motivated and intelligent
candidates are never considered. My mentors were among the most respected
insurance people on the West Coast, and I learned about insurance and risk
management the old fashioned way—at somebody's desk side.
—Robin L. Foorman, CPCU, ARM,
Insurance & Risk Management
Consultant, Walnut Creek, CA
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The availability of quality and qualified workers is a huge looming problem
for virtually all industries. We, on the production end of the insurance
industry, have a two-fold problem. We need trained or trainable technicians
and trainable sales-capable, self-starters to continue growth of our brokerages.
Finding self-starter-type people with both sales and technical capabilities
is a real challenge. Collectively, our industry needs to begin funding meaningful
scholarships in risk management to push growth and interest in our industry.
When you really think about it, the insurance industry ... makes our
economy function and provides vital services that otherwise would not be
possible. That's pretty exciting and important! How about a major national
TV ad campaign promoting this concept?
—Tom Davis, President,
Davis American, Ltd., Oak
Brook, IL
-
From a claims-centric point of view, we will not retain new professionals
so long as they are treated as process workers in an electronic assembly
line. We can start by staffing to allow for reasonable pending levels, not
draconian numbers that discourage even the most diligent. We must then demand
that supervisors and auditors focus on providing constructive criticism
to the team, and not play a "gotcha" game of failure analysis. We should
also encourage our people to participate in local and regional claims associations—many
of those organizations have failed (or have been hijacked by vendors) due
to the lack of carrier and broker support.
These actions (and others) won't lead to immediate "metrics" that we
are so driven to produce, but will allow us to turn our industry over to
a new generation who have amazing skill sets that did not even exist when
us "seasoned" veterans began. Ultimately, if we encourage and reward good
people skills, we should be able to retain the best and brightest staffs
in to the future.
—Ron Musto, Senior Claims Coordinator,
InterWest
Insurance Services, Inc., Folsom, CA
-
The industry has more minefields than most of us
are willing to acknowledge with respect to the future. The industry has
an image issue which will make it difficult to attract the up and coming,
youngest and brightest; we will need a very focused PR campaign. As a result
of the demographics, the industry will have a future cost issue—any time
there is supply shortage, prices increase. A successful company will not
replace staff on a one-to-one ratio. Rather, it will create and implement
a strategy to enhance productivity.
—Audrey Rudberg, Insurance Manager,
Cargill, Minneapolis, MN
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Jack, the problem of the industry, from both the brokerage/agency side
and underwriting, is the perception of the industry—which has not been helped,
especially over the past 5 years, with all of the suits, fines, and criminal
charges levied against what has become a wide variety of industry personnel.
This, coupled with the reduction in workforce, makes potential new candidates
somewhat hesitant to consider either side.
A large part of the woes continues to be the traditional securities marketplace
whose only concern is a company's ability to make quarterly, semiannual,
and annual numbers. In keeping with that philosophy, brokers/agents and
insurers continue to knee-jerk their way through cost cutting, which usually
falls on the head of employees.
Further, and especially within the brokerage/agent community, there is
a perception that you can't make a reasonable income unless you are a manager,
or like title, or the few and far between producers of substantial business.
This leads management into critically poor decisions on moving employees
into positions that they are either ill qualified for, or don't want. I've
long been an advocate in paying brokers/agents incomes which are appropriate
for not only the job they are doing, but for the retention of their clients
and the ability to negotiate new business. Unfortunately, the industry continues
to have blinders on. A whole new ideology really needs to be put in place.
There are major changes coming within the next half decade, and it is unlikely
that the industry as we now know it, is ready.
—Peter Polstein, Retired, Somers, NY
-
I agree with Jack's comments on training. Unfortunately, in an effort
to reduce the expense ratio, formal training programs have been reduced
or eliminated at a number of companies. Lack of training and succession
planning will certainly have an impact as the Baby Boomers retire. Many
of these Baby Boomers had the benefit of starting their careers with organizations
that valued training and education as key corporate necessities. Also, such
programs may have had an impact on the recruitment of new hires a generation
ago. Those companies that still value training and education will attract
and retain the best people in this very "knowledge based" industry.
—Steve Foster, Assistant Vice President—Contract
Writer,
Chubb, Whitehouse Station, NJ
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I couldn't agree with you more. Most people you can attract to the agency
size of the business are often ones without a college degree. Even those
placed by experienced "headhunters" leave much to be desired in the way
of work ethic, focus, ability or desire to learn, etc. The knowledge level
amongst desk underwriters at the agencies is pathetic. In general, training
is always the thing we never have enough time to do in any organized fashion,
and yet it is decidedly one of the most important for long-term excellence.
