Archive for the ‘Reputation’ Category

Is YOUR Business selling to RETAIL?

April 24, 2017

It wasn’t that many years ago when a manufacturer didn’t really worry about Accounts Receivable (A/R’s) if one sold or supplied to a BIG NAME firm, e.g. General Motors (GM), Chrysler, Delphi, Kodak, Blockbuster, Schwinn Bicycle, Marvel Entertainment, Hugo Boss, Reader’s Digest, Trump Hotels, Sears, Radio Shack, etc., because they always paid you and you really didn’t worry the same as the neighborhood “Mom & Pop” operation, right? Even if you gave 30 or 60 day terms and didn’t get paid for 90 days, it just meant you waited but why would you really need worry.

Unfortunately, today’s world has changed substantially and auto makers like GM had to restructure with governments bailing them out, Radio Shack went under and Sears recently said there was “substantial doubt” as to their long-term operating ability. WOW! Many of the names listed above have all had to restructure and that meant unsecured vendors were not very happy.

So how do YOU manage your business to ensure that you will be paid and remain afloat? I have met so many companies, through the years, that would often have 80% of their sales from a small number of customers and I would always recommend prudent Risk Management – “don’t put all your eggs in 1 basket” – and suggest they consider diversifying their markets and considering options for transfer of their risk, e.g. trade credit insurance. Some clients neglected to follow any or much of my advice and I do know of several who are no longer in business.

Trade credit insurance is often used by firms in Europe but not so often in North America. Why? Europeans may have been less reliant on one’s reputation, perhaps, but my own banking background tells me that North American banks don’t suggest the option, don’t know enough about it and don’t vary credit terms adequately to encourage YOU obtain this. I also hear that terms are much more favorable in European banks for those companies who do purchase the option so many of you don’t feel the savings warrant the added expense.

Where I do find many Canadian (can’t say the same is more or less frequent in the US) companies using Trade Credit Insurance is in their Export Financing but why only for those types of deals? Perhaps you Factor your A/R’s but I just read “Wells Fargo & Co. is among the firms no longer providing Sears vendors with factoring — short-term financing that helps gives them a cushion.” Imagine then what I seem to hear more often than not – insurance works when you really don’t need it but often doesn’t respond when you truly have the need. Do you feel that way or have you heard this said?

This is why I continue to preach Risk Management and supplementing with a suitable Risk Transfer mechanism (insurance should not be solely price-driven when purchasing but knowing what is and is NOT covered and buying the policy from a reputable agency/brokerage with adequate Errors & Omissions insurance of their own and a suitably rated (I tend to like AM Best A-ratings or better) underwriter for your General Liability, Trade Credit, Cyber, Crime, Specialty and Directors’ & Officers’ Liability policies.

I do hope you realize that insurance buying may be 1 of the most important business decisions you make each year but I do know that you overlook this importance because of the trust you place in your providers and the lack of understanding of what is really behind an insurance contract.

 

Let’s discuss today! I can be reached on Twitter (@WRiskManager), on LinkedIn or Facebook and by e-mail – larryewinsurance@gmail.com

 

Info derived from http://www.msn.com/en-ca/money/companies/sears-payless-woes-push-retail-vendors-to-get-more-militant/ar-BBAcFIC?li=AA54rW&ocid=spartanntp and other online material.

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What is #Integrity? How does anyone in the #Sales field prove beyond a doubt that YOU should #trust him/her?

March 15, 2017

I shared on #LinkedIn, earlier today, an interesting read for all concerning the #banking #industry and the pressures their staff are facing today to #mislead, #sell, etc. their #clients into #services they may or may not need. As a former banker, I have seen many of the same “tricks”. For that reason, I was fearful for many years of the open competition (what we called an unbalanced playing field) between the #banks and #insurance sales. In my own jurisdiction, we were known as #brokers because we dealt with several different insurance companies for our clients but many other locales use the word #agent but the difference matters little.

I use the term unbalanced or uneven because most people are not aware of the size of the Canadian banks (#RBC, #TD, etc.) vs. any insurance company. AND less that #LifeInsurance (e.g. #SunLife, #Manulife) dwarf much of the #Property/#Casualty sector in #Canada so that there is no possible way of balance if you eliminate barriers between the different sectors of #finance.

If you don’t believe this then look at what shows in a #Google search on #Wikipedia – RBC has TOTAL ASSETS of C$1.09 #trillion (2015), Toronto-Dominion Bank has TOTAL ASSETS of C$1.08 trillion (2015), Sun Life Financial has TOTAL ASSETS of US$246.853 #billion (2015), Manulife has TOTAL ASSETS of $935,176 #million CAD (2015), #Intact Insurance has TOTAL ASSETS of $21.236 billion (2015).

