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
www.vassargroup.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 Rick.
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.
The Most Comprehensive
Wrap-Up Advice Available—The fourth edition of The Wrap-Up Guide
provides a balanced treatment of the perspectives of both wrap-up sponsors and
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approaches, contract provisions, CIP documentation and administration, and much
more. See the table
of contents 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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