—Phillip Lieberman,
Lieberman Consulting Services,
Caldwell, NJ
-
In the retail end of the business in South Florida the majority of employees
are overworked, underpaid, and poorly trained. So what the consumer gets
is not very good. Not only are we looking at a crisis in the future, we
are looking at a crisis now—but agency management apparently is not willing
to address it. Anyone with a college degree is not interested in going to
work in an agency as a technical assistant at $35,000 year. Experienced
people move predominately for money, so there is a lot of movement in agency.
The solution from the agency end is to recruit, hire, train, and pay good
people. Historically, they haven't done that.
—Judi Richards, Account Manager,
Tanenbaum-Harber
of Fla. LLC, Miami, FL
-
The minefield is real and expensive. Inexperience and lack of technical
skills are reflected in E&O and extra-contractual costs. Those costs are
staggering. The producer pre-licensing programs in most states involve a
32- to 40-hour classroom work with curriculum written on a fifth- and sixth-grade
comprehension level. The business of risk and insurance is an enormously
complex industry involving contracts requiring upper division undergraduate
or graduate level reading comprehension.
The risk and insurance community seek to be treated as professionals,
but far too many fail to develop even basic technical skills. Efforts to
strengthen state licensing requirements are easily defeated by the industry
in state legislatures. Far too many firms do not encourage, or financially
support, formal training programs.
What is the cost of E&O litigation and extra-contractual disputes that
could have been avoided had the individuals involved had basic skills? How
do you defend an experienced producer who can't explain coinsurance in their
deposition?
The cost of skill development is borne in one of two ways. One is the
nominal cost of legitimate career development. The more expensive form is
cost incurred in resolving disputes in the courts.
—James R. Mahurin, CPCU, ARM,
Risk Management Consulting,
Franklin, TN
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Until the insurance industry gets rid of what I call the "McDonald's
Philosophy," particularly in the claims area, when it comes to employees,
the industry will never be competitive with other industries. What does
this mean? It means that insurance companies are going to have to start
offering—and maintaining—a competitive salary structure. Too many companies
take the attitude that if they get a maximum of 5 to 7 good years from an
employee, that's enough—let them go. That attitude is reflected in the fact
that claims operations are ALWAYS the first area for the latest round of
cost-cutting, even when adjusters are already doing the work of two or even
three individuals.
Training is another area. Who wants to stay in an industry where the
attitude is to send the new adjuster to a week-long "shake and bake" course
(which mostly concentrates on personnel policies and what side of a file
jacket the forms are supposed to be filed in), and drop the adjuster into
a desk with 200 plus claims files with instructions to "Start handling claims."
Do companies send these people for any kind of legitimate training? Seminars?
Conferences? Count on it, the response is almost always that it is too costly.
Young people quickly pick up on this and figure if the company (and the
industry) don't give a darn about their development, why stay in the industry?
Bottom line: Until there is a massive change in attitude in higher management,
the claims department will always be playing catch-up all vis-a-vis other
industries when it comes to attracting—and keeping—good younger employees.
—Joseph Martan, Staff Counsel,
Property Loss Research
Bureau, Downers Grove, IL
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Jack, I couldn't agree with you more about the need for bright, creative,
and energetic young people into our industry. You may want to provide a
link at your site of the colleges/universities that offer course work in
risk management and insurance. I'm sure that some of your readers may not
be aware of the academic institutions in their area that produce graduates
looking for a career in risk and insurance.
—William Feldhaus, Associate Professor,
Georgia State
University, Atlanta , GA
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I understand your focus is on getting new blood into our industry but
nothing was said in your article about retaining the Baby Boomers' experience
by being flexible in work schedules. The truth is that many of us BBs must
work longer then the previous generation. You can site healthcare cost,
lost of retirement income from the corporate greed we all have seen in the
last several years, general increase in cost of living expenses, whatever
reason you want to pick. You should also recognize that we want to stay
mentally active! But putting in a 40-50 hour week is not something a lot
of people want to do in their 60s & 70s!
If you can encourage the insurance industry to recognize & provide alternate
work schedules, this could/would fill some of the need for staff. Our industry
should also encourage mentor programs that would allow BBs to share industry
knowledge and the New Bees sharing their technology knowledge. You know,
the old WIN-WIN type of thing.
—Joyce Webb, Senior Account Manager,
Agri-Business
Insurance Services, West Des Moines, IA
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The editorial was right on. We need to encourage everyone to obtain more
insurance/risk management specific education. We also need to give more
recognition to those who have achieved the CPCU designation as well as others
such as the ARM, ASC, etc.
—William Tappler, Associate Director of Insurance,
New York University, New York, NY
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