Some insurance companies (e.g. #Wawanesa, #Economical) are among the largest CANADIAN insurance providers to YOU but because of their “#mutual” status do NOT report Assets to Wikipedia because they are not #PubliclyHeld #corporations. So let’s look at Net Income as a measure. Intact Insurance showed Net Income of $706.0 million (2015) – the LARGEST Canadian Property/Casualty insurance company – and A.M.Best ratings show Wawanesa Insurance with Assets of $2 Billion or greater, Economical Insurance with Assets of $1.25 Billion to $1.5 Billion, #Cooperators Insurance with Assets of $1 Billion to $1.25 Billion. Anyone can quickly see that there is really NO comparison in size between RBC and a small insurance company, correct?

To prove my point, Wikipedia also states that RBC had NET INCOME of $10.026 billion in 2015 which dwarfs the $706.0 million that Intact shows for the same year and only supports my premise that the playing field can never be level.

Today, however, I feel mixed emotions as to whether this would be good or not because I know that insurance sales can be just as focused on sales and, too often, NOT on the real needs of the client! Why do I believe this? I have experienced working with and against people who used the “cut and paste” approach – obtain a copy of the insured’s current #policy, submit for #quotes and find the lowest #price for those coverages being currently provided. Why? Well, many of you will go back to your long-time provider and then ask if he/she can match the policy price, right?

Do you do this? If so, are you not encouraging a level of poor #service from your providers? Maybe, even a bit of #dishonesty because there are those individuals who will overlook something you might truly need just to lower your cost!

Whatever happened to integrity? If #reputation and one’s #handshake are not important to #business, should #government always have to legislate and permit the courts to #adjudicate? We all love to tell #lawyer jokes but are we not the real reason we need the legal profession?

This is why I no longer can involve myself with sales because I feel that my own integrity and reputation are, somehow, discoloured by those around me whose own views of selling are so dissimilar to mine. I am a Consultant, yes, a #Risk #Management consultant and this means that I only work for you, Mr. Business-#owner or #Executive.

Let’s talk and I will again share an earlier post here from LinkedIn that was subsequently posted to my Twitter feed.

“#integrity has always been of paramount importance to me! Too many in #finance – #banks #insurance companies, agents/brokers – put their own interests above that of their clients/customers. As a #RiskManagement consultant I work for my clients to advise 1st because I NEVER sell anything. If you #trust your connections then think again – http://www.cbc.ca/news/business/banks-upselling-go-public-1.4023575”

I can be found on #Twitter – twitter.com/WRiskManager – or on LinkedIn – http://www.linkedin.com/in/wriskmanager/ – and also on #Facebook – http://www.facebook.com/WRiskManager-159010316375/ – and look to a growing number of followers on those sites.

OCCUPATIONAL HEALTH & SAFETY (OHS) – FINES, SURCHARGES, EXPENSES AND CONVICTIONS – WHAT DOES THIS HAVE TO DO WITH INSURANCE?

August 15, 2014

Through the years in which I have been working in the insurance business as a broker, it became apparent to me that most clients will simply view his/her broker as a salesman, not as the professionals we all strive to be. That was why I focused my career in the consulting field of Risk Management. I realized that insurance won’t always do what I felt it did, previously, for clients and what we all would say it was designed for, ensuring the client is placed back in the same position following a loss as that client was prior to the event.

Some insurance companies have gone on to do surveys and express results that show only 50%, for example, of any business losses are ever covered by insurance! YES, only ½ of your losses can and will be reimbursed by the purchase of an insurance policy.

So what does this mean YOU should then do? Well, finding a professional and reputable insurance brokerage who understands Risk Management can be a wonderful step; but I know many businesses will still feel they are dealing with a “salesman”, someone who derives financial reward from the selling of an insurance policy to YOU! This may be quite accurate, in a large number of situations. I will gladly consult with businesses within my “licensed” territory (ONTARIO, CANADA) on a “fee” basis (but even then I will – if you read further – offer something SPECIAL to YOU) but also perform further reviews outside my territory for those who understand my expertise may be limited by some restrictions of knowledge (e.g. Workers Compensation laws in the various US states) that would need to be supplemented by other experts.

As a former retail commercial banker in both Canada and the USA and a licensed Life/Accident & Sickness insurance agent (“we” in the industry prefer the term broker since it represents multiple insurance company representation) and Property/Casualty broker in both Canada and US, I have been working for my clients, in a manner different than usual, for 10+ years. In reviewing leases, contracts, loan agreements and other legal documentation – supplemented by financial statements to ensure the client knows what all their major risks of conducting business are – I can identify and advise whether it is suitable to “retain” or “transfer” various identified business risks to others. The definition of retention includes assuming all risks by self-insuring all or a portion through deductibles, under-insuring, etc. Most businesses are not aware of the many risks they face nor whether it is even possible or if they have insurance to rectify a loss when it occurs. Transferring one’s risk may be through the purchase of an insurance contract that transfers the risk of loss to an insurance company, pool, captive or obtaining a Hold-Harmless Agreement, etc.

