As John Lennon and Paul McCartney could tell you, sometimes you just need a little help from your friends. And in the insurance agency business — where building relationships are key to success — that friend often is more than just a trusted colleague, the person is also a more experienced advisor or mentor.

Some companies have formalized mentorship programs, especially to develop their producers' skills and book of sales. But Roy Little, president and CEO of the Insurance Educational Association, said mentorships don't always need to be formalized educational programs. He has witnessed mentorships take many forms: the natural or unconscious relationship; the deliberate relationship; and the formal program. In all instances, however, the key to finding or serving as a good mentor is to have a natural rapport with the other person, he said.

A Natural Chemistry

In the unconscious relationship, Little said that early in his career a senior person in the company at which he was working took an interest in him, and encouraged him to keep striving. "Instead of following the sort of obvious, step-by-step program to establishing myself, becoming part of the team, and waiting until the next promotional opportunity might come along, this person said, 'Why don't you take on this particular project?' He basically got a chance to see whether I was going to be a clear thinker and good communicator, and I got the chance to say, 'OK, I wonder where this thought is going to take me.'"

As the mentee, Little said this mentorship provided a significant growth and startup experience without being tied to a performance review. Moreover, the mentorship was particularly successful because Little said it formed as the outgrowth of a natural relationship, in which he and the mentor had a natural chemistry and genuine interest in seeing each other succeed.

"If the [mentorship] really works, the mentor is also listening to himself talk and saying, 'Hmm, I could improve this myself," so it should work on both sides," Little said.

Deliberately Seek Feedback

In the deliberate mentorship, Little said he personally sought advice from someone in mid-career, so the relationship was a little more structured than a natural relationship. When the company he was working at merged with another firm, Little said he felt like the influx of new personnel meant it might take him longer to realize his career ambitions. As a result, he asked the advice of a senior person outside of his department to provide a clear assessment of his performance and how he was viewed by others.

"I chose this person … thinking about who knows me in this company at the level that I'd like to get to, but is just outside my line of sight. … It was a situation where I classically said, 'Got a minute?'" Little said. But in that short visit, Little said he learned what others in the company thought of his performance from somebody who didn't have to sign off on his performance. Additionally, he learned that oftentimes, climbing the corporate ladder is about politics as much as skill.

Forming a Formal Program

In the formal mentorship program, Little said his former company's human resources department designed a program to spot and develop future managers. As the mentor in this relationship, HR paired Little with someone aiming for a similar career path. He and the mentee had regularly scheduled meetings — and sometimes specific agendas for their meetings.

Little said unfortunately this relationship was not as beneficial, in part because the mentee did not have clear expectations of what he would gain from the relationship, and also because the relationship between the mentor and mentee felt forced.

"I really don't know if there was any discussion about whether the mentor and mentee might be an appropriate match," Little said. "What I took out of that experience was that the encouragement of mentorship is something that I would espouse loudly, but in order to work, the relationship has to be completely voluntary on both sides. … Unless there's naturalness or chemistry, and the sort of genuine interest in each other as people as opposed to players within an organization, it kind of becomes an imposed requirement, as opposed to something that would be of value to both."

Read more: http://www.insurancejournal.com/news/west/2010/06/14/110692.htm#ixzz0uTOw6VHk

PAY AS YOU DRIVE, PART DEUX

State Farm, the largest U.S. car insurer, is going first.  So much for perceptions that the first company to try this innovative rating technique would be, well, somebody smaller and faster.  State Farm calls the program “Drive and Save.”

The application is under review, California Insurance Commissioner Steve Poizner said in a recent statement.  Mr. Poizner approved the concept last fall (see our first blog, below). 

"It's just common sense that Californians who choose to drive less should have an option to pay less for auto insurance," said Commissioner Poizner. "The voluntary pay-as-you-drive initiative is a cutting-edge program that will allow insurers to offer these plans without compromising consumer privacy. I hope other insurers follow suit and join State Farm in offering this product."

State Farm says that the new policies could roll out as early as September. “It’s a program from an insurance point of view that helps us better match price to risk, and that’s a good thing for everybody,” Devereux said.

Progressive’s “MyRate” pay-as-you-drive coverage, which uses a device to measure mileage, is talking to California now.

