Banking and insurance chief executive officers (CEOs) think it’s time for their chief financial officers (CFOs) to shine. But many also have deep misgivings about whether the finance function — and its leadership — is ready to deliver real value to the business strategy. Winds of change keep blowing Anyone that thinks that the financial services industry has been slow to change has clearly not spent much time in the finance function. Indeed, the last decade — the past 5 years in particular — have been all about change for finance executives. Change has been driven from all sides: new accounting standards, increased capital adequacy and/or solvency rules, heightened reporting requirements, new regulatory directives and the recent shift towards more integrated reporting are just part of the change sweeping through the financial services industry and flowing into the finance (and risk) functions at financial institutions. At the same time, bank and insurance CFOs also need to support the organization and its business strategy. New products are being introduced, businesses are being sold or acquired, non-strategic assets are being divested and new markets are coming into scope. And with each change, the finance function has needed to respond. Rise above the fray While bank and insurance sector CEOs seem to sympathize with the plight of the finance function, most clearly expect their CFOs to rise above the challenge. In a recent global survey of more than 370 CEOs commissioned by KPMG International, 67 percent of financial services respondents said they expect the role of their CFO to increase in significance over the next 5 years, the highest percentage among all c-suite executives. The problem is that few of these CEOs seem to think their finance leadership is currently ready to take on this high profile role. The same survey found that just 53 percent of the financial services CEOs thought their CFO was viewed as a valuable business partner by the business. Only around a third of respondents believed that their CFOs truly understood the challenges they face as CEOs. Just 19 percent thought that their CFO was currently playing a critical role in supporting the CEO and the board. Simply put, the data suggests that CFOs of financial institutions still have a long way to go if they hope to live up to their CEO’s expectations. Taking an enterprise-wide view of performance A number of CFOs at the top global banks and insurers are now starting to focus on developing and improving their enterprise performance management (EPM) capabilities. Essentially, they are starting to recognize that — by combining financial data with operational and customer data through the latest wave of integrated EPM solutions — CFOs can start to take a leading role in helping to dynamically manage the planning and execution of the business strategy. EPM delivers benefits across the organization. At the finance level, improved EPM capabilities enable finance functions to optimize their finance operations and dynamically generate more value-adding reports, allowing the finance function to become a more vital business partner across the enterprise. It can improve the speed, relevance and access to the type of performance reporting and analysis that creates real business insights when and where it is needed most: in the business. And it can help create better alignment between the organization’s diverse back-office functions (such as risk, capital management, compliance and operations) to drive better end-to-end decision making based on a single set of balanced key performance indicators (KPIs). Improved EPM capabilities also allow the finance function to become a better — and more strategic — business partner. In some cases, this is achieved by driving valuable forward-looking analysis and planning through the EPM’s integrated business and financial planning features. Using these advanced EPM functionalities enables finance functions to better anticipate and even predict business outcomes, leveraging sophisticated ‘what-if’ scenario-based analysis capabilities based on key business drivers, events and relationships. And, in doing so, it can help the finance function become more integrated with the organization’s sales and operations planning processes. This forward-looking EPM feature is especially important for financial institutions, as new accounting standards like IFRS9 for financial instruments and IFRS4 Phase 2 for insurance contracts (both life and non-life) forces them to disclose fair market values and net present value (NPV) calculations on their financial assets and liabilities. This, in turn, will likely make results more volatile and more transparent, which will lead organizations to demand even greater control than they have today. Many financial services organizations are also seeking to improve their end- to-end performance in key areas such as customer performance. Some have even defined new roles specifically to support improvements in their end- to-end processes. As a result, some organizations are finding that EPM helps deliver a consistent end-to-end framework that ensures consistency in definitions, improves connectivity to show correlations and encourages the reuse of data to improve reconciliation. Aligning the Risk and Finance functions of insurance companies with EPM For insurers, one of the big benefits of EPM is closer alignment between the finance and the risk functions. Creating this alignment is more important today than ever. The finance function is critical to measuring and reporting financial metrics such as gross premiums, investment returns, claims paid and overall profitability, while the risk function needs to estimate the technical reserves based on a complex array of actuarial models covering insurance, market and operational risks. Together, these two form the basis for the all-important equity and solvency ratios of the company. The latest generation of insurance- specific EPM systems can bring both worlds more closely together. Not only are they able to generate the usual financial and certain regulatory reporting requirements, but they can also support the integrated business planning and management reporting needs of the company through innovate data cubes, on-the-fly dashboard generators and real-time analytical capabilities. From discretionary to mandatory Perhaps most importantly, a strong EPM capability can enable management to make better business decisions. It can help improve speed and access to information. Leveraging new technologies (such as those on offer at the KPMG Data Observatory), EPM can deliver improved visualization and analytics capabilities, thereby empowering the organization with competitive insights. And it can make sure everyone is looking at consistent data from the same source, improving decision- making confidence. Essentially, it can help management answer the big questions that they are struggling to answer today. This is exactly what CEOs say they want from their CFOs. Indeed, when we asked CEOs of large financial institutions what their CFO could do to deliver more value, three initiatives boiled to the top: 1. applying financial data analysis to help the organization achieve profitable growth; 2. using financial data analysis to create and implement new operating models; and 3. finding ways to turn the regulatory environment into a competitive advantage. All three can be achieved through improved EPM capabilities. As a result, most CFOs are starting to recognize that investing into EPM is no longer a discretionary activity. It is a source of potential competitive advantage, a way to better manage regulatory requirements and a path to improved efficiency and cost savings. As such, EPM is quickly becoming a mandatory capability for finance functions in the financial services industry. More than just a reporting tool We have used words like ‘discipline’ and ‘capability’ when we refer to EPM, rather than ‘software’ or ‘solution’. That is because EPM is much more than simply a tool or software package that is ‘bolted-on’ to consolidate and analyze global data from existing ERP systems. In fact, the real value of EPM comes only when the organization — led by the finance function — starts to turn that data into real, reliable and actionable insights. And that requires a holistic approach to EPM that spans the enterprise and the whole operating lifecycle (as illustrated in Figure 1). To start, organizations may want to consider flipping the historical ‘plan-do- check-act’ approach on its head. Indeed, creating a robust and appropriate EPM program requires finance functions to start with the ‘act’ (i.e. what insights does the business need in order to act), and then ‘check’ what information is required and whether it is available. Only then should finance functions move onto the ‘do’ of building the solution and, ultimately, the planning that can be achieved once the information is available. Once EPM programs are in full swing, finance functions can then go back to the traditional and continuous ‘plan-do-check-act’ lifecycle process and culture. Become a value player: Solve the business’ problems Securing ‘buy-in’ from the business for a new approach to EPM is not easy; fatigue with new change programs is high and executives are competing fiercely for resources for their own programs. But buy-in is critical, not only at the executive level but throughout the business and across the enterprise. In this busy environment, CFOs may want to start by helping the business answer one specific (yet critical) management question: “How can I best help you achieve your business goals?” Maybe it’s about finding the optimal pricing mix for their products and services. Maybe it’s about identifying the right acquisition targets to drive profitable growth. Or maybe it’s about identifying the most profitable customer segments and channels. The key is in working collaboratively with the business to solve their problems and then using that opportunity and outcome to drive greater appetite for more advanced EPM capabilities within the business. Bank CFOs leverage EPM to become more strategic Most banking CFOs are already well on their way to moving from being a scorekeeper to becoming a business partner. But EPM enables CFOs in the banking sector to move one step further by allowing the finance function to combine multiple sets of data — financial, customer, risk and operational, for example — to provide the organization with deeper, more valuable and more strategic reports. Our experience suggests that the ability to leverage and adopt new technology and approaches will be key. Some of the leading banking CFOs are already using data visualization and predictive analytics to collect, analyze and communicate key data sets. And early adopters are now investing into robo-advisors and other automated technologies that can reduce or eliminate manual intervention. A business-led approach When we work with banks and insurance CFOs to create stronger EPM lifecycle discipline and improve their EPM capabilities, we focus on creating a holistic enterprise performance management model and approach that recognizes the transformation that is required in process, people and technology to allow CFOs to drive real value from their finance teams. In doing so, we lead our clients through a business-led technology transformation that instills the necessary EPM awareness, capabilities and skills across the enterprise and throughout the business, helping CFOs meet the evolving and increasingly sophisticated demands of their organization. Questions to evaluate if your organization needs improved Enterprise Performance Management capabilities ...

