Thanksgiving Risk Management


I thoroughly enjoy the long Thanksgiving holiday weekend.  I prefer to avoid the hustle and bustle of the shopping crowds, and spend the weekend on three activities instead:  Family, feasting, and football.  Just before this holiday weekend began, I noticed a few articles on the dangers of turkey fryers, and it caused me to consider a few of the personal risks associated with this holiday.

Perhaps the most acute personal loss exposure is that of property damage from grease fires, mostly from the growing popularity of turkey fryers.  Business Insurance reported annual damages averaging $15 million from grease fires this time of year.  That’s quite a few charred birds and charred garages.  I must admit, fried turkeys are quite tasty, but they are definitely risky.  I am happy to report that my family’s fried turkey was delicious and cooked without incident this year.  We purchased an electric fryer last year, which seems to be significantly safer than the open flame propane fryers, but hot oil is always dangerous.  Even if you avoid burning your garage down, splashing and splattering 375-degree oil will cause serious burns.

If you survive the turkey fryer, there are additional risks associated with food poisoning.  Food safety practices are sometimes overlooked in the rush to get the feast on the dining room table.  No one wants to spend their holiday weekend in the bathroom or the hospital due to undercooked birds or leftovers not properly refrigerated.

And then there’s Black Friday shopping chaos…  Auto accidents increase as people rush to the shopping malls or drive long distances to grandma’s house.   In a sad commentary on the state of civility this holiday weekend, there are incidents of brawls and stampedes erupting over shopping deals that may not even be great deals to begin with.

It’s a wonder we survive the holiday…  Be careful out there by practicing good personal risk management.  When it comes to Black Friday, I’m all about risk avoidance:  I stay home and watch football from my sofa.

Paris, France


The civilized world has once again come under attack by barbarians.  The coordinated terrorist attacks in Paris on Friday provide yet another sad example of the dangers and risks we face in today’s world of highly charged geopolitics.  Whatever you may believe about the threat of climate change, and for all of the risks that we face as a result of natural disasters and pure happenstance, nothing is as heart-wrenching as the deliberate and premeditated violence of humans against other humans.

This blog post is not a lesson about the loss exposures posed by terrorism, nor is it about the role of insurance following terrorist incidents.  This is about humanity, or rather the lack thereof.  In the face of such inhumane acts, all we can do is unite against such evil and increase our vigilance.  We must learn to become more aware of our personal risk situation at all times, alert to suspicious behavior, and courageously confronting evil when it shows its face.  This is the most stark and most critical example of personal risk management that I can offer.

Pray for Paris, indeed.  Pray for all of humanity.  Survival of civilization depends on it.


Senior Executive Redeployment


It’s no secret.  The insurance industry (as well as many others) are graying with greater numbers of baby boomers beginning to collect social security and embark on their golden retirement years.  The trade press articles and blog posts (mine included) have been warning of the looming talent crisis with relatively few young people pursuing risk and insurance careers.  It’s a problem, but a fixable problem.

Personally, I sense the tide may be turning with so much attention being paid to the industry’s talent needs and the more aggressive communication of opportunities to young people.  Though it may be presumptuous of me to pronounce the talent crisis problem “solved,” I want to address something today that may be a transitional issue/opportunity for the industry as more young people come aboard and the “seasoned” executives feel more comfortable heading for the exits as a result.  This may ruffle some feathers, but it’s a conversation worth having.

Late last year (2014) I received a copy of the book “The Daily Drucker: 366 Days of Insight and Motivation for Getting the Right Things Done” by Peter F. Drucker with Joseph A. Maciariello (2004, HarperBusiness).  It’s a collection of Drucker wisdom from a cross-section of his many management books over the years, each formatted as a one-page quick-read daily dose of Drucker.  I have been journeying through this little gem, one day at a time, throughout 2015.  Here’s an excerpt that recently resonated with me:

An employer should have in place a policy for the over-sixties in managerial and professional ranks.  The basic rule, and one that should be clearly established and firmly enforced, is that people beyond their early sixties should ease out of major managerial responsibilities.  It is a sensible rule for anyone, and not only for the executive, to stay out of decisions if one won’t be around to help bail out the company when the decisions cause trouble a few years down the road – as most of them do.  The older executive should move into work one performs on one’s own rather than be the “boss.”  This way, he or she specializes and concentrates on one major contribution, advises, teaches, sets standards, and resolves conflicts, rather than works as a “manager.”  The Japanese have “counselors,” and they work effectively, sometimes well into their eighties.