PAY AS YOU DRIVE

Okay, we've all been busy with other things over the last year but I'm surprised this one is slipping under the radar.  Last September, California Insurance Commissioner Steve Poizner issued final pay-as-you-drive regulations, which will enable insurers to rate their policies based on actual miles driven as opposed to estimated miles driven.   Have you even heard about this?  Judging from the silence out there, not many have.

I've been watching the success of providers like Zip Car in large cities like Philadelphia and San Francisco.  Customers--mostly city dwellers with limited daily needs for cars--can join up, simply get in the car and drive where they want paying only for the use of the car.  "Pay As You Drive" does the same thing, shifting the fixed cost of insurance to a variable cost just like gas, oil and tires.

This one just might work because technology now allows mileage tracking securely enough to satisfy the crustiest underwriter.

Like all innovations, this is not for everyone:  high mileage drivers will probably want a more traditional policy.  And California is not the first to offer PAYD policies, according to the Environmental Defense Fund:

"PAYD insurance is available in some form in 34 states and in many foreign countries including Israel, the Netherlands, United Kingdom, South Africa, Canada and Japan.

"Given its many benefits, why isn’t PAYD universally available in the U.S.? One reason is that many state insurance regulations do not permit PAYD — either by outright prohibition or conflicting requirements. North Carolina, for example, requires that premium charges be stated upfront, which precludes PAYD charges since they vary according to miles driven.

California is now working on eliminating its barriers to PAYD insurance. The state's insurance commissioner Steve Poizner recently announced his intention to draft new regulations to allow usage-based insurance. 

Texas recently became the first in the nation to have a "by the mile" choice of auto insurance offered by MileMeter. Traditional insurance offers 15 percent or less mileage-based discounts that don’t typically capture the full benefit of driving fewer miles."

The California regulations also allow insurers to offer discounts to drivers who opt to purchase a mileage verification policy. Any auto insurance program, including a pay-as-you-drive program, must be approved by Commissioner Poizner before being placed on the market for consumers to purchase.

If a driver elects to purchase a pay-as-you-drive policy, the insurer would verify the driver's miles through a variety of methods, including odometer readings taken by the insurer or its agents or vendors, auto repair dealers, smog check stations, self-reporting by the policyholder or a technological device placed in the consumer's vehicle. The final regulations explicitly prohibit insurers from gathering location data from consumers for automobile rating purposes through the addition of a technological device. The regulations would not affect existing multipurpose devices such as GM's Onstar system or the use of a technological device as part of an emergency roadside assistance program.

In 2008, the Environmental Defense Fund estimated that if 30% of Californians participate in pay-as-you-drive coverage, California could avoid 55 million tons of CO2 emissions between 2009 and 2020, which is the equivalent of taking 10 million cars off the road. This would save 5.5 billion gallons of gasoline and save Californians $40 billion dollars in car-related expenses. Additionally, the California Air Resources Board has recommended the adoption of pay-as-you-drive as one of the means to meet future climate change gas reduction targets.

As near as I can tell, Progressive and GMAC are offering these products now.  Others are "studying it."

I came across a small article that appeared in “FINS” (a career site by the Wall Street Journal) early this month.   The topic of the article was about standardizing risk manager certifications, and the four which were mentioned were:

-- Financial Risk Manager from the Global Association of Risk Professionals

-- Professional Risk Manager from the Professional Risk Managers' International Association

-- RIMS Fellow from the Risk and Insurance Management Society

-- Society of Actuaries Fellow and Chartered Enterprise Risk Analyst from the Society of Actuaries

Notice anything missing?  The time-honored and very popular Associate in Risk Management was not mentioned in Jeremy Greenfield’s April 1 article, but did appear later in an extended follow up article which differentiated between financial risk management designations and enterprise risk management designations. 

With the recent introduction of the Enterprise Risk course—augmenting the ARM—the Insurance Institutes of America have added currency and depth the ARM designation and we applaud that.  It is an excellent course in itself.

It looks like we are going to see a proliferation of “risk management” designations, no doubt accelerated by the 2008 capital market meltdowns.   We will have to accustom ourselves to understanding (a) the nature of risk being managed and (b) by whom. 

