IRMI Update—Issue #143
An E-mail Newsletter for Risk and
Insurance Professionals
ISSN: 1530-7948
August 23, 2006
In This Issue
Colleague,
In June I had the good fortune to attend the annual conference
of the Society of Insurance Trainers and Educators (SITE) in New
Jersey. Since my career focus has not been on training, this was
an out-of-the-box experience for me. Here are a few things I learned
and conclusions I drew as a result of attending:
- The most successful U.S. corporations spend
more than $1,600 per employee per year on training,
while the overall industry average is less than
$700.
- In general, insurers seem to be increasing their
training programs as compared to a few years ago
(but are way behind what they were doing 20 years
ago).
- Some insurers obviously have "learning cultures,"
and it is the more successful insurers that seem
to have them.
- Seventy percent of training is compliance based
and has no impact on productivity.
- People have moved from memorizing facts to "fingertip
knowledge," wherein they rely on their computers
to pull the most up-to-date knowledge from their
Internet and Intranet resources (like IRMI Online
and IRMI.com).
Less macro, but another important point that I picked up and
will use is this: studies have shown that the actions managers take
before and after their employees attend training classes will have
far greater impact on the success of the training than what happens
during the training itself. To help assure effectiveness, managers
should work with their people in advance to show support for and
set goals for the training program. They should then follow up after
the program to assure the knowledge is being applied. Compare this
approach to the typical manager's statement upon the employee's
return to the office: "Hope you enjoyed the class, now it's time
to go back to work."
Overall, this was a very refreshing meeting, and I found it to
be the warmest, most welcoming group I think I've ever encountered
at an industry event. Anyone with responsibility for training—or
those, like me, who just do a lot of public speaking—should consider
joining SITE or attending its annual meeting. Learn more
here.
In case you didn't notice, we recently surpassed 800 articles
in the www.IRMI.com site, all available to you at no charge. We
at IRMI are proud to offer this service. Thank you for subscribing
to IRMI Update and for your confidence in our editorial team.
Have a great day.
Jack
Jack P. Gibson, CPCU, CRIS, ARM
President
IRMI
Risk Management Takes a Top-Down Commitment—These
days, it seems all we hear about in the risk management arena is
the advent of enterprise risk management. Now, I am sure that the
qualification of risk management on all levels of an organization
has great merit, and that the quantification at each level is very
important.
The issue I have is the same issue that any good risk manager
has with this premise: Risk management, to be effective, must be
identified at all levels of the organization, or it won't work.
It has always been like this, way before we started calling it "enterprise
risk management." If your company does not have an awareness of
the need for risk control in the backroom as well as the boardroom,
then production needs will outweigh all concerns, and preventable
losses will occur.
An owner and chief executive ask me why I thought the company
wasn't making any money. I replied that the organization was motivated
by production at all costs. "Well," came the reply, "if we don't
have production, we have no company." I replied that it was not
the production side of the equation that concerned me, it was the
"at all costs" part that was troublesome.
Only with a top-down commitment can a risk management program
succeed at all levels of the organization. The risk manager who
has that commitment in words and deeds will be able to elicit systematic
changes in the production chain, leading to a healthier workforce
and reduced costs. If not, then let's face facts—at that point,
all you're really doing is insurance.
By: Rick Vassar CPCU, ARM, AIS, ARM-P
The Vassar Group, Sterling, VA
Suggest a Risk
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Submit your tips.
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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.
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and learn more.
In IRMI
Update 142, Editor Jack Gibson discussed the importance of the
umbrella/excess liability program for risk professionals. He asked
readers for their views on the importance of umbrella policies and
the processes used to review umbrella/excess liability coverage
terms and conditions. Following are a few of the responses received.
-
I have to agree with Jack on his umbrella comment.
In selling umbrellas, I use a real example from
my own career. I had not been on the retail sales
side of this business very long (I started 34 years
ago as an underwriter) when I called on a small
TV/appliance store that also did some repair work.
At the time, this man and wife team only had a $300,000
general liability policy. I convinced them that
they needed a "sleep at night" umbrella policy and
sold them a $2 million limit.
Not long after I delivered their policies, I
received a call from the wife thanking me for talking
them into purchasing the umbrella. She said they
were lying in bed the night before and remembered
my "sleep at night" sales pitch and they were actually
able to go to sleep. It had been a very stressful
time for them. You see, they had recently sold and
installed a Zenith TV which happened to be the TV
set that supposedly caught on fire and caused a
multimillion dollar fire loss at the Texas State
Capitol. Although, Zenith Corp. "stepped up" and
backed their product, my client was still at risk.
This incident reminded me of exactly why I had
decided to stay in the insurance business and get
into sales and insurance counseling. It's probably
just an ego thing, but I felt people needed me to
give them good advice. My decision was not based
on money, because I knew there were many agents
that were much better at the sales process. I just
wanted to give the best advice I could, and that
way, I could "sleep at night."
Yes, there other other lines of insurance besides
liability that are important, but many other losses
that can be covered by insurance can also be fixed
or replaced by borrowing money for the replacement
or repair. But it might be very hard to borrow money
to cover a multimillion liability judgment.
Jack, thank you for reminding me of why I continue
in the insurance counseling and sales business.
—Jim Sammons, Insurance Counselor,
Watkins Insurance Group, Austin, TX
-
I agree with Jack's editorial. The umbrella is
the most important coverage for most organizations.
We review the umbrellas with care from one year
to another noting all new forms and deleted forms
on renewals. If the paper changes at renewal, I
like to review using IRMI's umbrella reviews and
checklists from Silverplume. These are very helpful.
—Laura Foust, Account Manager,
Ruhl & Ruhl, Inc., Davenport, IA
-
While the umbrella is an important component
of a properly designed insurance program, most claims
fall well below the attachment point for an umbrella.
In this market, the companies have so restricted
the forms, they rarely provide any true broadening
and are merely excess limits.
—Elroy Bennington, President,
EF Bennington & Assoc. Inc., Lynchburg, VA
-
Since many umbrella/excess forms are on a "following-form"
basis it is essential that the CGL policy be set
up correctly for the risk's needs. The per-project
aggregate or employee benefit liability forms are
optional and need to be added by the broker. Therefore,
if the primary CGL is flawed, so will be the excess
insurance. In addition, a risk must carry CGL before
they can buy excess coverage. For this and other
reasons, I think that the CGL is the most important
policy. This is especially true since a businesses
tort liability can be unlimited whereas, for example,
liability under a workers compensation policy is
limited by statute.
—David R. Doig, CPCU, ARM,
Broker,
Kern Insurance Associates, Inc., Bakersfield,
CA
-
In all my years as a broker and account manager,
I never thought of policies in this way. Umbrella
coverage is very important, of course, but I always
viewed primary policies as equally important. I
also viewed primary coverages as more complex and
more susceptible to error or omission. If there
is a flaw at this level, it is carried over to the
excess layers and "follow form" then has no meaning.
The importance of a particular coverage is best
tested in a hard market, when coverages are scarce
and premiums are excessive. I have suffered through
a few tight markets, and my clients tended to jettison
or reduce their excess layers, rather than sacrifice
their primary protection.
This does not belittle the umbrella's importance,
but does suggest where it stands from the buyer's
perspective.
—Bob Menninger, President,
Commercial Insurance Research, Manchester, NJ
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