Category Archives: Risk Management

RIMS 2017 – Here we come

Bright and early Sunday morning, I depart with four Ferris State RMI students to attend the 2017 RIMS Annual Conference in Philadelphia, Pennsylvania.  I confess that at this stage of my career – having endured 30 years of planes, trains, and automobiles – business travel has little appeal to me.  Yet, I am enthused to accompany four students to this very large and impressive industry event.

It’s difficult to convey the vast scope of the RMI industry within a classroom.   Some things just have to be experienced and witnessed firsthand.  The immensity of the RIMS conference, with its thousands of attendees and vast array of exhibitors that includes many household names of the insurance industry, certainly drives home the point with students.  The educational sessions show the students that there is much more for them to learn and a cornucopia of career opportunities awaiting them.

My first RIMS conference was 26 years ago, and I still learn something new every year.  I am truly excited for the opportunities awaiting my four students.  I know that they will meet new and interesting professionals at the conference events, learn of concepts that will spark their interest, generate new ideas for their careers and personal ambitions, and yes, have some fun.

It’s going to be a great week and I will relish the opportunity to watch my students take it all in.  It may even make the planes, trains, and automobiles tedium of business travel worthwhile.  Maybe.

Scholarship Season

scholarship_money

Spring break is upon us!  Over the next few days, Ferris State students will scatter to various warm climates for spring break next week.  When the RMI students return in mid-March, they will be facing several imminent scholarship deadlines.  The amount of scholarship assistance that is available to today’s RMI student is impressive, uplifting, and dare I say, overwhelming.  The ever-growing list of RMI scholarships certainly reflects the industry’s urgent need for young talent, and that should speak volumes to those students and parents still contemplating an academic and career direction.

Many of these scholarships have springtime application deadlines so that awards may be made during May for the upcoming 2017-18 academic year.  This time of year, I receive multiple scholarship opportunities each week that I pass along to my RMI students.  As I have blogged in the past, there are also several online resources (including our own partial list) that will help students to find RMI scholarships.  There is absolutely no reason that a diligent student cannot find at least some scholarship assistance for their RMI education.

All of this is good.  Or is it?  Let me return to my prior use of the word “overwhelming” as it relates to these scholarships.  There are so many scholarship opportunities from every type of RMI organization imaginable, that students seem to be “freezing up” when it comes to applying for these scholarships.  With so many opportunities, it becomes difficult for the individual student to discern which opportunities afford them the best chance of receiving an award, and with limited time to crank out scholarship applications, they can apply for only so many.  In fact, this is beginning to be noticed by the awarding organizations as I have begun to receive queries from some scholarship sponsors as to why their application numbers are lower than expected.  To be clear, I don’t think that’s a universal condition as many of the established and well-known scholarships continue to receive plenty of applicants and award their scholarships only to the most deserving students.  It seems to be the newer, lesser-known scholarships that are struggling to find applicants.

This is a real shame because these sponsoring organizations have funds to help students, and they really do want to bolster the young talent coming into the industry.  I hesitate to say that there may be an over-supply of RMI scholarships because that almost feels blasphemous.  How could there ever be an over-supply of such a fantastic thing as scholarship money when tuition and book costs continue to rise?

I have an idea.  What if some of these scholarship sponsoring organizations who are struggling to generate applicants diverted those scholarships funds for a few years?  Instead of begging for student applicants, put the funds into the hands of the collegiate RMI programs to use for program marketing and enrollment growth initiatives.  More RMI students enrolled at schools equals more future scholarship applicants.  Now, you might argue that the scholarships themselves should be a powerful recruiting tool for boosting RMI enrollment.  Absolutely true, but there is much more to the student decision to major in RMI and I believe that the individual RMI schools are in the best position to convey the overall value proposition (including abundant scholarship opportunities) to prospective students – but not many schools have budgeted funds specifically for marketing their RMI academic programs.

This could be an interesting short-term tactical shift for some scholarship sponsors that pays off with a long-term strategic success of awarding more scholarships to the most deserving students (however each awarding organization may define that) a few years down the road.

Flexible Career

career_in_insurance

Practical Education, Flexible Career, Rewarding Life.

Last week, I posted about the practical education element of the Ferris State RMI program’s tagline.  In the continuing spirit of Insurance Careers Month, I will discuss the flexible career aspect this week.  I’d like to begin by highlighting one example of insurance career flexibility: me.