Okay, we've all been busy with other things over the last year but I'm surprised this one is slipping under the radar.  Last September, California Insurance Commissioner Steve Poizner  issued final pay-as-you-drive regulations, which will enable insurers to rate their policies based on actual miles driven as opposed to estimated miles driven.   Have you even heard about this?  Judging from the silence out there, not many have.

I've been watching the success of providers like Zip Car in large cities like Philadelphia and San Francisco.  Customers--mostly city dwellers with limited daily needs for cars--can join up, simply get in the car and drive where they want paying only for the use of the car.  "Pay As You Drive" does the same thing, shifting the fixed cost of insurance to a variable cost just like gas, oil and tires.

This one just might work because technology now allows mileage tracking securely enough to satisfy the crustiest underwriter.

Like all innovations, this is not for everyone:  high mileage drivers will probably want a more traditional policy.  And California is not the first to offer PAYD policies, according to the Environmental Defense Fund:

"PAYD insurance is available in some form in 34 states and in many foreign countries including Israel, the Netherlands, United Kingdom, South Africa, Canada and Japan.

"Given its many benefits, why isn’t PAYD universally available in the U.S.? One reason is that many state insurance regulations do not permit PAYD — either by outright prohibition or conflicting requirements. North Carolina, for example, requires that premium charges be stated upfront, which precludes PAYD charges since they vary according to miles driven.

California is now working on eliminating its barriers to PAYD insurance. The state's insurance commissioner Steve Poizner recently announced his intention to draft new regulations to allow usage-based insurance. 

Texas recently became the first in the nation to have a "by the mile" choice of auto insurance offered by MileMeter. Traditional insurance offers 15 percent or less mileage-based discounts that don’t typically capture the full benefit of driving fewer miles."

The California regulations also allow insurers to offer discounts to drivers who opt to purchase a mileage verification policy. Any auto insurance program, including a pay-as-you-drive program, must be approved by Commissioner Poizner before being placed on the market for consumers to purchase.

If a driver elects to purchase a pay-as-you-drive policy, the insurer would verify the driver's miles through a variety of methods, including odometer readings taken by the insurer or its agents or vendors, auto repair dealers, smog check stations, self-reporting by the policyholder or a technological device placed in the consumer's vehicle. The final regulations explicitly prohibit insurers from gathering location data from consumers for automobile rating purposes through the addition of a technological device. The regulations would not affect existing multipurpose devices such as GM's Onstar system or the use of a technological device as part of an emergency roadside assistance program.

In 2008, the Environmental Defense Fund estimated that if 30% of Californians participate in pay-as-you-drive coverage, California could avoid 55 million tons of CO2 emissions between 2009 and 2020, which is the equivalent of taking 10 million cars off the road. This would save 5.5 billion gallons of gasoline and save Californians $40 billion dollars in car-related expenses. Additionally, the California Air Resources Board has recommended the adoption of pay-as-you-drive as one of the means to meet future climate change gas reduction targets.

As near as I can tell, Progressive and GMAC are offering these products now.  Others are "studying it."

IEA is fortunate to count Allen Leno as one of its senior instructors and course authors.  Allen sheds some interesting light on the lesser-known case of the "Almarez/Ogilvie" rulings recently revised by the WCAB.  In this article, Allen points out that the key problem for claims adjusters and employers is earnings capacity after an injury.  Here is Allen's article:

In Ogilvie, the Board made few substantive changes from its prior decision. The parties must use the RAND methodology and formula which means that the formula from the original decision still applies. The problem is that the RAND researchers did not fully understand the impact of the terminology they used and the Board compounded the problem by failing to consider the impact of events following injury. The Board confirmed that the calculation should consider earnings for the three years pre and post injury. Earnings for the three year period pre-injury should be for a “similarly situated” worker meaning that we may not use actual wages but wages for the average worker in the industry in question in the worker’s geographic area. The real problem is the post-injury earnings which are often zero or are very low because the employee was TTD for a significant portion of the three year period (TD payments cannot be included in the calculation). Thus we would often have to enter $0.00 for the post-injury earnings capacity, giving the worker a 100% earnings loss. This results in a calculated DFEC modifier that can go as high as 6 compared to the 1.1 to 1.4 range in Table A from the 2005 PDRS. Thus we have modest WPIs doubling, tripling, or worse compared to the 10% to 40% increases contemplated by the Table A. The Board does leave some room for contemplation of earnings capacity rather than actual earnings for the post-injury period although when and how substitution is appropriate is vague. Taken as a whole, the Board’s decision suggests that calculating and applying the DFEC modifier is not a simple calculation that can be done by any claims administrator or attorney. The involvement of vocational experts seems a certainty for the foreseeable future.
 