1. Doesyourexecutiveteamhave real insight into the group’s true profitability by product, service/ channel, country/region and customer?
2. Is your organization combining financial, operational and customer data to make better decisions and create a competitive advantage?
3. Are you able to anticipate future regulatory changes and use those insights to gain entry to new markets using innovative channels faster than your competitors?
4. Do you know which channels currently provide the best growth and profitability and do you have a plan for optimizing them?
5. Are you able to conduct collaborative planning across all of your business functions to optimize investment decisions and improve shareholder return while at the same time maximizing capital efficiency?

Reprinted from (Regulatory Challenges Facing the Insurance Industry in 2016,) Copyright: 2016 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved. Printed in the U.S.A. The KPMG name and logo are registered trademarks or trademarks of KPMG International. All information provided is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the facts of a particular situation. For additional news and information, please access KPMG's global web site.

More than 50 research studies worldwide have found that certain types of news coverage regarding a death by suicide can increase the likelihood of additional suicide deaths in vulnerable individuals. The magnitude of the increase is related to the amount, duration and prominence of coverage. Business leaders can learn from these media studies and shape written and oral communication in a preventive way. Media Lesson: Risk of additional suicides increases when the story explicitly describes the suicide method, uses dramatic, graphic headlines or images, and repeated/extensive coverage sensationalizes or glamorizes a death. Use non-sensationalized language and life-giving terms. Avoid images that glamorize the death such as photos or videos of the location or method of death or grieving family and friends. Headlines such as “Kurt Cobain Used Shotgun to Commit Suicide” should better be drafted as “Kurt Cobain Dead at 27.” Business Application: Talk about suicide in a way that assumes the recipient will handle the information in a mature, responsible, life-giving way. Often, leaders avoid any reference to suicide when speaking with their teams. The rationale can be wanting to avoid any power of suggestion. “We didn’t want to give them the idea.” This belief is highly inaccurate. They already have the idea…especially immediately following a death by suicide within their social circle. Avoiding the topic lends it negative power. Discussing suicide carefully, even briefly, can change public misperceptions and correct myths, which can encourage those who are vulnerable or at risk to seek help. See Also: A Manager's Response to Workplace Suicide Media Lesson: Avoid reporting that death by suicide was preceded by a single event, such as a recent job loss, divorce or bad performance review. Also, avoid describing a suicide as inexplicable or “without warning.” Reporting like this leaves the public with an overly simplistic and misleading understanding of suicide. Application: Suicide is complex. There are almost always multiple causes, including psychiatric illnesses that may not have been recognized or treated. However, these illnesses are treatable. Refer to research findings that mental disorders and/or substance abuse have been found in 90% of people who have died by suicide. Most, but not all, people who die by suicide exhibit warning signs. Identify a list of usual “Warning Signs”. Consider quoting a suicide prevention expert on causes and treatments. Fully acknowledge the horror and the loss but emphasize what is being done to support those who are impacted. Change your language from “committed suicide” or “successful/unsuccessful suicide” to “died by suicide” or “completed suicide.” Media Lesson: Do not cite the content of the suicide note or any “manifesto.” Better would be “A note from the deceased was found and is being reviewed by the medical examiner.” Application: Communicate, communicate, communicate but determine what content is shared on a “what is helpful/need to know” basis and always prioritize respectful adherence to the needs and wishes of the family. Media Lesson: Use your story to inform readers about the causes of suicide, its warning signs, trends in rates, and recent treatment advances. Include means of accessing resources. Application: Knowledge offers healthy power. Have a hopeful, caring, life-giving tone. Focus the major portion of your remarks upon resilience and health rather than details about the death. Talk about available treatment options, stories of those who overcame a suicidal crisis, and resources for help. Emphasize faith practice and spiritual strength. Include up-to-date local and national resources where people can find treatment, information and advice that promotes help-seeking. Business leaders can change the conversation and help keep people just a little bit safer.

