Unusual Insurance


Are you insured against the peril of zombie incursion?  No?!  Do you really think that auto, home, and life insurance is all you need?  Okay, well, yeah, that is perhaps all the insurance you need – but that’s not the case for all of us.

Spring has me feeling a bit whimsical and I thought perhaps it would be mildly entertaining to mention that insurance goes well beyond the oft-considered boring coverages related to our automobiles, homes, and responsibilities to our dependents.  Professional athletes and entertainers have been known to insure their valuable body parts for substantial sums.  Rolling Stone guitarist Keith Richards has reportedly insured one of his fingers for $1.6 million, and Bruce Springsteen’s vocal cords are allegedly insured for up to $6 million.  Then there are a multitude of celebrities who have reportedly insured various attractive body parts for large sums.  I’ll leave it at that.

Suffice to say that insurance isn’t always stuffy and boring.  Just ask the underwriters who analyze and consider these unique risks.  Any celebrity insurance stories you wish to share? Feel free to comment – but please keep it PG rated!


The Risk of Controversy


Traditional risk management generally focuses on property and liability risks facing the organization.  Buildings can burn, equipment can be stolen, customers can sue for injuries, employees get hurt, and automobiles can crash.  There are a multitude of risk management techniques that can be deployed against these risks.  Some techniques are risk reduction, some are risk prevention, and some are risk avoidance.  The risk that remains requires some sort of risk financing treatment that often involves the purchase of insurance products.  Traditional risk management is the realm of the professional “insurance manager” which was the precursor to the “risk management” position in many firms when the extent of risk management was primarily the purchase of insurance products.

Enterprise risk management represents the recognition that the risks to an organization go well beyond the typical property and liability risks of traditional risk management.  Insurance is not always a viable option for the enterprise risks that are more strategic in nature.  These types of risks include the prospect of supply chain failures, product flops, strategic missteps, and public relations challenges.  Such risks were previously thought to be general business risks that resided solely with the C-level executives.  Enterprise risk management reflects the realization that a risk professional has something to offer for managing these risks just as they manage traditional property and liability risks,

Lest you think that only large corporations need to worry about enterprise risk management, consider the situation of tiny little Memories Pizza of Walkerton, Indiana.  Amidst the current firestorm of controversy surrounding Indiana’s Religious Freedom Restoration Act, the media has been swarming small businesses, looking for evidence of the Act’s evils.  They found what they were looking for when they spoke with a young co-owner of the pizza shop. This blog will not take a position on the Indiana controversy – that’s not my place or purpose.  However, the entire controversy and the specific case of Memories Pizza perfectly illustrates the type of risk that faces organizations beyond those that are typically (and relatively easily) covered by insurance.  When controversy erupts, organizations may wish to just “keep their heads down” and stay out of it because common sense dictates that taking a stand is sure to alienate some stakeholders even if it elates other stakeholders.  But when an employee with little or no public relations training is suddenly put on the spot, the organization may find itself thrust into damage control mode.

The risk of controversy is real, and it’s not insurable.  Just ask Memories Pizza if they ever thought, in a million years, that they’d be shutdown by a state law that had no direct effect on them… until they commented on it in a nation that espouses the right to free speech.

Underwriter? What’s that?


I have a soft spot for the underwriting profession, primarily because that’s where my own career got started.  It has to be one of the least understood professions out there.  My own story is typical.  My senior year at Michigan State University (Go Spartans!) was filled with on-campus interviews with a variety of companies and job types.  With an undergraduate degree in Socioeconomics (a blend of political science and economics), I wasn’t sure what sort of job awaited me.  What I had going for me was a strong set of analytical and communication skills.  As it turns out, that skill-set is well suited to insurance underwriting.  But I didn’t know that then.  When I interviewed with CIGNA (back when they were still in the property and casualty insurance business) I had to do some fast research to have the slightest clue about the job for which I was interviewing.

So what does an insurance underwriter do?  At the very heart of the job, it comes down to deciding which risks the insurance company will accept and at what price/terms.  Staff underwriters typically work in an insurance company home office and set guidelines for the types of risks that are acceptable to the company.  Line underwriters apply those guidelines to the individual risk applications that they underwrite.  That is an oversimplification of the job because underwriting requires thorough analysis of risks, interaction with insurance agents, loss control, claims, management, and more.  Creativity and problem-solving skills are paramount because some risks may not be acceptable upon first review but creative application of loss control measures and insurance contract modifications can make it possible to accept a challenging risk.  A win-win-win for the insurer, the agent, and the insured.