First, I do not interpret this as a renewed call for “mandatory retirement” so let’s take that off the table.  Instead, Drucker recommends a shifting of roles for older executives toward more project-oriented and advisory work while the next generation of executive management steps into the decision-making roles.  The premise is simple and easily understood – Do you really want people making impactful, long-term strategic decisions when they are not going to be around for the outcomes/consequences?

This is not industry specific, but I found it fascinating to think of this in terms of the “gray” insurance industry, an industry that routinely makes long-term decisions about the lines of business and types of risks it will underwrite.  So now for the potential ruffling of feathers. To my risk and insurance industry colleagues occupying senior executive positions and blowing out 60+ birthday candles these days…  As we attract more talented young people to the industry in the next few years, and have an increasingly capable group of mid-level managers waiting in the wings, can you step aside and take on the type of role that Drucker recommends to help the next generation to fill your shoes successfully?

Crop Insurance Cutback


It has been a big week for political news.  We had the election of a new Speaker of the House in Rep. Paul Ryan.  We had a Republican presidential candidate debate that was allegedly tainted by media bias.  We had a two-year federal budget deal that presumably takes debt-ceiling crises and government shutdowns off the table until 2017.  But there’s something within the budget deal that has received relatively little attention.  Lurking in this budget deal is a $3 billion cutback (over ten years) in the federal subsidies for crop insurance.

Naturally, this cut (which reportedly came as a complete surprise) has midwestern legislators up in arms, characterizing the cut as “devastating” to the crop insurance industry.  I am the son of a farmer, and I fully understand the nature of the economic risk that farmers and ranchers face.  Droughts and storms have wreaked havoc on farmers in recent years.  The federal crop insurance subsidies support the availability and affordability of crop insurance.  When I do the math, a $3 billion cut over ten years is a reduction of $300 million per year, for a program costing north of $9 billion per year, which is roughly a 3% cut.  Devastating?  Really?

Opponents argue that farmers have already endured a $12 billion cut in the crop insurance program since 2008, and a further erosion of federal crop subsidies in last year’s farm bill.  There is also the argument that this could have a long-term negative effect on the viability of the U.S. agricultural economy and our affordable food supply.  Farmers in some parts of the U.S. have been challenged with extreme droughts and I’m sure that crop insurance cutbacks must feel like yet another whack to the head for them.

As sympathetic as I am to the agricultural business, my personal skepticism about government intervention in any market causes me to wonder if it isn’t a long overdue weaning of the industry off of government supports.  I remember my father declining to participate in subsidy programs in the 1970s and 1980s that could have paid him handsomely but he felt they were “government nonsense” that served no practical purpose other than subjecting him to a myriad of government rules and bureaucracy.  These latest crop insurance cuts hardly strike me as “devastating” although perhaps the cumulative effect with previous cuts may appear to be devastating.  Then again, government economic interventions tend to be highly distorting over time and so perhaps it is time to “devastate” this free market distortion and allow the free market to work as it should once again.

Agree or disagree?

Back to the (Insurance) Future


The pop culture was all abuzz with Back to the Future references this past week because October 21, 2015 was the fateful day in the “future” to which characters Marty McFly and Doc Brown (no relation, though my daughters tell me there is some resemblance when I am stressed) in the second Back to the Future film.  It certainly had Chicago Cubs fans all geeked since the film teased a Cubs World Series win in 2015 which seemed plausible until just a few days ago.  So much for that.