In my own region, for example, I will highlight some possible circumstances that might relate to your own business and real risks you know about and, without pointing fingers, tell you why you might want to talk with me. After reading this statement, if you don’t contemplate contacting me then do discuss with your insurance professionals and get a second opinion because many, in my field, are NOT aware of the availability of insurance for these expenses – (TORONTO (Canadian OH&S News) Penalties for workplace safety violations in Ontario are harsher than any other province in the country, threatening employers and supervisors alike with thousands of dollars in penalties at the least, and jail time for the most egregious of errors.).

I know many of us are familiar with Bill C-45 – http://www.ccohs.ca/oshanswers/legisl/billc45.html – but if, for some reason (possibly you are not a Canadian and immigrated here) then you should be. Penalties for violation can result in substantial fines and/or jail terms. Insurance will never suffice if a jail term is meted out by the judicial system but the legal defence costs, while you are assumed innocent until proven guilty, need to be paid and here is where some form of insurance may meet your need.

Canada: Canadian Employers Hit With Record Setting Occupational Health and Safety Fines – is $750,000 excessive or fair for a family-run corporation? http://www.mondaq.com/canada/x/269016/employment+litigation+tribunals/Canadian+Employers+Hit+With+Record+Setting+Occupational+Health+and+Safety+Fines+The+HR+Space

BOLTON, Ontario—A 67 year old contractor lost his life while making repairs to a reach truck. http://www.mmdonline.com/safety-and-security/contractor-dies-repairing-reach-truck-77870/

TORONTO, ON – Symtech Innovations Ltd., a construction business in the commercial and industrial sectors, has been fined $90,000 after a worker died following a fall through a skylight. http://news.ontario.ca/mol/en/2014/08/symtech-innovations-ltd-fined-90000-after-worker-dies.html

WOODSTOCK, ON – Erie Greenhouse Structures Inc., a company that produces and installs greenhouses and related equipment in Tillsonburg, has been fined $73,000 after a worker lost part of a finger in machinery. http://news.ontario.ca/mol/en/2014/08/erie-greenhouse-structures-inc-fined-73000-after-worker-injured.html

BRAMPTON, ON – Action Trailer Sales Inc., a company that sells, leases, maintains and repairs all types of semi-trailers, has been fined $50,000 after a worker was injured while changing equipment on a trailer. http://news.ontario.ca/mol/en/2014/05/action-trailer-sales-inc-fined-50000-after-worker-injured.html

BRAMPTON, ON – General Kinetics Engineering Corporation, a manufacturer of vehicle suspension systems, has been fined $50,000 after a worker fell from a ladder. http://news.ontario.ca/mol/en/2014/06/general-kinetics-engineering-corporation-fined-50000-after-worker-injured.html

Now what is the “something SPECIAL to YOU” that I offer? As a consultant, I would normally charge a fee for service but anyone – within Ontario, CANADA – who contacts me and mentions this Blog will be entitled to 1 hour of FREE analysis and feedback, without any further obligation. I can be reached by e-mail – larryewinsurance@gmail.com and I might call this my “end of summer” special but the sale won’t be limited to a timeframe if YOU mention to me at any other time since I am hoping that my Blog is the reason and wish to promote blogging as an effective tool in my business promotional efforts. If you don’t live/operate from Ontario, CANADA and still wish to discuss, I am very happy to see if there might be an opportunity to assist you – again at no cost, but it may NOT be 1 hour FREE but a shorter time.

Student Apartments, Residences, Housing, etc. – NOT Apartments!

September 20, 2011

Any property investor or LENDER in the Province of Ontario, CANADA who has an equity or financial interest in student accommodations should take special care when purchasing, renewing or accepting as collateral an insurance policy – insurance companies do NOT like to insure any properties with multiple students living in any unit.  Many insurance companies decline the class of business so that anyone who is selling insurance through those companies may not be insuring you, whether you hold an insurance policy or not!

If you are reading this and own or lend on student housing where the insurance policy does not identify as such, e.g. shows as “apartment building” on your policy – do yourself a huge favour and ask to have the policy amended by the insurance company – not just the agent/broker.

Some commercial realtors are not yet realizing the predicament in which this places an investor – buyer or seller (and also the realtor) – if you own any of the many student apartments being advertised as such.  And many insurance salespeople are also not aware of the consequences to the client, the firm (brokerage or agency) or the insurance company if written as an apartment building and a claim occurs.  If declined by an insurance company for “material misrepresentation”, our whole industry is tarnished by your oversight and I, for one, do not appreciate hearing of another insurance company claim that was not paid, legitimately or otherwise.

Insurance companies on both sides of the border do not like multiple tenanted risks – “rooming houses” by definition – and most of these student apartments have 5 in each unit; well, how can anyone describe this occupancy in any other terms?  If you don’t wish to take my word for it, please do some research and you will quickly learn and agree with me.