Rather than reinvent the wheel, take a look at this description of effective underwriting.  I remember my early days as a brand new property and casualty insurance underwriter, and the relationships that I built with many commercial insurance agents.  They knew that I was a “newbie” and I appreciated their patience with me, and many of them took the time to contribute to my early career education.  An experienced underwriter is like gold to an agent because they have the stories and insights that help agents to write more business that fit within the underwriting appetite of the insurer.  I moved on to an underwriting/marketing staff position, and then jumped over to a corporate risk management position before launching my own business.  I didn’t spend enough time in my underwriting job to develop the kind of deep expertise that makes an underwriter extremely valuable.  I respect the underwriting professionals who have developed that kind of expertise and make the industry work so well for the insurers, agents, and insureds.  It’s a little-understood job, but a very rewarding and valued job.  Go kiss an underwriter today.


“Hottest” Hiring Market in Years


No doubt about it… the insurance industry is in need of young talent.  I’ve written about this fact several times in the past year, and the evidence continues to point to continued strengthening in the demand for labor in and around the insurance industry.  The latest evidence is provided by a study that you can read about here.  If ever there was a time to consider a career in risk management and insurance, it is now.

Speaking of opportunities, here is one for those with at least some experience in the industry and an interest in an exciting “ground-floor” opportunity:

An independent insurance agency based in Southfield, Michigan is seeking a licensed insurance producer with at least three years of experience to join its firm and help to drive its growth plan. For the right professional with strong motivation and drive, this opportunity could involve some ownership interest in the agency. Individuals interested in exploring this opportunity should contact Souzan Haddad at 248-352-3222.

I am aware of several career and internship opportunities in the insurance industry right now, so the aforementioned opportunity is but one example.  Get ’em while they’re hot!

Oh, and one more thing… the vernal equinox occurs at 6:45pm EDT today (March 20) so this is the perfect time to wish you a happy spring-time!

Pi Day


Every March 14 is Pi Day (3.14) – but this year is the once in a century extended version of Pi Day…  3.141592653 (3/14/15 9:26:53am)

In honor of this whimsical encounter with a once-in-a-lifetime intersection of the calendar/clock with this irrational number, I offer this insurance industry perspective on “irrationality.”  Conveniently posted at precisely the momentous day and time (by my watch), of course.

Happy Pi Day!

Driverless Cars and Corporate Filings


The Wall Street Journal reported last week that the reality of driverless cars on the public roadways is now being recognized as a business risk in some corporate filings.  According to the WSJ piece, three insurers and an auto parts firm have listed driverless cars as a risk factor for their future business.  Granted, the “risk factors” section of corporate filings is a laundry list of cover-your-backside investor disclosures so that if/when a publicly traded company’s stock price tanks the firm’s management and directors can point to the filing and say, “See, we told you this might happen, so don’t blame us.”

It’s interesting to me that the insurers are flagging driverless cars as a potential business risk due to the possibility that such cars might actually reduce the number and severity of accidents, and reduce the demand for insurance products.  Uh, what?  As long as there are fast-moving hunks of metal and mass chugging down roadways, there will be a need for insurance.  But what if driverless cars actually reduce the number of accidents, injuries, and property damage?  Isn’t that what the insurance industry has been wanting to do all along?

I wrote about driverless cars a few months ago, and raised several questions that remain unanswered.  I’m sure that these and many other areas of uncertainty underlie the insurers desire to include driverless cars as a potential business risk.  We always fear the unknown.  Peter Drucker, in Managing in the Next Society, wrote:

“If you start out by looking at change as threat, you will never innovate.  Don’t dismiss something because this is not what you had planned.  The unexpected is often the best source of innovation.”

I don’t necessarily think that all insurers are viewing driverless cars as a threat, just because they list it as a potential business risk in their mandatory corporate filings.  More likely, it’s an acknowledgement that there will be some volatility brought about by such a major innovation.  As the WSJ article points out and my previous blog entry alluded to, when driverless cars are involved in accidents the insurance burden may shift from the personal auto insurance policy to the manufacturer’s commercial general liability policy because the “at fault” aspect of the accident may have more to do with the software than the person sitting inside the car.  Still, not knowing how all of this will shake out and affect the insurance premiums and claim payouts most certainly is beginning to enter the stream of consciousness in the insurer board rooms and management suites.