The real issue in the Ogilvie formula is earnings capacity after injury. It seems pretty clear that the Legislature had earnings capacity in mind and the RAND research discusses earnings capacity. Unfortunately, the RAND researchers apparently did not understand that an injured worker is usually not going to be in a position to earn wages until s/he is P&S/MMI. Thus the three year post-injury period should not begin until the employee is P&S – at the very least. We cannot count TTD as earnings and the worker cannot earn wages and received TTD. Beyond that simple fact is terminology itself. We use a DFEC value from Table A or calculate a DFEC value for the modifier. It is a Diminished Future Earnings Capacity modifier NOT a Diminished Future Earnings modifier. A simple example might best serve to clarify the Board’s perceptual error:
 

 Red flags are signs of danger to brokerage firms and agencies, and also to their business customers.  By learning about the new FTC Rule, agents and brokers can help business policyholders ensure that their risk management and insurance plans include protection against identity theft and similar losses caused by security breaches.

 Data security is more than a legal concern; it’s also an important customer satisfaction and public relations issue.  Imagine having to sign letters to valued customers, telling them that their funds and privacy are at risk because of a missing flash drive.  Some firms proactively work with potentially impacted customers after a data loss and contact credit bureaus to help protect against damage caused by identity theft.

 Data breaches routinely result in lawsuits, and compliance with the Red Flags Rule is the first step in proving that a business was not negligent.  Failure to comply, on the other hand, may be used as evidence that the business failed to meet established federal regulations for safekeeping personally identifiable data.  Litigation outcomes may be strongly impacted by whether a business is, or is not, in compliance with the Red Flags Rule.

(This article originally appeared on the American Agent & Broker website.  The authors are Louie Castoria and Lori Nugent, both attorneys at the law firm of Wilson Elser Moskowitz Edelman & Dicker LLP.)

Introduction:

Insurance regulation is once again on the radar screen of the White House and U.S. Congress.

On June 17, President Obama introduced the administration’s proposal for Financial Regulatory Reform: A New Foundation (“White Paper”) that provides a framework to reform the regulation of the U.S. financial system.

On May 21, Congressman Paul Kanjorski, D-Pa, reintroduced the Insurance Information Act of 2009 (“IIA”).

Both proposals establish an insurance division within the Department of the Treasury to enable the monitoring of the insurance industry by the executive branch.

The Department of the Treasury’s White Paper:

The Treasury’s proposal may ultimately change the nature of insurance regulation.  The

White Paper calls for the creation of the Office of National Insurance (“ONI”) within the

Treasury Department. The White Paper proposes that the ONI monitor all aspects of the insurance industry to: (i) identify the emergence of problems or gaps in regulation to avoid a future insurance related crisis; (ii) manage the government’s responsibilities under the Terrorism Risk Insurance Act; (iii) function as the federal insurance regulatory authority on international insurance matters with the authorization to enter into international agreements; and (iv) increase international cooperation on global insurance regulation. Treasury has further recommended that ONI identify insurers “whose failure could pose a threat to financial stability” for referral to the Federal Reserve for supervision.

Treasury has listed six principles to modernize and improve insurance regulation:

1. Effective systemic risk regulation with respect to insurance.

2. Strong capital standards and an appropriate match between capital allocation and liabilities for all insurance companies.

3. Meaningful and consistent consumer protection for insurance products and practices.

4. Increased national uniformity through either a federal charter or effective action by the states.

5. Improve and broaden the regulation of insurance companies and affiliates on a consolidated basis, including those affiliates outside traditional insurance businesses.