Even the insurance press got into the spirit of the week.  Insurance Journal published this fascinating comparison of today’s insurance industry with that of the mid-1980s from whence Marty McFly traveled.  I found this especially entertaining since the mid-1980s was when I began my career as a Michigan State graduate (more on that in a moment) who had just accepted my first full-time employment gig as a commercial underwriting trainee with CIGNA Property & Casualty Insurance Company.  I remember the ISO changes and the “new” Commercial General Liability policy forms, thankful that I didn’t have the “baggage” of knowing a whit about the forms they were replacing.

On the other side, there is this Insurance Journal glimpse 25 years into the future of auto insurance.  As difficult as it is for an “old-timer” to imagine an auto insurance market 60% smaller than today’s market, the logic is sound and plausible.  But have no fear young insurance professionals, and students preparing to join the industry.  There are and will continue to be growth opportunities for the insurance market as long as innovation and economic growth persists.  Two words:  Cyber Risk.

Oh yeah, about the young underwriter and graduate of Michigan State University… please indulge me as I share this religious experience from last weekend.  Go Spartans!

Gamma Iota Sigma in Chicago


Last weekend (October 8-11), five students and two faculty (including yours truly) traveled to Chicago to represent Ferris State’s Gamma Iota Sigma Upsilon chapter at the annual International Conference.  Chapter leaders attended Thursday afternoon sessions related to chapter management, and then everyone participated in a delightful welcome reception that evening.  It was heartening to see (and meet) many risk management, insurance, actuarial science, and finance students and faculty from other schools gathered in one large room.  Our colleagues from the Olivet College Alpha Alpha chapter made it just in time for the reception after experiencing multiple issues with their bus transportation.  We were happy for their safe arrival, and ready to quiz them on their transit-related risk management techniques. :-)

The following morning we listened to breakfast keynote speaker J. Patrick Gallagher, Chairman, CEO, and President of Arthur J. Gallagher and Company.  He marveled at the amazing business that is insurance, and encouraged the students to spread the word about the fantastic career opportunities in this field.  Mr. Gallagher noted that the industry could absorb the entire Gamma Iota Sigma membership of over 2,000 students and still have abounding opportunities.  Friday afternoon was filled with educational sessions and a robust career fair that gave students a multitude of interview opportunities, for both internships and permanent jobs.  Friday evening culminated with an awards banquet at Navy Pier.

Saturday began with the whimsical and always entertaining chapter roll call skits.  The students then embarked on a variety of community service activities, one of which took some of our Ferris State representatives (Jared, Alex, Kate, and Morgan) to clean up Montrose Beach as pictured below.


Saturday evening, the conference concluded with a closing dinner and dance party.  We all made the journey home on Sunday, filled with enthusiasm, ideas, and hope for the future.  Personally, this was my first Gamma Iota Sigma conference and I was incredibly proud of our Ferris State students and the growth of the Upsilon chapter.  I hope that many more of our risk management, insurance, finance, and actuarial science students will get involved with the chapter and have the opportunity to attend future conferences.

An Icon A5 in Every Garage


Alright, this is just plain fun. The Icon A5 personal aircraft is making its debut.  I’ve been watching the development of this aircraft from afar for a few years now.  I’ve always had an interest in aviation, but I have never taken the time to become a licensed pilot.  The Icon A5 can be piloted with a Sport Pilot License, though my wife has been reluctant to grant her blessing for any adventure that takes me higher off the ground than a step ladder.  I have pointed out the safety parachute feature of the Icon A5, but she remains unconvinced.

How does this relate to risk management and insurance?  Well, it certainly has implications for the currently rather small market for personal aircraft insurance.  Moreover, those personal umbrella policies are going to get a bit more expensive for Icon A5 owners.  If the Icon A5 becomes the next expensive toy that enthusiasts purchase in place of (or along side of) speed boats and sports cars, there could be thousands of these babies in garages across the nation.

I have a spot ready for one in my garage.  Now I just need to convince my wife that it would be a blissful way to visit Mackinac Island in the summer without that pesky highway drive.  There is also the looming conversation with my insurance agent…  “You have a ‘WHAT’ in your garage?”