At the end of 2016, some CEOs are going to be happy about their results. Others? Not so much. Underlying both the good and the bad will be a clear bifurcation between those that get and execute modern IT and those that don’t. The outcomes will be stark and the penalties brutal. This bifurcation will just be beginning, and the gap between the haves and have nots will continue to grow. This article will talk about what the bifurcation is, how it came about and how you can end up on the right side. But first, here’s a snapshot of how your organization will behave if you’re a winner in 2016. You’ll be better at customer acquisition, retention and growth than your competition. You’ll be far faster and more effective at integrating and leveraging acquisitions and faster than your competition in introducing new products, services or features. Revenue-per-employee will be better than your peer group, and return on capital assets will be better than average for your market segment. You’ll have advantages in decision cycle time and decision quality as well as better talent management and broad collaboration enablers. Your BPM layer will have near-perfect compliance and cost-efficiency. You’ll quickly respond to new entrants, ideas and attacks. And your marketing spend will be two times more effective per unit dollar than your nearest competitors. This translates into segment-leading profit, share and growth numbers and the best shareholder return. But seriously, how can you do all the above — and more — to put a serious hurt on your competitors? Clearly, you must have the right strategic focus, the right goal alignment across the firm, the right talent matched to task and the right structure to mission. But even with that, it is simply impossible to achieve the above in today’s world without being excellent at IT and having the CEO/CIO be his or her own lock-step mini team. Those that don’t, won’t succeed. The big bifurcation is beginning. What led to the current IT bifurcation? In the early 2000s, after the Y2K fog cleared, smart, well-funded startups began to leapfrog current technology. Even some established big players made great leaps forward (often by acquisition). The foundations were set back then for things like Enterprise Architecture, SOA/Web Services, next-gen analytics, cloud(s), Business Process Management (BPM), virtualization, enterprise grade KM/collaboration platforms, modern portfolio management, analytics (think metadata) and agile development to really make a difference. Around 2007 and 2008, a lot of the first-gen players were killed off by the second generation, which was born advantaged by having seen the stumbles of the first generation. At the same time, the size and value of networks increased, and the mobile layer began to take on critical mass, helping spawn the emerging big data field with its own thick fog. This spawned a hockey-stick growth curve for the massive and massively complex “social” layer, which, in turn, fuels more big-data plays. It’s now 2016, and these areas (and more) have matured into extremely viable, high-impact opportunities for IT. On top of that, emerging areas like SDN, SDDC, DTM, TBM, algorithmic solutions, next-gen visualization, real IT asset management, social tools and new construction tools have created a split — the big bifurcation — in the IT world. The firms that leverage a decent amount of the modern tech mentioned above and figure out how to do that while whittling away at legacy overhang are simply better armed for the competitive fight than their opponents. They are the ones at the knife fight with the gun. It shows up in concrete results. It generates the happy CEO or CIO I described above. What are your odds of landing on the winning side of IT bifurcation? Like golf, poker, raising a teenager, hiking to the South Pole and writing haiku, undertanding next-gen IT stuff is conceptually quite simple — but it’s wickedly hard to do really well. Like those examples, in IT, there will be a long wake of wreckage from ugly, failed attempts. May the odds always be in your favor. Unfortunately, they are not. Less than 10% of the Fortune 1000 IT teams will be on the winning side of this by the end of 2016. The rewards for landing on the winning side will be great, as will the unprecedented churn in CIOs and CEOs. As results become apparent and, in part thanks to increased media buzz, the board-level understanding of the bifurcation becomes clear, heads will roll. Taken as a whole, the changes I described above are new, drastic and high-impact. We are entering a new epoch, one that makes the advent of the two past big network changes in U.S. business (railroads and telegraph) look like child’s play. This is not an acceleration or concentration of an existing case. This is a new scenario. Tips for how to land on the right side of IT bifurcation So what are the prescriptions? Here are 10 to get you started. 1. The genius of “and” versus the tyranny of “or” This IT game would be easy if the business, the market, the competition and the invention would all just pause for 18 months while we go tools-down, clean up the inevitable legacy quagmire and get all the new cool stuff. Of course, that’s not happening. It's hard to look at a bubble spend to enable judicious clean up, change and construction. Clean up the legacy mess, change the underlying IT factory to make it modern and construct using the new methods. For example, jump in at the deep end and do an existing funded program with BPM instead of whatever it was you were going to use. Yes, you must spend to do this. But you must also eliminate cost structure. What you really want to do as you change and construct is reduce the cost structure. Cost structure is your factory cost of production — your unit cost of output. For example, in my experience, BPM applied well is three times faster, qualitatively superior and 30% cheaper right off the bat — a good cost-structure impact. So, spend more and reduce the cost structure this year, and a couple of years out, your multiyear spend will have a favorable return (IRR for example). It’s about the genius of delivering and shrinking the cost structure, not just delivering or just reducing costs. One small test is to see if you can identify the director in charge of targeting and shutting things down. I know you have many folks tasked with building and adding new things to your IT estate. Where’s this other person? 2. Get clarity of mission, and match talent to task and structure to mission There is not a chance your current structure, talent map and set of guardrails (rewards/punishments aligned to mission) just happen to already match the new mission. You need to move fast and rip off that Band-Aid. 3. Be humble, get help Find and engage external been-there-done-that help. Make sure knowledge transfer is a key focus and time-box these engagements. Run away from any external "experts" who seek to be semi-permanently embedded in your world. 4. Get “journey talent” Cricket players can play rugby; they can adapt to a new game. Get some journey talent and get rid of those who should not make the journey. The existing team can generally be taught to play the new game — the one the new competitive landscape mandates regarding the bifurcation. Your existing team has very valuable knowledge and is a supporter of the positive parts of your culture, which is equally valuable (I hope). IT is a special case, and the new cool stuff appeals to the IT masses. IT talent generally likes to learn, and its job content has more value when it works on “the new stuff.” It is, however, hugely important to get some journey talent, people who have been on that journey before, down in the trenches where the real work happens. Some people just will not have the skills. For example, great command-and-control leaders often are not very effective in influencing organizations. Most of today's effective IT groups live in a partnering/influencing world. More importantly, there will be people who verbally get on board but, in reality, are in the back of the boat not rowing, are rowing the other direction or are not in the boat at all. Get rid of these folks. Get rid of a few publicly. 5. The art of change Almost no one wakes up and says, “Wow, I hope I see a bunch of change today.” Change is often hard and uncomfortable. The best balm is reward — reward for being in the boat and pulling your weight, for results and for progress. The two things you have to worry about are making sure the entire team knows what change management model you use and keeping a close pulse on the organization to make sure you don’t add too much change. The latter is simply an art; there is no specific way to measure this. You have to feel it, you have to listen and you have to hear it. If you want to see an organization spin out-of-control and do weird stuff, overload them with change. On the model side, there are, broadly speaking, only four change models. One of them works three times better than the others. Most companies cannot verbalize which one they use. Once you believe in bifurcation and see the benefits on the other side of the fence, there is a huge gravitational pull to do too much too soon. It requires great leadership and pattern recognition to not do that. I wish I had an easier answer for you. Yep, again, IT is conceptually simple just wickedly hard to do. 6. Program Management The only thing the top 7% of IT shops of any significant size have in common is that they are all great at program management. Can you name your PM guru(s) and top PM talent? 7. Architecture Great ideation and construction skills — coupled with a lack of focus on architecture or a deficiency in that area — leads to spaghetti-esque disaster. It leads to more and more of your costs going to keeping the beast humming and less to delivering stuff that helps the P&L. Great architecture coupled with just B+ construction leads to greatness. Can you name your EA/Arch guru(s) and top architecture talent? You need a well-architected view of your destination if you are really going to land on the right side of bifurcation. 8. Finance Make sure you serve the CFO team and partner where needed. It is not a peer relationship. In IT, you are their supplier. Having said that, it's a good idea to argue with them constructively — quite a bit, too. Get them plugged-in/embedded, get their help and support. Learn their language, learn to listen in their language. Implement a TBM solution. Get obsessed about moving spending out of the “keep the lights on” column and into the delivery column. It’s a business. Sure, other measures are important, but we keep score in units of money. 9. But our culture won’t let us … Culture — at a national, geographic or ethnographic level — is hard to change. Generally, it takes a good part of a generation (or more or forever) to change it. Culture inside a company is not the same thing; it's a simpler subset. In a company, behaviors are a function of what employees get punished and rewarded for, and they are a function of how clearly those are communicated, executed and sold (yes, sold) to the employee base. The sum of the behaviors is the culture at a company. I would be surprised if your current culture is a perfect fit for the next few years. Think through this, execute the right changes and stick with it. The changes may not be drastic, but they are important. 10. The war for talent and cumulative IQ Quite clearly, there is a war for talent, and it’s getting worse. Think of the talent needed for all the new stuff mentioned above to execute. There are three things you need to do.