Many of you (I have to take each of you at your word when I hear that Aviva, Economical, etc. are insuring you) have an insurance policy that may not respond to a claim in the event of a loss – property or liability – because the insurance company will not insure “student residences”!  Yes, this is common knowledge among the insurance community so anyone who is insuring as an apartment building had better be extremely careful in dealing with you; do NOT rely on their written evidence that you have an insurance policy but insist on the insurance company showing on the policy or verifying in writing that you have students occupying the property.  There are acceptable insurance markets for this category of risk – Lloyd’s being one, Zurich (yes, we have access for fire-resistant structures through this carrier) and, possibly, others through “subscription” or wholesale facilities.

I specailize in working with investors, lenders and property managers so why not just contact me for advice and assistance to ensure that you do not face the terrible consequences of having an insurance policy but not really having insurance?  I have an appointment this week with someone who thought State Farm still wrote student apartments until they contacted the company to determine otherwise (after I encouraged them to obtain written verification that they do have coverage).

And one final note: ask your insurance professional to explain cancellation when done “ab initio” – it means that you were cancelled as if there never was any insurance policy written.  I am sure that you do not wish for that to happen to you!

Student Apartments – calling all investors, underwriters and brokers – BEWARE!

September 20, 2011

Why is it so easy to lie (well, I am frank – let’s call it “stretch the truth”) when someone asks a question?  I made a phone call that resulted in exactly what I anticipated and an outright “LIE”!  ‘Who do you have that will insure “Student Apartments”?’  This, after I explained that it was a 4-floor building of 7 units and 5 students in each apartment which I know is a “STUDENT ROOMING HOUSE” description – NOT a description for an Apartment Building.

The office I phoned was a smaller brokerage I know that advertises they insure these exact type buildings (I’ve run into them in my travels) and did exactly what they were expected to do – ask me for my information where I was very evasive since I am a competitor of theirs, unknown to them as John Smith.

Because they have a website and a Facebook page, it becomes easier to document what I need to use in a blog of this sort.  There are “X” insurance “markets” showing in total for their firm – this includes Auto, Substandard Auto, Surety, etc.  This means I can eliminate several and a few more who have expressed to us  (Aviva, for example, does not have the property capacity to exceed $1Million, Intact has withdrawn quotes and Economical refuse to insure) that they do not have an interest in insuring “student housing/apartments” of any sort in our geographic territory (I won’t say they do not in other parts of our country or the world because I know they do have smaller percentages of property on subscription policies available through specialty wholesale markets) – Ontario, CANADA.

I will say the broker stretched the truth, unless they were counting wholesale markets when replying to me.  Why tell me one has 4 or 5 insurance companies that will insure this kind of risk?  Either it is a lie to the caller or to the insurance company when describing the type of business when quoting is requested – OK, I will tell you their firm is also a member of an apartment managers association, and, if they were a larger brokerage, may then have exactly what they told me BUT they are NOT.

I will not accuse the brokerage of misrepresenting to the insurance company – I have only seen 1 policy they had in force where I know this may have happened but if you’re a member of an association, would it not be easier for an insurance brokerage to include this sort of property in their portfolio?

What I do know is that there are several insurance brokerages in my territory of operation who have been misrepresenting STUDENT APARTMENTS to the insurance companies as APARTMENT BUILDINGS – and, for those who are not familiar with the differences, they are huge!  An apartment will house a single family or a couple of unrelated individuals – NOT 5 students who are unrelated in EACH apartment unit.  The risk is greater and very significant to an insurance company so why would any insurance company insure for the same premiums as an apartment and 1/3 or 1/4 what Lloyd’s might charge for Student Rooming Houses?  They would not, knowingly!

I have been researching this a great deal – in both Canada and the USA – and will tell you that there is a good likelihood, in the event of a significant claim, you will find you do NOT have any insurance so why pay for a policy that is not going to respond when you need it to?  If you are paying an insurance premium for “fool’s gold”, do you really believe you can collect for “gold” after the loss?  I am not trying to scare business to my door but being very practical and hope that each of my readers understands that.

It would be easy to document for any company underwriter where the streets are (there are at least a half dozen university campuses – Guelph, Laurier, Waterloo, Western, McMaster, Conestoga – within 1-1.5 hour drive of my home office).  Since I am so familiar with the territory, why not ask?  Even Google Maps will assist if you’re not anxious to contact me.  For those underwriters who are not familiar with this simple fact – Economical and Aviva are presently on risk for many of these buildings that they will not and do not insure – HMMMMM!  How many other insurance companies are insuring “multi-family apartments” within 1-2 kms. of an university campus?  Look at Google Maps and check your building addresses and descriptions!

Knowing that the market in the USA is anticipated to grow (and Canada is following suit) where starts were expected to tally as much in 2011 as in the prior 3 years, I fully understand why insurance brokers are targeting this sort of risk but how long before your reputation is tarnished by not disclosing to your underwriters what is being insured?  How long will it be before loss ratios mount and you risk losing company contracts?

Yes, it may be an impossible task for me to educate everyone involved in the buying, selling and investing in the latest real estate craze but I surely hope to try.  Insurance companies do not have to pay a claim or defend you if there is any known “material misrepresentation” and it will then be up to you to decide how to pursue your insurance agent/broker.  What is the cost – both financially and in time – to you?