I was one of the many “accidental” insurance professionals who stumbled into a commercial underwriting position fresh out of college.  A few years later, I moved into a risk management role with a large retailer.  Applying my interests and aptitudes for technology, I eventually started my own consulting practice where I worked on several Fortune 500 risk management information system projects.  An opportunity came along to develop a system and process for tracking certificates of insurance, and an entirely new business was born.  Over the course of ten years, I was able to grow and then sell that business, and then pursue the bucket list objective of earning a doctoral degree.  Shortly thereafter, Ferris State revived its RMI academic program and began searching for a lead faculty and program coordinator, and here I am today.

Over the years, I’ve talked to countless risk and insurance professionals, some who intentionally entered the industry and many who discovered it accidentally.  I am always intrigued by the unique stories of these career arcs.  They are always a fascinating story of career evolution that starts in one area of the industry and then twists and turns through a variety of different roles, opportunities, firms, and locations.  Many in the industry have had the chance to live in some wonderful places, including overseas.  Here in Michigan, insurance professionals can work in the metropolitan areas of Detroit and Grand Rapids, or near the exquisite shorelines of Grand Haven and Traverse City, or in the pristine wilderness (and sportsman’s paradise) of the Upper Peninsula.  The key takeaway from my and many other stories is that a risk and insurance career is not stagnant, but rather it allows for evolution through a number of interesting, challenging, and meaningful positions in a variety of locations.

A flexible career has another meaning besides career path mobility and opportunity.  Numerous articles describing the desire for workplace flexibility have appeared in recent years, particularly when discussing the Millennial generation.  However, I believe that this desire for flexibility is not unique to the Millennials.  In this age of instant, always-on communication, I think we all value the ability to work from anywhere we wish, and at the times that we wish.  Technology certainly supports our ability to be productive from our home office or even from the bleacher seats as we watch our children and grandchildren play sports.  The risk and insurance industry offers this type of flexibility.  Many professionals are now based out of home offices.  Field personnel who do loss control or claims work often schedule their own appointments.  I’ve spoken with many insurance agents over the years who treasure the ability to work in the office during the morning, have a client meeting over lunch, spend time on a family activity during the afternoon, and finish up their day with a little work in their home office.  The next day’s schedule may look entirely different – it’s up to them.

Let me be clear.  There is work to be done.  I don’t intend to paint a picture of insurance professionals spending all of their afternoons on the golf course,  During my consulting days, I traveled 50-75% of the time and I was away from my young family more than I cared to be at times.  Nevertheless, the work was always interesting, never boring, and I always had a degree of control over when I scheduled projects.  On the whole, I have enjoyed a tremendous amount of flexibility and variety in my risk and insurance career, and you can too.

 

Practical Education

theory_into_practice

February is “Insurance Careers Month” during which risk and insurance professionals make a concerted effort to highlight the industry’s career opportunities for young people facing a myriad of academic and professional choices.  A few years ago, when Ferris State University revived its storied risk management and insurance academic program, we re-engineered the curriculum and co-curricular opportunities for the 21st century.  As the new program took shape, I sat down with an advisory board sub-committee to craft a tagline for the program that would capture its essence and the potential that it offered students:

Ferris State University Risk Management and Insurance:  Practical Education.  Flexible Career.  Rewarding Life.

 In the context of insurance careers month, I decided to break this tagline down and discuss each of its component parts over the next few weeks.

“Practical Education” is not just lip service – it’s part of the Ferris State DNA.  The school was founded in 1884 by Woodbridge and Helen Ferris as Big Rapids Industrial School.  A review of the school’s history clearly demonstrates a focus on teaching practical skills that prepare students for gainful employment and successful careers in fields where workers are needed.  To this day, Ferris offers programs in such fields as Heavy Equipment Technology, Welding Engineering Technology, Plastics Engineering Technology, Pharmacy, Optometry, and yes, Risk Management and Insurance.  All of these are fields clamoring for young, educated talent.  The Ferris State mission and core values clearly emphasize the practical nature of a Ferris State education.

The new Ferris State RMI academic program has been designed from the ground-up to provide this practical education.  Our students learn the foundational concepts of the risk management process, insurance coverages, insurance law, and terminology.  But that’s not all.  The reality is that in many fields, a significant portion of the technical knowledge a person gains in school will be obsolete within ten years of graduation.  The truth is that the technical learning continues well beyond college graduation, and in fact, never really ends.  Insurance coverages will evolve with emerging risks such as cyber-risk, and who knows what comes next in the 2030s, 2040s, and beyond.

At the heart of our practical education is an emphasis on experiential learning, adaptable degree programs, and development of timeless skills.  Practical education means that our students will complete internships where they go to work in the “real world” of risk and insurance.  It means they attend industry conferences where they are exposed to emerging industry issues and begin building a professional network.  It means that they participate in co-curricular activities such as Gamma Iota Sigma.