• Launch an enterprise-wide KM/collaboration platform. I have done this at three G500 firms. The impact: Decision-quality goes up, decision-cycle time improves, resistance to innovation decreases and continual improvement efforts have a better chance of working. Un-innovation is the work all over your firm where people are working through a new problem/challenge or are implementing something for the first time, even though it’s been done before (sometimes many times) somewhere else in the company. So you don’t get bifurcated in a bad way, this will be key for the IT business journey you are heading on.

• Make HR strategic. One of the two Pareto root causes of failure for strategic change is the lack of appropriate and matched talent. Your strategy is really an optimizing play of the money, stuff (computers, buildings, IP, etc.), people and information you have. Your stuff and money are not as differentiated from your prime competitors as you think. The talent is the lynchpin. It is strategic. Get external help to help map this out well.

• Become more diverse. Where do all the white male IT superstars work? Pretty much wherever they want in the jobs they want. How hard is it to get that talent? It’s very hard. Many of them occupy their Peter Principle position and will never move. Where does the top minority and female talent work? A lot of them work in underutilized positions in IT sub-cultures inside companies where they are disenfranchised and subjugated to some degree.

If only you had an IT sub-culture where you were working on cool, new stuff, had a great compelling mission and had an environment where those talent segments were fully ensconced, appreciated and valued. The icing on that cake is that retention goes up. That impacts output per unit dollar and cost structure in good ways. The sprinkles on that icing is that the cumulative IQ is a sum of your IQ plus a kicker for the diversity of ideas. Think about it. One hundred smart guys who all think alike aren’t really that much smarter as a group than any one of them individually. Visualize three new tech hires: Web developer, social media wizard and big data scientist. Were any of your visualizations 57-year-old balding white men? Probably not. One world-class tech guru I know personally, who is the best I have seen at driving Agile at scale, labors away in a high-pressure consulting firm. Why hasn’t anyone just grabbed him? I believe that is a segment with some hidden gems, too. Conclusion – 80 extra IQ points I hope all that helps. I hope you don’t end up on the wrong side of bifurcation. It’s just beginning, but it is coming fast. Lastly, remember what Alan Kay said: “Context is worth 80 IQ points.” That means a lack of context subtracts IQ points. Lack of contextual understanding may be IT’s biggest problem, historically. Buckle up, and step on the gas. This article was previously published on SandHill.com. The story can be found here.

In the article "40 Hours and I'm an Insurance Agent," we caught a glimpse of the dismaying reality that it takes 15 times the education to be a manicurist in the author's state than it does to be an insurance salesman.

In Texas, to be eligible for a hair-weaving specialty certificate or a wig specialty certificate, an applicant must submit a form, pay a fee, spend at least eight weeks taking 300 hours of instruction and pass a written and practical exam. To be an insurance salesman in Texas, one must pass a written examination, be fingerprinted and undergo 24 hours of continuing education semiannually. So the reality is that, as far as many states are concerned, it is more important that your wig is styled correctly or your nails are shapely than it is that your home, car, business and life are insured properly — and for the right price.

Now comes the additional shocker that to sell reinsurance and to operate under the reinsurance intermediary's license, the individual selling this reinsurance needs to have zero education, zero testing and zero personal proficiency licensure. There is no educational requirement, no testing, no continuing education requirement and no ethical code. There is not even a floor for reinsurance salesmen's professional requirements, much less any lofty standards. How, then, are they to be taken seriously or considered professionals?  

Willie Nelson's song should be changed. His advice to mamas in an old song was, "don't let your babies grow up to be cowboys/let 'em be doctors and lawyers and such." No, what mamas should really do is tell their kids to sell reinsurance.