Try cutting to the root of the problem and discuss with a professional who is expert in the field of student housing.  I await your comments, mail, calls.  And I cover from Ottawa to Windsor and do know the niche!

Insurance – a written contract, credibility and integrity vs. “Material Misrepresentation” and “ab initio” cancellation

September 9, 2011

It is strange to sit here and think about how I should address such a topic as one’s integrity and credibility in the Financial Services field – especially given the global financial meltdown of a couple of years ago and some of the lessons that, as a society, were learned – I thought – at the time.

Unfortunately, I have to be critical of competitors of mine which I don’t really like to do.  The reason is that I have seen something, recently, that brought this to the forefront while I have been contemplating it for the past 1-2 (surely, it can’t be 10-20) years now.

When an individual or business owner wishes to “shop” his/her insurance, how should this be done?  Should research be done into the insurance agent/broker and what degree of checking can they do?  Do you care about the “rating” of the insurance company that is quoting and issuing the insurance policy?  What significance is that to whether a claim – your claim – might be reimbursed?  Can an insurance company not pay a claim?  What is “Material Misrepresentation” and something called cancelling “ab initio”?

I’ve been through some excellent training – yes, even Roger Sitkins may have an excellent approach – but I don’t always agree with what is being implemented (hiring people from outside the insurance industry with various specialties and experience to then sell to those same industries but not really know anything about insurance?).  Might that not give cause for misrepresenting the description of operations (how important can this be?) to an insurance underwriter because of a lack of understanding of the insurance business?

Having seen a number of insurance “contracts” – yes, that is what the policy is and what the broker/agent’s “summary of insurance” (or any other written offer/binder until the insurance policy is issued) is – that do NOT properly address a client’s true “description of operations” is incomprehensible.  For many years, I have known of insurance companies who refuse to quote a submission where a licensed restaurant/facility may occupy a strip shopping plaza or where a portion of a multi-tenanted building is vacant.  And yet, that same insurance company will be insuring many clients in that identical situation!

How can any agent/broker explain to his/her client the reasoning behind this?  I don’t know if it is possible!  As to why one individual will provide a quote from “XYZ Insurance Co.” and that same company has declined similar/identical submissions to another broker?  Well, an important reason can be the information that was provided to an underwriter!  If I describe an apartment building that houses 5 or 6 students in each unit as a High-Rise Apartment Building, will I see the same result as a properly worded submission – “High-Rise Apartment Building occupied as Student Housing”?  Anyone who is familiar with our industry will know that the answer to this question is very obvious!  It is just as apparent to a seasoned veteran as describing a frame building as fire-resistive and we all should know that critical difference.

This week, I was advised by an insurance company that they have a “capacity” of $1,000,000 for property in a specific class of business – meaning buildings, contents, etc. (and $1,000,000 is NOT a large sum of money).  To insure a greater amount will then require obtaining their Head Office approval and the possibility of purchasing “re-insurance” at much higher rates than their normal charge might be – this is not too likely to happen!  They would, in all likelihood, not be competitive, either.  That company, apparently, quoted a competitor of mine (according to a client) for $20,000,000+ in Property values at lower premiums – hmmm?  What does that tell you?  It tells me the insurance company may now rescind that very quote (and I would hate to be the broker having to explain that one to the client – oh, it is easy to say it’s the insurance company’s fault, right?).

And when there is a claim that your (not my) client – I’m now directing this at my competition – expects to be reimbursed by the insurance company, will you be there to explain why – due to “material misrepresentation” – that the insurance company refused to pay?  I surely hope so but tend to doubt it.  Maybe my industry competition will claim that this is a case of my crying over “sour grapes” but I was raised in a family where a handshake meant something and a written contract wasn’t necessary (yes, I know those were the days, as is often said) and credibility and integrity still mean something to me!  Where is your integrity and credibility going to be?

I have known, countless times, of manufacturers who exported most of their product and were not paying suitable liability insurance because the company underwriter has limits for percentages of foreign sales and was never advised that they were exceeded (e.g. 10% when it was 90%!).  One instance, I know quite well, was a Wholesaler/Importer of goods from Southeast Asia where the insurance company was not aware of what the product was or where it was manufactured – and yes, it was “critical”!  Yes, company websites are checked, sometimes, and the info showing can be significant in the event an underwriter is reviewing your quote or renewal.

Having as many years in this industry, as I do, should give some of my clients and prospective clientele a degree of comfort but when another individual can insure someone for not 15-20% less but at 1/3 of my quoted premium, will you be really caring about that?  I surely hope so!  Then again, maybe you will think that insurance is a necessary evil and that nothing will ever happen to you and your business!  GOOD LUCK!

Oh, if you really care to know more about “material misrepresentation”, cancellation “ab initio”, etc., please contact me by your feedback, here or elsewhere, on the many postings I have.  Only then you may find that your provider is not too credible and wish to replace him/her!  But I won’t be waiting with nothing to occupy my time because I do have many clients who want a professional handling their insurance business for them.