6. International coordination of insurance regulation.

The Insurance Information Act:

Establishes the Office of Insurance Information (“OII”) within the Department of the Treasury, and authorizes OII to:

1.      Receive, collect, analyze, and disseminate, data and information, and issue reports regarding all lines of insurance, except health insurance.

2.      Coordinate federal efforts and establish federal policy on international insurance matters.

3.      Determine whether state insurance measures are inconsistent with federal policy.

4.      Serve as a liaison between the federal government and individual or several states regarding insurance matters of national and international importance.

5.      Serve as a primary advisor on the export promotion of United States’ insurance products and services for the Treasury’s representative to the Trade Promotion Coordinating Committee.

The IIA does not grant the Treasury “general supervisory or regulatory authority” for insurance in the United States. If passed by Congress, IIA would additionally create an advisory group of regulators and consumer groups to inform the OII, which would be required to report to the U.S. Congress every two years.

The Beginning of the End or the End of the Beginning?:

Does IIA mark the beginning of the end of state regulation of insurance? Will a Treasury pronouncement that a state’s regulations are inconsistent with federal policy fast track the federal charter of insurers? Will the Treasury’s desire to improve and broaden the regulation of insurance companies and affiliates on a consolidated basis preempt state supervision? As conventional wisdom puts it: “Once the camel’s nose is in the tent, the rest is sure to follow.”

Alternatively, does the limited scope of IIA signal the end of the beginning of federal regulation of insurance? Advocates of IIA contend: “the bill has clearly defined and limited preemptive powers applicable only if state laws conflict with United States international trade agreements.” Does the absence of insurance supervision and regulatory authority for the Treasury in IIA reveal a political retreat from an optional federal charter? Or is battle for the regulation of insurance merely postponed for another day?

Washington D.C. insiders note that Congress will be consumed with the regulatory overhaul of the U.S. financial system, an exhaustive and complex endeavor. As reasoned by Charles Symington of the IIABA: “There’s only so much oxygen. When they’re trying to stabilize the financial markets, it does leave less time than people would like.”

 (This blog is excerpted from a longer essay published in ReSource ReSearch, a journal published by ReSource Intermediaries, a reinsurance brokerage based in San Francisco.  ReSource Intermediaries is a member company of the Insurance Educational Association and its CEO, Bob Kennedy, is a former Chairman of IEA.)

One of the most controversial topics of the President’s proposals for health care reform is “the public option.”  While this blog is not a forum for personal or institutional opinion for or against the reform proposals, I do want to point out that, in the insurance industry, there are abundant examples of public options that work well.  While my experience is in the property-casualty side of the world, I can’t see why these examples would not extend to health insurance.

Consider personal automobile insurance.  Auto insurance is viewed by many as being a social right.  Every state where I’ve done business has a state-sponsored “assigned risk pool” that provides insurance for all but the most dangerous drivers—usually those whose licenses have been revoked.  Premiums are high and based on driving records, but the depth of availability proves that it is “affordable.”  Private insurers peacefully co-exist with these pools, and often issue and service the policies on behalf of the governmental department that runs the program.  So, administratively, it works.

Consider homeowner’s insurance in coastal states.  Protection from hurricanes is viewed as a social right by these states’ citizens and legislators.  Some insurance companies provide “wind coverage,” while most rely on state-run FAIR plans or state-sponsored insurance companies to serve folks who own homes or condos in the wind zones.  In some cases, insurance companies issue and service policies on behalf of the plans; in other cases, the state-run insurers do the job.  In a few cases, the private companies actually compete with the state-run companies.  Once again, a “public option” system works.

And in my home state of California, we have perhaps the best example of a working “public option.”  Workers’ comp is not only a social right; it is legally required for employers. California’s State Compensation Insurance Fund has operated for decades as a backstop insurer of workers’ compensation.   Over time, the State Fund has expanded to be a very large enterprise and often competes with insurance companies in a state whose work comp market is larger than the next five states and the federal work comp program combined.  Here, corporate insurers coexist with the State Fund in good years and lean; and employers stay or switch insurers based on a variety of factors including service, convenience, financial solidity and price.  As employers and agents and brokers participate in the WC market in California and discuss provider options, State Fund is mentioned as often and as unremarkably as Travelers, Zenith, Liberty Mutual, and all the other insurance companies who voluntarily compete in the marketplace.  In this example, the “public option” works very well.  (Dean Calbreath, a staff writer for the San Diego Union Tribune, has a great article on this subject in that newspaper’s August 16 edition.)