Medical school and law school are both incredibly expensive and time-consuming, and both lawyers and physicians must be licensed to practice - after years of post-graduate work and after passing very comprehensive tests. In some areas of the country, a major intermediary broker pays its reinsurance salesmen a salary of between $146,000 and $158,000, according to Glass Door; this amount does not include any bonuses, stock options or benefits, which are definitely provided.  

See also: The 13 Oddest Aspects of Reinsurance

Salesmen of any sort can earn a great deal. The average annual income for an average sales representative is between $26,950 and $133,040, according to 2008 figures from the U.S. Department of Labor's Bureau of Labor Statistics. Reinsurance salesmen are definitely well compensated. Reinsurance salesmen handle and sell millions - or perhaps billions - of dollars worth of reinsurance, costs that are ultimately paid for by you as part of your policy's insurance premium.  

The top-5 highest-paying jobs in America (according to CNBC) are: 

1. Surgeon (median base salary: $352,220)
2. Psychiatrist (median base salary: $181,880)
3. Physician - general practice (median base salary: $180,180)
4. Corporate executive - senior level (median base salary: $173,320)
5. Dentist (median base salary: $146,340)

The top 5 highest paying jobs in America (according to Glass Door) are: 

1. Physician (median base salary: $180,000)
2. Lawyer (median base salary: $144,500)
3. Research & development manager (median base salary: $142,120)
4. Software development manager (median base salary: $132,000)
5. Pharmacy manager (median base salary: $130,000)

Reinsurance salesmen can definitely clear those hurdles and find themselves making more than the median salary of one of the five highest-paid jobs in the U.S. 

The State Will Protect Your Wig but Not Your Wallet 

For your supposed protection, the National Association of Insurance Commissioners (NAIC) has promulgated a series of "model" acts that address various issues, including topics related to reinsurance intermediaries, which, on paper, various states have adopted. However, the NAIC Annual Financial Reporting Model Regulation, (Section 7 D (1)) demands that the same CPA may not oversee the financial audit of an insurance company more than five consecutive years. It is well-known that becoming a CPA demands rigorous educational criteria and has extremely comprehensive ethical standards. There is no requirement to be a reinsurance salesman employed by an intermediary, yet almost every state focuses on the well-educated, well-trained and ethically bound CPA and virtually ignores protecting the citizens of its state by not properly overseeing the reinsurance salesman.

Perhaps the National Coalition of Insurance Legislators (NCOIL) needs to take up where the NAIC has failed.

Clearly, reinsurance itself is not magical and it is only really esoteric because the reinsurance industry and the intermediary brokers want it that way. The industry makes up its own words and has its own jargon, but the concepts are not difficult - and it certainly is not rocket science. The reinsurance industry (and those who sell reinsurance) have worked very hard to keep reinsurance nebulous and away from any scrutiny. Reinsurance is not insurance on insurance, it is insurance on the claims made against specified individual (facultative) or a group (treaty) of insurance policies. Reinsurance has no premium tax, is lightly regulated, has favorable accounting for its sale, isn't generally faced with lawsuits from its purchasers, is able to argue the same issue over and over, punishes the purchaser and not the seller and is simple. The parties have unequal bargaining power - yet the law punishes the weaker. Reinsurance also has a lower overhead, meaning reinsurers can make a profit at a higher loss-level than insurance companies.

See also: Disjointed Reinsurance Systems: A Recipe for Disaster

Reinsurance represents one of the largest year-in and year-out expenditures of many insurance companies. It affects the costs of everyone's insurance as it is part of rate promulgation. Any excess charges or incompetence by the reinsurance salesman in what is charged to the ceding company is also passed on to the unsuspecting policyholders of the ceding company.  

As long as state insurance regulators believe it is more important that a wig is braided correctly or that someone's fingernails and toenails are well-filed than it is that someone's insurance is correctly priced, expect to overpay for your insurance.

From all aspects of professionalism, any reinsurance intermediary that considers its front-line staff to be more than just salesman or that advertises its advantages over other intermediaries (beyond just selling reinsurance), should welcome, and, in fact, push for change, including a switch to federal regulation, if they are advertising that they have better qualifications than competitors. It is one thing to advertise and promise your professionalism, it's quite another to actually prove it.

A developing trend in the workplace is to eliminate traditional performance ratings and rankings, a process that is almost universally derided by managers, employees and human resources professionals alike. Finally, executives are capitulating to overwhelming evidence that rating people not only fails to improve their performance but also actually lowers productivity and destroys morale. An added benefit of the trend will be improved mental health among employees. Author Garrison Keillor famously described his fictional hometown, Lake Woebegone, as “a place where all the women are strong, all the men are good looking and all the children are above average.” That description is not terribly different from the way American businesses and employees perceive themselves—above average. As a company recruiter, I always strove to attract and hire the “best of the best,” “A-players” and “superstars,” those who fit the company’s image as a place with only the very best employees.   And yet, the typical performance management system in America forces managers to rate employees on a scale of one to five, and suggests—strongly suggests in some companies—that those ratings be distributed on a bell curve. That means fully 70% of employees are rated simply “average.” The result? Conflict and stress. Many of the most emotionally charged conversations I’ve had with employees as an HR professional emerged from their distress over the numerical rating that their supervisors had assigned them during a performance review. Rating people is fraught with stress for everyone involved. In their 2014 article in Strategy + Business, David Rock, Josh Davis and Beth Jones, researchers at the Neuroleadership Institute, explained that giving employees a numerical rating produces a “fight or flight” response in people, “the same type of ‘brain hijack’ that occurs when there is an imminent physical threat like a confrontation with a wild animal.” Not only is rating and ranking employees difficult, it’s expensive. An estimated $14 billion are spent annually on leadership development, which includes training managers to assess and differentiate employees’ performance. Despite that investment, managers are notoriously bad at conducting performance reviews. In one study almost half of the employees surveyed stated they did not believe their managers were being honest during the performance review. One oft-quoted manager at Adobe called it “a soul-crushing exercise.” As business leaders seek to stop wasting time on a failed system, the trend to reengineer performance reviews is gaining momentum. The number of Fortune 1000 companies that have ditched ratings has risen from just 4% in 2012 to 12% in 2014, according to CEB. The goal of performance reviews, as it always has been, is to improve the company’s business results. Eliminating ratings will succeed on two fronts: alleviate a key source of workplace stress, and in turn, improve company performance.