Practical education means that students complete the foundational RMI courses and then have the opportunity to draw a variety of other courses from across the University to complete their degree and to suit their interests and career direction.  Interested in becoming a cyber-security/cyber-risk expert? Take a few of our information security courses.  Interested in predictive analytics for risk and insurance? Take data analytics and data mining courses.  Interested in the agency side of the business? Take our agency operations course along with a few small business management courses.  Examples of practical tailored education abound.

Practical education means that students learn and practice the skills that every employer seeks.  The RMIN 489 capstone course includes units, exercises, and activities in such areas as critical thinking skills, logic, problem-solving, and collaboration, to name a few.  Just next week, the RMIN 489 students will be addressed by an industry veteran who will be coaching them through several case studies drawn from genuine situations from the realms of underwriting, claims, sales, and risk management.  The cases we use in this course are not canned textbook cases – they are real-world (with names changed to protect the guilty/innocent) situations for which there is rarely “one correct solution.”  The intent is to exercise the students’ problem-solving and analytical skills as they evaluate each case against the foundational risk and insurance knowledge they have gained.

This is real-world stuff.  This is a practical education.

Back to School

college_bound

Next week marks the beginning of a new academic year at Ferris State University, and it is going to be a busy one.  The FSU Risk Management and Insurance program officially launches a re-engineered curriculum this fall.  One of the most important features of the updated curriculum is a 15-credit block wherein students will tailor their education (with academic and professional advice) to suit their interests and aptitudes.  Some students may decide to enhance their RMI degree with an area of emphasis in data analytics by completing coursework in data mining, statistics, and predictive analytics.  Other students may focus on risk management by adding coursework in advanced risk management, enterprise risk management, and risk management technologies.  These are but two examples of potential specializations which might also include other areas such as cyber-risk, entrepreneurship, agency operations, and more.  Fun stuff!

Earlier this year, the Ferris State RMI program launched a strategic planning process.  The bulk of the committee’s planning work is now complete.  Execution of the strategic plan is already underway, and will be an ongoing process over the next few years.  This will result in considerable activity both inside and outside of the academic classroom, adding to our students’ success and strengthening the program for future students.

On a personal note, I am beginning my fourth year in academia this fall.  After spending the first 25 years of my career working in and around the risk and insurance industry in a variety of roles, I can honestly say that the past three years have been the most intrinsically rewarding years of my career.  But what really excites me is what I see ahead.  Ferris State has established a fantastic foundation for the RMI program, the risk and insurance industry is eager to hire ambitious graduates, and now we just need to fill more of the seats.  It is going to be a busy and exhilarating year.  Let’s get started.

Brexit Surprise

brexit

Besides being a fun word to say, “Brexit” has suddenly become a historical term that will now appear in history books for years to come.  Not more than 24 hours ago, as the votes were being cast in the United Kingdom, the clever term seemed to be headed for the dustbin of over-hyped media-coined phrases.  The conventional wisdom was that the UK would remain part of the European Union, and “Brexit” would be forgotten much like “Grexit” was cast aside last year.  The U.S. stock market certainly priced that expectation into the 230-point Dow Jones Industrial Average rise on June 23.  The surprising victory for the “leave the EU” faction caused worldwide financial markets some whiplash, with the Dow falling 610 points on June 24.  And just like that… Bam! The “Brexit” star is born.

Financial markets abhor uncertainty, and the now imminent departure of the UK from the EU will not be quite so imminent as there is a two-year process ahead for negotiating the terms of disentangling the UK from the EU.  That means two years of uncertainty, and probably a few more surprises and unintended consequences.  Welcome to the Brexit-induced damper on all things financial and two-year Chinese water torture of volatility.  The Federal Reserve, along with the rest of the world’s central bankers are going to be doing an awful lot of re-thinking in the months ahead.  I could be wrong (as I was about the Brexit-outcome) but I wouldn’t count on seeing anything that resembles a “normal” interest rate environment in the next two years.  Heck, we might not even see another 25 basis point increase in U.S. interest rates for that long.

There are so many Brexit-related things to think about… there are many political implications and backstories, but at the heart of the Brexit-surprise seems to be a nationalistic fervor that sovereignty still matters.  That could have parallels here on this side of the pond in November’s presidential election.  Channeling Forrest Gump, “That’s all I have to say about that.”