Is a Second Opinion Worthwhile?

November 18, 2010

It is possible that, with age/maturity, I have learned a few things in my life but I’m slowly losing my tolerance for others’ stupidity or lack of knowledge when they should (because they’re professionals) know better. Why do I feel this way? To begin, I enjoy learning – profusely learning – through reading, whether it be online, books, periodicals, etc. and attending seminars, speeches, etc. I hope you do too because learning should never stop, especially for professionals – experts in their fields of practice.

Last week, I had the pleasure of identifying several weaknesses in our own firm’s marketing by listening to Faith Seekings, an online connection of mine on Facebook, LinkedIn, etc., while attending the AGM for the Canadian Institute of Management’s Toronto Chapter. I will be the last to admit that our firm is not without fault but we are always searching for ways to improve.

Last night, I attended a joint dinner meeting of the CIM/CMA/CGA Grand Valley in Kitchener and listened to Eugene Roman, in charge of New Product Development for Open Text, one of the numerous success stories of “Canada’s Technology Triangle”. Eugene spoke on issues that directly impact my own industry and attract my attention – risk, compliance, records retention, etc.

So how does this relate to my lack of tolerance then? For anyone who doesn’t know me, I have worked in the “insurance field” for 20+ years, including Risk Management, following a lengthy banking career in both Canada and the USA. I have seen much and I am constantly “shaking my head” at others’ lack of understanding of our business but this week…it was the “icing on the cake”.

For years, I have been in the minority when suggesting that if an insurance broker does not understand the business you, the client, operate, either learn it very fast or suggest that you deal with someone who has the level of expertise required to adequately protect you and to offer you advice.

Now…the rest of the story, as one of my favourite radio phrases goes…A residential builder that I have known for several years and pursued for most of that time has provided me with copies of the firm’s insurance policies – a shambles due to anyone’s lack of insurance understanding (so I am not blaming or placing fault on him) and having many different policies all due at different calendar dates. I know the insurance brokerage well and this client is one of that firm’s largest clients – and surprisingly, does not receive anything special in the area of service (possibly because the brokerage is afraid of the builder learning how inept their firm is).

One project that is currently under construction has 2 phases – with a total “insured value” of $500,000. The problem only begins when I questioned the builder as to his cost and am told the 1 townhouse structure is $800,000. The worst part of the problem is that the 1 building is nearing completion and won’t finish for another 4-5 weeks while the other building is framed and roofed and ready for the exterior to commence.

If a fire occurs and demolishes both structures (likely to happen with high winds and very frequent in the insurance industry), he is required to insure to 100% of his final cost and is penalized for every dollar of loss, except that he only has $500,000 TOTAL when he may lose $1,000,000+.

Will he be bankrupt, at that point, due to the insurance professional’s lack of business acumen? I hate to imagine anyone ever losing their business because they relied on professionals who were less than that. What might my recommendation be? For anyone without a sufficient understanding of risk management and insurance, never rely on anyone for too long without obtaining a second opinion – it might be the difference between success and failure for your company.

Brand Reputation – How Important to you is Managing Media Risk to prevent the damage from Negative Press?

December 2, 2009

I won’t take credit for this since my morning e-mail from RightNow Technologies is a promotion of their upcoming webcast and their firm’s services but…do read.

It is a very interesting article re Media Risk and much of what I have been recently stating on my various WRiskManager platforms on Plaxo, Facebook, etc.  I know that a market capitalization reduction of $180 Million caught my attention – how about you?  It could be a much smaller business but how much effort will now be required to rebuild the reputation you have lost?  How much revenue and profit has been foregone by some needless act?  How will your bankers react?

RightNow Webcast: United Breaks Guitars with Dave Carroll

Dave Carroll’s story depicts the value of great customer experience and illustrates that spending a little can save millions when it comes to your brand’s reputation.

In 2008, Dave was flying United Airlines with his band Sons of Maxwell when a passenger sitting next to the window exclaimed that the baggage handlers were “throwing guitars out there.”

Carroll’s guitar was broken. He spent the next nine months in a service maze pursuing compensation. Eventually, customer service at United Airlines told him they were closing the incident and would not respond to any further emails.

Carroll vowed to write three songs about the experience and post them on YouTube, hoping to achieve a million views with all three combined. But he did much better. He hit one million on the first song within one week, and is at six and a half million views at last count. A media frenzy ensued and United’s market capitalization dropped $180 million over the next three weeks.

Register for this live webcast and hear Dave Carroll tell his remarkable story. He will be joined by Jason Mittelstaedt, RightNow’s CMO and Bruce Temkin, Vice President & Principal Analyst at Forrester Research, for a discussion on customer experience in the age of the social web.

There’s no better way to understand how powerful the voice of the consumer has become than to attend this webcast.

View the United Breaks Guitars video.

Join us:

Thursday, December 10, 2009
11:00 a.m. – 12:00 p.m. Pacific
2:00 p.m. – 3:00 p.m. Eastern

Register Now!