The industry knows today’s customers are ready for digital insurance. It knows the expectation for anywhere, anytime responsive service is dictating how customers choose service providers. But are insurance professionals stepping up? Based on what we are seeing, they still need some convincing. How often is the digital path chosen? An interesting trend emerges when we look at technology that enables digital insurance, namely e-signatures. E-signature adoption rates approach 100% in unmediated channels, including online portals. As processes become mediated, though, especially in the hands of captive and independent agents, adoption declines. How do we explain this behavior when we know customers want to transact digitally and are doing so when managing transactions on their own? The answer is the belief by many captive and independent agents that digitization implies self-service, compromised personal attention and less of a role for agents to play in the transaction. We have seen enough e-signature implementations to know that the key to high opt-in rates, especially among independent agents, is change management. Managing digital change to get the highest agent adoption rates Here are some of the ways insurers can manage the transition to digital insurance and ensure agents adopt new technologies. See also: Digital Insurance, Anyone? Involve key stakeholders early: This is obvious, but it’s a practice that is not always followed. Early involvement from select agents or staff members, for example, will ensure that their feedback is captured and accounted for and that they will then have more personal investment in the success of the project. It also gives the project more credibility when key stakeholders are on board. Gain executive buy-in: It is not uncommon to encounter resistance when moving processes off of paper into the digital domain. Legal concerns may arise; perhaps IT will weigh in, and other lines of business may voice apprehensions. Without executive commitment, initiatives can get sidetracked. To gain that buy-in at the executive level, it’s imperative to focus on the business improvements the technology will bring. Implement e-signatures in phases: It’s best to start with a smaller, hand-chosen group of early adopters – your technology evangelists. Get them using the new solution, gather feedback and tweak processes if necessary. This is your opportunity to recruit champions and advocates, and to document testimonials that will be helpful in your communications efforts to roll out the project on a larger scale. Provide comprehensive training: This can be as simple as watching tutorials, but, in truth, nothing beats hands-on practice. Training should be designed for staff and agents in a way that allows them to gain comfort in the new process. You can create an operational sandbox account for your users so, when they are in front of a client, the process is practiced and smooth. Offer incentives: Incentives can be very effective in gaining rapid adoption and helping to ease learning curves. Gamification is a new trend that lends itself nicely to training. As an example, insurers can award points for every new business application submitted electronically and offer reps the ability to redeem points toward prizes. By delaying the eligibility for rewards and incentives until after a specified number of transactions is attained, you can ensure the initial learning curve hump is overcome. See also: Stretching the Bounds of Digital Insurance Communicate a lot and often: People need advance warning when big changes come, even if they’re good changes. Anticipate questions and answer them in advance. Make the process personal. Provide real examples of how it will help individuals in their day-to-day jobs. Don’t focus on the benefits to the company but rather emphasize the time saved, the convenience factor for both agents and their clients.   Use testimonials from the champions you recruited during your earlier phase rollout to help encourage adoption. Show the value of metrics: Monitoring and leveraging analytics from transaction data is a convincing way to maintain executive support for the new, digitized process. The “on-demand” customer mindset is changing the insurance business fast and fundamentally. A recent poll of insurance providers and insurance brokers shared at an industry event revealed “digitization” as the top response to major industry game-changers (or threats). Are you ready?

One day in 2014, before most people could even spell “opioids” (two “i’s), the CEO of a company named Healthentic asked me to review a white paper based on the output of its new analytics tool. Healthentic’s tool is far more focused on the “80” of the “80-20” rule than competing tools are. So, rather than drowning readers in data, the tool is supposed to help certain figures jump off the pages and lead to action. As my role in life appears to be the thankless task of finding errors in other people’s work, I was pleasantly surprised that Healthentic called me to plausibility-check the tool early in the process, rather than disseminate it and wait for me to publish “highlights" of my analysis after the fact, as I am wont to do. As usual, I noticed some highly suspect information. In this case, it was prescriptions for Tramadol, Oxycontin and Hydrocodone. With my usual charm, grace and humility, I said: “These figures can’t possibly be right. This isn’t an NFL team in constant pain. If these figures were correct, it would mean that 40% of their employees filled a prescription for a synthetic opioid in a single year.” We rechecked the figure and the raw data several times. And yet the original statistic refused to bend. It was accurate. See also: Paging Dr. Evil: The War Over Opioids Ironically, the particular Healthentic customer profiled in the white paper was obsessed with employee health. Its staff could recite how many employees had high blood pressure or high cholesterol, participated in the “steps challenge” or the “biggest loser contest” or didn’t buckle their seat belts. But opiates and synthetic opioids -- the elephant in the room capable of magnitudes more damage to employee health and productivity than any of the wellness vendor siren songs -- had been completely overlooked. In the days that followed, we talked through four possible scenarios and ruled out three:

1. Employees were being injured due to safety hazards and accidents -- but the company’s OSHA reports were clean and, in any event, those prescriptions would have shown up in workers’ compensation, not group benefits;
2. Certain local doctors were prescribing way too many of these pills -- but the prescriptions seemed to be coming from many different doctors;
3. Employees were reselling their prescription meds — but if that were the case they’d have enough sense not to purchase these pills through the PBM;
4. A sizable number of employees were at-risk or already addicted to opiates.

It was definitely the last. Little did we know this was the leading edge of the belatedly discovered synthetic opioid epidemic. Healthentic analysis consistently finds that opioids are some of the most prescribed drugs for all employers. “Take two aspirin and call me in the morning” has become: “Take some Oxy and text me in the morning.” It wasn’t hard for a person with a few dental or medical procedures to have several months’ supply of the drug. Pain is no laughing matter. It is human nature to ease suffering. But the cost and consequences of treating chronic pain so freely with opioids is shockingly high. Not a week goes by without more national news being made on the topic, such as Prince’s death. Of course it isn’t just famous people who are susceptible. Opioids — synthetically designed cousins of heroin — are so addictive there’s a Super Bowl commercial for another drug to treat constipation from chronic use. Obviously a market has to be quite sizable to merit a Super Bowl ad. See also: Progress on Opioids — but Now Heroin? The good news is that it doesn’t have to be this way. Pursuing early detection of a large supply of opioids and putting treatment goals in place will help a great deal in avoiding chronic use and addiction. Employers can help to head off chronic use before it turns into addiction. Independent analysis of your data should identify the three key risk factors for this population:

1. a 45-day or greater supply;
2. 10 or more prescription refills; or
3. overlapping synthetic opioid and benzodiazepine prescriptions.