So the health care debate rages on, and who knows where it will all come out.  But care should be taken about dismissing the “public option”—in many cases public options serve a great and useful purpose to free enterprise and society.

            Mediation is all the rage in settling claims and lawsuits. What did we do before there were mediators?

There was a time, back when dinosaurs ruled the Earth, when insurance claims adjusters and their appointed counsel actually negotiated settlements with claimants and their counsel. It was far from a perfect system, but it worked most of the time because the best plaintiffs’ lawyers knew that, on average, they’d do better by settling most cases, and that they couldn’t take every case, or even a large percentage of cases, to trial. It was a more congenial time, when opposing advocates would battle fiercely, but professionally, in court, then head out afterwards and try to settle the case over a couple of drinks.

The old system can still work, but today it’s considered “safer” to discuss settlement in the context of a formal mediation. State and federal rules encourage mediation and generally cloak the process in an unbreakable “cone of silence” privilege to allow the parties and the mediator to communicate candidly, without fear of what they say being later used in evidence.

As mediation has become overutilized, myths have grown up around mediating, the foremost of which is that it’s the mediator’s job to evaluate the case for the parties. If that were true, why would claimants and insurers even bother to hire adjusters and counsel? The fact is that it is the claims professional’s job to evaluate the case, aided by the legal advice and courtroom experience of outside counsel. (Ironically, is also the plaintiff’s attorney’s job to evaluate cases.) The mediator may have many years’ experience on the bench or in practice, and any mediator worth hiring is worth listening to, but that doesn’t turn mediation into an evaluative process. The evaluation precedes the mediation.

Evaluating a case requires the use of a highly specialized tool, a telephone. Oh, it will likely involve other tools, such as independent medical examinations, depositions, and some jury verdict research, but all that paper is meaningless unless the claims professional and his/her colleagues, including outside counsel, honestly discuss the case. The dialog cannot be outcome-driven; no participant should try to sugar-coat a bad fact or play “spin doctor.” There needs to be a healthy skepticism in the dialectic—nobody should accept any important fact as a given. Long before the mediation begins, the arguments and evidence should be tested by fire.

And then it is time to mediate, or if you want to be brave, to negotiate.

There are two overused processes at many mediations: opening presentations and “mediator’s proposals.” An opening joint session can be useful to set the tone and lay out the ground rules, but lengthy, grandiloquent dissertations tend to produce more heat than light. PowerPoint slide shows are death to discussion, and chew up hours of valuable time that should be spent bargaining, rather than grandstanding for the clients and driving the parties further apart. Neither side does better by “surprising” the other. That’s why mediation briefs, including crucial exhibits and consultants’ reports, should be (gasp!) exchanged in advance of mediations. Both sides need to be ready to compromise, which requires knowing their downsides, not just their mantras.

Then there is the ultimate mediation cop out, the “mediator’s proposal.” These were once face-saving devices, in which each side would confidentially disclose its acceptable range to the mediator, who would then pronounce, with Delphic acuity, a proposed number that just happened to fit within the narrow overlap of the two ranges. Miraculous!

Maybe it’s that sense of infallibility that has given rise to the modern myth of mediator as judge, jury, and executioner, in other words, both sides moving in baby steps until 5:45 PM, then letting the mediator pick a number in last few minutes. Is that mediating or passing the buck—maybe hundreds of thousands of bucks?

A skilled mediator can aid the parties, especially those unaccustomed to litigation, by helping them see past their emotional ties to their positions, and see their case as it is, warts and all. The mediator should be more than a telegraph, simply sending messages back and forth, but less than an oracle. If the parties have impartially evaluated their positions, and each other’s, they won’t need an oracle.      

(The author of this article is Louie Castoria.  He is an attorney with Wilson Elser and a Director of the Insurance Educational Association.  Louie publishes often in trade journals and shares his sense of humor on a weekly basis in his home town newspaper.)