Now, what about the effects on risk management and insurance?  [I know, I know, you wondered where I was going with this Brexit rambling.]  Well there’s great speculation today about the future of London as an international insurance hub.  Not that it will cease to be an insurance hub, but more about what frictions and complications may be introduced by the need to re-structure firms, obtain new licensing, and yes, perhaps re-locating some resources, once the UK is no longer a part of the EU’s shared economic and regulatory framework.  Will Brexit impede London insurance firms’ access to the EU markets?  What about EU insurance firms serving the UK market?  All fair questions, and all will need to be sorted out over the next few years.  I realize it’s not the same, but I think it might be useful to think of Brexit in terms of the potential economic considerations that would arise if Michigan were to suddenly secede from the United States (Miexit?) and left us all to figure out how to transact business with Indiana and Ohio.  It could kill the export market for Mackinac Island fudge!  Oh the inhumanity that could be wrought.

More broadly, put your risk management hat on and think about the enterprise risk management dimensions of Brexit.  Isn’t this one of those unique sorts of risks that ERM was intended to address?  The political and economic risks associated with Brexit clearly fall into the strategic risk quadrant that traditional risk management relegated to the C-Suite, but ERM’s Chief Risk Officers are supposed to be ready for such vast strategic risks.  So how are CRO’s with operations in the UK and/or the EU reacting today – particularly since most of the world was shrugging off Brexit as a soon-to-be non-event just yesterday?

Add Brexit to your list of worries, concerns, and market volatility triggers to monitor for the next few years.  Oh, and one more piece of advice.  Don’t check your 401(k) balance today.  In fact, it’s probably best you just keep that long-term investor perspective and leave those statements unopened until, say, 2020.

 

 

You Get What You Pay For

tornado

One year ago this month, my hometown of Portland, Michigan was struck by a tornado.  The storm damaged several homes, businesses, and churches.  Thankfully, no one was seriously injured, and one year later the town has largely recovered.  I know of several good friends who have recently moved back into repaired and rebuilt homes and offices, thanks to the benefits provided by their insurance providers.  However, it has not been an easy road back for everyone.  I blogged about the storm and some of the recovery struggles last fall.

Some of my friends who are ecstatic to be back in their home or office have mixed feelings about the sometimes long and arduous claims process they endured to get there.  There are also a few situations where people are still not back in their damaged homes primarily because the insurance coverage they purchased was insufficient.  Two such situations involve older, shall we say “vintage,” homes whose owners understandably want the repairs done with like-kind and quality materials rather than similar or functionally equivalent materials.  The trouble is that like-kind and quality materials in vintage homes are much more expensive and not typically covered by traditional homeowners insurance policies.  Therein lies the source of conflict and the delay in getting these policyholders back in their homes.

I can certainly empathize with these policyholders who understandably assume that the insurance they bought would indemnify them by restoring them back to their pre-loss state regardless of their purchased limits and the loss settlement technicalities of the insurance contract.  Most insurance consumers fail to understand that there is no direct correlation between their home’s market value and the true cost to rebuild it.  Furthermore, the typical insurance policy provides for similar or functionally equivalent materials because that is perfectly acceptable to the vast majority of homeowners and makes the cost of the insurance policy more affordable.  For those consumers with vintage homes that they want to have restored with like-kind, quality, and workmanship, the simple truth is that it costs more to do so.  It likely requires that the consumer purchase higher limits and also loss settlement provisions that reflect this desire.  That means paying a higher premium – something most consumers resist even when all of this is explained to them.  My late father was a smart man, and he often used the phrase, “Son, you get what you pay for.”

I feel bad for my Portland brethren who are still embroiled in disputes with their insurance companies almost a year after the storm.  It’s no fun for the insurers either, as they take a black-eye in public relations even though they are abiding by the contract that was sold.  Nevertheless, the industry, and especially the agents who sold these policies, must shoulder some of the blame for not being more careful at the time of sale.  I am not going to name names here, but agents who become “order-takers” rather than personal risk advisers to their clients are doing their clients and themselves no favors.  I would much rather see an agent take the time to understand the nature of a client’s home, and if it’s vintage or has vintage elements, the implications for insurance coverage must be fully explained and proper coverage for the client’s expectations must be recommended.  Perhaps the customer is fine with losing some of the vintage charm of his/her home by replacing ornate doors and trim with contractor-grade materials because they don’t want to pay more in premiums.  The point is, that discussion must occur and the agent/personal risk adviser needs to have the client “sign-off” on such decisions.  If they want to fully restore their damaged home to its vintage charm, then they must invest the time with their agent and underwriter to obtain that level of coverage and pay for it.  “You get what you pay for,” or another apropos phrase my father often used, “There’s no such thing as a free lunch.”