As brokers and employers, you can flag this population to the medical carriers and providers. You yourselves won’t be aware who is at risk, in conformance with the new CDC guidelines. I emphasize the word “independent” because of how far behind the curve the payers are. One insurance carrier told an employer not to worry about the 150 people Healthentic had tagged for being at risk for chronic opioid use. “We know about these people. They are in our medication compliance program. Most are on palliative care.” That would be an obvious whopper even if these employees had worked at Chernobyl, and a quick analysis confirmed there wasn’t a single palliative care referral in the group. Employers’ obsession with wellness, and carriers’ unwillingness to run the data, is great for my business, and for Healthentic’s. Unfortunately, it is not so great for employees at risk for opioid addiction. The only good news is that at least they won’t be constipated.

One of the longest-running and most heated-discussions is about who is the greatest quarterback of all time. Many will say Joe Montana, but others will go with Tom Brady or Peyton Manning (among others). This discussion depends on your viewpoint and what you feel is valuable. At one time, the common answer may have been Johnny Unitas or Sammy Baugh, but their names don’t even enter the conversation for most of us any more. Another long-running argument concerns whether whole life or term life is the greater life insurance product. (For the purposes of this article, we are omitting other common types of life insurance, such as universal life, variable life and indexed life.)   My colleague and friend Chris Huntley, founder of Huntley Wealth & Insurance Services, is organizing a movement to promote awareness of term life insurance and some of the downfalls of investing in whole life. The Whole Life Rebellion fits into the Insurance Consumer Bill of Rights, which provides that consumers should purchase policies that match their needs. Whole life insurance remains a top-seller. In fact, the American Council of Life Insurers estimates that 64% of all policies purchased in the U.S. are whole life.   For the majority of consumers, term life insurance is a better fit. Yet, as with everything, it’s not quite so simple. See also: Bringing Clarity to Life Insurance The bottom line is that you need to be able to make that decision on your own, and the key is to become educated. The Insurance Consumer Bill of Rights is designed to provide guidance in knowing what questions to ask and what are reasonable expectations for your insurance agent and insurance company. Rather than starting with the question of whether whole life or term life is better, consider the following points:

1. Do you need life insurance? If you have no need for life insurance, then you have no need for either term life or whole life. We’ll go through the various reasons why whole life is suggested when there is no need for life insurance; just remember that, if you don’t need life insurance, then you don’t need ANY type of life insurance. Some day, I might buy a Porsche, but I’m not going to buy auto insurance on the Porsche until I own it.   
2. How long do you need the life insurance? This is the classic question that really gets at the heart of the debate. Life insurance is needed when someone is financially dependent on you. Most needs for life insurance are for a finite period, such as providing insurance for the benefit of your children, most of whom will be financially independent by the age of 18 to 25. You may also need insurance to make sure your family can pay the mortgage. Well, most mortgages are for a fixed period and can be matched with term life policies, almost all of which are guaranteed for a certain time.   
3. Will you outlive your term life insurance? What if the need for life insurance is permanent, let’s say for a spouse?  Well, in a situation where there are no other investments available to you or you choose not to participate in them, some type of permanent life insurance may make sense. However, according to the Economic Life Cycle Planning Method developed by Dr. Laurence Kotlikoff, your need for life insurance will diminish as your other assets grow. See my article with Dr. Kotlikoff published in AM Best, “A Different Approach,” or visit Dr. Kotlikoff’s site and learn more about the Economic Security Planner.
4. Isn’t it true that only 1% of term life policies pay a claim? Out of all the term life insurance policies issued, only 1% will result in a claim. But how many homeowners' policies pay out? Most people are happy if their home doesn’t burn down, and they don’t have to file a claim. Keep in mind that, while great statistics for whole life aren't available because insurers consider the information proprietary, estimates are that 15% to 20% of whole life insurance policies result in a claim. One of the big reasons that so few whole life policies result in a claim is that many owners let them lapse every year. A joint study by the Society of Actuaries (SOA) and the Life Insurance Marketing Research Association (LIMRA) on 2007 to 2009 found that, in year one, 7% to 9% of whole life policies lapsed; in year two, 6% to 7% lapsed; and in year three, 5% to 6% lapsed. You can find the study by clicking here. 
5. What if you have someone who will always financially depend on you or have some other permanent need? Is this finally a reason to have whole life? Well, almost. However, something called guaranteed universal life insurance acts as a term life insurance policy up to age 120 and does not build cash value. The premium is lower than a whole life policy. And of what benefit is a cash value if you intend to keep the policy in-force for the rest of your life? A primary rule in investing is lowering expenses when looking at two similar financial vehicles.
6. Can you buy term insurance and invest the difference? That doesn't work. With whole life insurance, there are very high surrender charges in the first few years of a policy, so when a policy lapses before the fourth or fifth year, the policy owner may only recoup 10% to 20% of the premiums paid. The question should really be, Will you still want to and be able to pay the premiums for a whole life policy?    
7. Doesn’t whole life allow for tax-deferred cash accumulation? Yes, completely true. And so do 401(k)s, IRAs, etc. In these retirement accounts, you can have a wide variety of investments such as exchange traded funds with expense ratios of less than 1% per year. By contrast, whole life is a black box when it comes to quantifying expense. Costs and expenses are not fully disclosed and are at the discretion of the insurance company. And then, of course, there’s the fact that there’s no guarantee that the tax treatment for whole life insurance will continue. Almost every year, the U.S. Senate and House of Representatives discuss the cash value component of permanent life insurance and note that taxation of this “inside buildup” could yield $300 billion over 10 years. Hmmm, with a growing national debt....
8. Whole life allows me to borrow from my policy: The key here is you are borrowing your own money, which you could do from many other vehicles such as a 401(k). And borrowing from your whole life policy may incur an interest rate that’s higher than interest rates on other types of loans and will also reduce the internal cash value build-up on your life insurance policy. Isn’t this the same as not investing the difference? And if you borrow too much money from your whole life policy, it can lapse without any value AND cause a phantom income tax gain. (See my A.M. Best article on the Pitfalls of Policy Loans.)