See you on the 10th,
RightNow

136 Enterprise Blvd. | Bozeman | MT | 59718 | 866.630.7669 |

http://www.rightnow.com/summit/Americas/2009/presentations/dave_carroll_tues.php

What else can I say about managing media for both positive and negative reaction – the value of ensuring positive images will definitely outweigh the negative as seen here from the views of YouTube and what someone has now done.  Am I not correct in emphasizing managing positive media as opposed to the damage done from something like this?

There are countless examples of companies who do not emphasize the importance of “perception” and how the public perceives their image of one’s business.  Not training your staff to contemplate the damage that can be done by one little act will cost so much more in lost revenues and profits than any employee will ever realize.  Can this cost be managed?  You bet!  But not by standard Risk Transfer – Insurance!  Only by better training, support, etc. can you ever manage media risk which, in my mind, is a very worthwhile investment in your business.

Use expert Risk Management to reduce the consequences of a similar occurrence happening to you!  Contact the WRiskManager today – larryewinsurance@gmail.com 

Multi-National Business and Risk

November 9, 2009

Does a corporation overlook proper “due-diligence” when expanding their operations and, if so, how often might this occur?  I don’t mean the normal, everyday analysis, but a significant Risk Management concern; the legal framework one must consider when crossing borders!

European businesses have become very familiar with establishing new ties with various professional services when they open subsidiary operations in the northern part of North America, particularly in their understanding that Canada is completely different from Europe (and, again, different from the USA).  They locate legal, accounting, banking and insurance specialists who, many times, do not have direct ties with their European operations.  They realize that NAFTA (North American Free Trade Agreement) can benefit their Canadian subsidiaries in allowing an opening into the greater American marketplace, a major advantage to locating in Canada, and then look for the most suitable expertise to assist them.

Examples that I have seen include the contacts made through the various European-Canadian Chambers of Commerce with one lawyer (friend of mine) being especially adept at being able to obtain clientele in this manner.   There are numerous other examples but I will only provide one to whet the appetite for connecting with me.

Why do they like to enter America through Canada?  Many Europeans realize that Canada is significantly closer to our European “roots”, as opposed to our American “neighbours”, in areas like politics (should I term it “social democracy” and multi-party governing, as opposed to a true 2-party form?).  Maybe, for them, it is a gradual change from Europe to America.  And yes, many Europeans do love America.

Now what about American corporations; do they prepare themselves in the same manner?  Do they understand that Canada is not the 51st state?  Reality tells us that many American corporations do not fully comprehend that Canada has distinct laws, particularly in the areas of Health & Safety, Workers’ Compensation, Vacation/Paternal Benefits, Unionization, the “Duty to Accommodate” in areas of Disability and, surprisingly, “Francophone” issues, among many others.  They do, however, realize that we have a “Government Health Care” system in place, unlike their home country (and, yes, there can be major cost savings from that associated with employer provided “group medical insurance”).

Sure, Canadian media is driven by American news events (CBC often reports items faster than CNN, by internet) and Americans residing in Canada don’t recognize that they’re living in a foreign country because of so many similarities (we also watch the same television programs and movies) but there are, in fact, major differences!

What is the significance of some of these issues that can be so different?  An example mentioned to me, over a recent coffee meeting, gave rise to an item that was publicized significantly in Canada not too many years ago.  See the following for one example: http://www.ogilvyrenault.com/files/unionfreespeech01oct04.pdf

Knowing that some corporations do not see the “negative press” (“Reputation Risk”) as something to be of concern may be one issue to debate at another time but as a “new employer” in a different country it should give rise to discussions in the Board room, should it not?

Or, what about language issues or a “Napoleonic Code” legal system which should also be Risk Management concerns?  You may ask what the Napoleonic Code is but it heralds back to the times of Emperor Napoleon and still is the legal system in use, today, in the Province of Quebec, a part of Canada that is also the reason that we are a legally “bi-lingual” country.

There are a large number of differences between Canada and the USA that cannot (or should not) be overlooked by an American subsidiary operating in Canada.  Anyone who recommends that their subsidiary operate as a “branch” of the parent will be confronting many major issues never contemplated at home.  Quite possibly now, a majority of American firms operating here, treat their operations in this manner without fully realizing the many Risk Management issues they face.

The most significant, in my mind, was Bill C-45 and the debate it caused in 2003, when Directors, Officers and Management could be fined and imprisoned for the most serious of health and safety violations!  I had clients who wanted to buy insurance protection which was not available because these are considered “uninsurable” (criminal) events.  What could they do?  We provided training and consulting from a Risk Management capacity which lessened their concerns.  This needs to be an ongoing function.

To conclude, it may be better to obtain the expertise of local consultants when expanding multi-nationally.  Good Risk Management practices would indicate that, instead of assuming that everything is the same as to what one has become accustomed, businesses should take a few moments to contact us.