Consider that the CEO of Northwestern Mutual, John Schlifske, recently stated that face-to-face meetings are the best way to sell life insurance. Why face-to-face? The key word here is “sell.” What if the goal was to help consumers make the choice that works for them? Yes, it’s a subtle difference, but the tone of the conversation needs to be changed. If the only tool you have is a hammer, then every problem is a nail. If the only type of product your insurance agent has is a whole life policy, then every planning issue will be solved by whole life. See also: What’s Next for Life Insurance Industry? Having an efficient plan for your insurance and for your finances overall removes the need for whole life. Forty or more years ago, whole life insurance made a lot of sense,  especially as it was pretty much the only type of life insurance sold. But this was before the average consumer had easy access to the stock market through discount brokers, mutual funds and other modern ways to invest. So, yes, using whole life insurance as a savings vehicle did make sense a long time ago -- just like disco, hula hoops, pet rocks and Rubik’s cubes were hot items at one time.   In today’s financial world, where there are many different types of life insurance and consumers have access to a wide variety of investment options, it does seem like the time for whole life has passed us by. But the decision is yours. Knowledge is power. Become educated and use the Insurance Consumer Bill of Rights to guide you and your insurance portfolio.

This is the third of three parts in a series. The first part is here, and the second is here.  Change isn’t always easy. If you’re an insurance agent or Write Your Own (WYO) dealing with the April 1, 2016, regulatory changes to the National Flood Insurance Program (NFIP), you know this all too well. As the Federal Emergency Management Agency (FEMA) continues to phase out various rate subsidies, agents are dealing with increasing policyholder concerns around rate increases and affordability. These regulatory changes inject new complexities into an already complex program. For agents trying to serve their customers in this space, it’s challenging to stay ahead of the NFIP changes around eligibility, pricing and flood zone determination — all while making time to absorb periodic, substantive modifications. Furthermore, increased regulatory scrutiny creates greater demands on agents because producers must invest additional time to ensure compliance. These dynamics generate new frictional costs that leave many agents feeling like there’s less return for their efforts. Homeowners have also felt the impact of the rapidly evolving flood insurance environment by means of increased costs and added requirements. Those interested in buying flood insurance or in maintaining existing flood insurance are faced with shifting price points and new steps in the application process. Just recently, pockets of homeowners in South Carolina were newly mapped into mandatory purchase areas, forcing some mortgaged properties to purchase flood insurance for the first time. Such changes can impose significant burdens on homeowners, particularly those on fixed incomes. See also: Why Flood Is the New Fire (Insurance) Strategies for Managing Through Change While regulatory changes to the NFIP may make it difficult for agents to sell flood insurance, emerging options can offer relief. Previously, if a prospective consumer rejected flood insurance because of price, agents often did not have an alternative. Today, this is not the case. Keith Brown, the president and CEO of Aon National Flood Services, said, “The NFIP offers a widespread product, and that has significant application in today’s environment. ... However, agents will find that there are some customers who may not be an appropriate fit for the NFIP. Now, agents can present options for policyholders who struggle with affordability issues if charged full-risk rate premiums. These agents are able to present coverage options more tailored to individual homeowner needs in terms of lifestyle, financial planning and risk exposure.” There are some strategies for flood risks that agents can adopt to help manage change through an evolving regulatory environment and shifting consumer appetite. First, it is important that agents are mindful of map revisions and the fluidity of the geographic risk associated with flood. Mapping changes drive pricing and surcharges applied to individual risks. For instance, a customer who wasn’t required to have flood insurance yesterday may be required to have it today. Innovations and opportunities in this business do not follow a set schedule, and agents seeking means of differentiation must be vigilant. With the proper education and tools, flood insurance offers a means for agents to help customers better protect themselves and their investments. Talk to your WYO; familiarize yourself with product choices your customers may find attractive if they’re struggling with the impact of regulatory changes. When looking at the newly mapped areas as defined by the NFIP, there is a distinct line that defines the area where homeowners must have flood insurance as a condition of having a federally backed mortgage. On the other side of that line, homeowners are not required to have flood insurance to mortgage their home; however, floods do not recognize these lines. In many cases, the homes sitting on the non-insurance-required flood zone lines have just as much of a chance of falling victim to a flood catastrophe. So, as an agent, understanding flood maps and knowing how properties may move in and out of different flood zones is invaluable in educating your customers and helping them determine what insurance they may or may not need. There’s no doubt that, in today’s ever-changing environment, a long-term strategy is difficult for agents. A basic understanding of the requirements surrounding floods will get you by. But if you want to have the opportunity to be more successful and be viewed as a valued business adviser and resource for homeowners in your community, you have to be able to look beyond the basics of flood. By taking on a more holistic view of flood, recognizing how floods can affect communities and having the ability to articulate all flood options (including private solutions), you can set yourself apart from others adrift in a sea of change. For an overview on the NFIP changes, check out a handy visual guide NFS has put together: “Making Sense of NFIP Regulatory Changes.”

With the Internet playing an increasingly important role in business operations across all sectors, companies now realize they need to adapt to the digital sphere to maximize their earning potential and customer reach. Research shows that businesses that embrace digital adoption see a five times greater impact on growth than those who resist going digital. In comparison with others, the insurance industry has been quite slow in using digital channels as a core part of business operations. 79% of insurers say they are still learning about digital, while more than half of insurance companies do not have operating models that can incorporate digital. This is extraordinary in an era where online operation is not a bonus but a prerequisite to become an industry leader. More than half of the world’s population spends time online every single day, indicating that customers want to be able to interact with companies through digital channels. A business that gets its digital operations right will deliver on customer expectations and retain those customers, who, in turn, will speak in a positive light about the brand. This word-of-mouth marketing is highly likely to result in more customers. It’s high time that insurers realize this and take action to allow for their customers to interact with them online. The infographic below, which was created by Top Quote, outlines the digital challenges faced by the insurance industry and what insurers can do to address these challenges.