Directors’ & Officers’ Liability Insurance general information

October 27, 2009

What is Directors’ & Officers’ Liability Insurance?  What does it do; who does it protect; why buy it?  These are just a sample of questions anyone in the business of D&O (buyer or seller) will have heard throughout their years of working in this particular specialty of insurance.

I once heard an esteemed partner in a well-recognized law firm offer that, in Canada, if there were 100 insurance companies that sold this form of insurance policy one would not find 2 identical policies anywhere in the country – can you imagine that this might be any different in the USA?  I can’t.

Who sells Directors’ & Officers’ Liability (more commonly called D&O) today?  Many insurance companies will offer the coverage but some will only write the “non-profit” market or Not-For-Profit Organizations, Associations, etc.  Others will write both classes (“For Profit”, as well) of business and still, other sources might include the “wholesale” marketplace or Managing General Agents (MGA’s).  These MGA’s attempt to access markets (e.g. Lloyds’) and design a policy specific to an industry or sector, in some cases.

What might be the Purpose of D&O insurance?  A simple response might be “good corporate governance” but nothing will truly be simple in a discussion of D&O.  Why is D&O necessary?  Legislation and the many decisions of the world’s Judicial System have required that anyone in the place of a Director and/or an Officer of any Corporation be protected due to the large personal risk that one faces – the loss of “personal assets” of a director/officer.  In the case of a “volunteer” director on a board, can you imagine explaining to your spouse that your family may face the loss of your home, business, savings, etc. when you have been volunteering for a church, service group, social activity, or other worthwhile cause and are named in a lawsuit?  Absolutely ridiculous!  Correct?  NO!  What about those individuals who served as Directors or Officers in prior years?  Yes, past and future directors can be covered by the insurance policy, as well as current directors.

What is covered by a normal policy?  Legal and Defense Costs (have you recently asked a lawyer who specializes in this area, how much their hourly rates are?), Damages, Settlements and Judgments are normal and, most people will agree, can be quite substantial.  Actual or “alleged” wrongful acts are covered but what will not be covered (nor should it be) are Fines, Penalties and other charges deemed uninsurable (e.g. profits or gains realized due to insider information).

Some of these acts may be “negligent”, “errors”, “omissions”, “misstatements”, “misleading statements”, “neglects or breaches of duty”, etc.  but will NOT cover “acts of bad faith”, “bodily injury or property damage” (that is what other Liability insurance covers), “claims relating to employee pension or welfare plans”, “environmental claims” (again other Liability insurance can be obtained for that), “claims resulting from facts known prior to the inception of coverage”, “failure to maintain insurance:, etc.

Claims can be brought by shareholders, creditors, employees, suppliers, competitors, government bodies, etc. – can you think of anyone who is not included here?

What about the corporation that no longer exists due to wind-up or other reasons?  Yes, the policy can have an “extended reporting period” whereby the insurance company will extend coverage for an additional term for additional premium, usually less than the full term’s cost.

Examples of claims could include any of the following:

  • Class action lawsuits against a Board of Directors for alleged mismanagement – hindsight will definitely be 20/20 so who is to determine that there was actual mismanagement?
  • Damages against various directors and officers of a firm for alleged non-disclosure of financial conditions and performance (I have an example where a bank claimed this from a Borrower);
  • Shareholders questioning whether their interests were adequately represented by the Board of Directors;
  • Corporate Governance issues which have become a major source of concern to the financial markets and to governments;
  • A suit against a group of directors over a dispute about the value paid by one company for another (and the odd item of note, here, was that the D&O insurance did not survive the takeover);
  • A public offering of stock where directors are quoted as touting the prospects where the stock fails to perform in a manner consistent with those statements and shareholders subsequently sue for damages, “alleging that they were induced to buy at an inflated price because of the excessive promotion of the stock by its directors”;
  • A wrongful termination of an employee, whereby an employee argues that a “sales decline was due to a weak economy and failure of the company to keep its prices competitive”;
  • The directors of a struggling company were unaware that management was using Sales Tax collections to finance the day to day operations and when the company took bankruptcy with unremitted tax monies, the government assessed the directors personally for outstanding tax liabilities;
  • Unpaid wages in the event of a bankruptcy;
  • Sexual harassment and discrimination;
  • And the list can go on.

What makes “non-profit” so different from “for-profit”?  Many of the above examples are strictly for profit, right?  Yes, most are but a non-profit organization can have instances of termination, harassment and discrimination, too!

One of the differences is that a non-profit may need and benefit from a “duty to defend” clause in their policy whereby the insurance company is required to defend the lawsuit, as opposed to participating or reimbursing an Insured following a judgment.  Some companies will even cover for administrative errors and omissions and not have a specific exclusion for “failure to maintain adequate insurance” (WOW!).  This may be a small benefit to a non-profit but is an example of a major difference from insuring a “for-profit corporation”.

There will be many other questions that a reader may have but this information should give an overview of Directors’ & Officers’ Liability insurance, the importance of obtaining and some of the differences between the two types of coverage available.

Please feel free to comment or ask further questions.