1. 100% Employment: One of the big reasons to go to college is to make sure you’re employed in a good career after you graduate. The insurance industry is predicted to continue growing for decades, and the existing risk management and insurance (RMI) programs only feed 15% of its needs each year, which means if you graduate with an RMI degree you’ll be a hot commodity! RMI programs had 100% employment, even through the 2008-2012 recession.
2. An RMI degree is basically a focused business degree: Majoring in business is a very popular choice already, but it’s a very general degree that usually takes a few years to really get you a solid career. RMI degrees are usually housed by a university’s school of business and have all the usual classes you’d get in a business degree (accounting, finance, marketing, statistics, management, etc) with the addition of a few RMI specific classes. What this means is that even if you change your mind and decide you don’t want to work in insurance (which you won’t), you can still easily get the same jobs that you would have been getting with a general business degree.
3. It is preparation for a career making a difference: If you love making a difference in the world, you’ll absolutely love the insurance industry! Even though we get a bad name in the press sometimes, the reality is that we are here to help people and businesses get back on their feet when unexpected things happen, and being a part of that is very rewarding. Also, many carriers offer time off to volunteer and to study for insurance designations.
4. Insurance is an incredibly stable career: The economy will continue in its ebbs and flows, and that means every few years people will lose their jobs when the economy contracts. Some very popular careers like banking, consulting and real estate are usually among the worst-hit when the economy slows. Insurance is incredibly stable because pretty much regardless of what happens in the overall economy, people and businesses continue to need insurance. This means career stability for you!
5. You’ll have more vacation than most of your friends: Most insurance carriers start you up with around 18 days of vacation a year. That means much more time off than most employees just starting careers in other industries.
6. Your senior year will be a LOT less stressful: RMI majors are expected to continue to be in high demand and feed only a portion of the insurance industry’s need for new talent, which means that a lot of RMI majors have accepted great job offers by December of their senior year, a good five months before graduation, and senior year is a lot more fun when you don’t have to worry about finding a job afterward.
7. You’re pretty much mathematically guaranteed to be in demand: The current makeup of the insurance industry workforce is very mature, meaning that 1 million insurance professionals, 43% of the workforce, are expected to retire in the next 10 years. In addition, the industry is growing and is expected to create 400,000 jobs. RMI majors are already pretty much immune to unemployment; they will be in increasingly high demand right around the time you graduate!
You pretty much can’t go wrong by majoring in RMI! There are not a lot of RMI schools out there, so click on the map below to open an interactive map of RMI schools. Schools marked in red have a full RMI major while schools marked in green have an RMI minor or concentration.
You’ve heard it before, “It’s not the tip of the iceberg that cost you so much; it’s what you can’t see. It’s what’s below the water level that costs you real money.” We hear that the total loss to a company from a workers’ comp loss is six to 10 times the value of that work comp loss. But risk managers have neither the right tools to understand and measure the loss, nor the right tools to improve productivity to capture the cash flow that comes from preventing that loss.
During my initial journey into lean sigma consulting, a seasoned Japanese colleague shared an important concept. While this principle was developed to improve the quality and efficiency of output in manufacturing, it has many other applications, including in improving safety and reducing workers’ comp costs. Understanding and applying the rule has improved the profitability of many companies.
Dr. Genichi Taguchi, a Japanese engineer, theorized (and ultimately proved mathematically) that loss within any process or system develops exponentially–not linearly–as we move away from the ideal customer specification or target value.
An example of Taguchi’s Loss Curve is shown below:
Another way to look at it is this: Anything delivered just outside the target, (labeled as LTL and UTL in the diagram above) creates opportunity for exponential financial improvement as we move toward the center of the U-shaped curve. And the farther away from the target we are, the greater the opportunity.
I explain Taguchi’s principle using an example from a kaizen event that dramatically improved machine setup times within a CNC shop.
For years, our client assumed it took 46 minutes to set up and change over machinery. After all, for 10 years, it did take 46 minutes. But our kaizen team was hired to challenge this thinking.
If the CEO and his team were right, setup times couldn’t be completed any faster. But if setup times could be better, loss had been occurring beneath the water line, which meant the iceberg was growing, but no one knew.
Machine setup time is loss because no value is produced during the setup process. And setup times can represent 35% of the total labor burden, so there’s a lot at stake. While employers can compute labor and overhead costs easily, when their assumptions are incorrect about setup times, they’re losing big money. But rarely do they know it or how much.
Here’s our client’s story:
Our client used people and machinery to produce aircraft parts. Machines were not dedicated to product families or cycle times. In other words, the client could build a Mack Truck or Toyota Corolla on the same machinery. And because setup times were slow, the client built large batches of products. When defects struck, they struck in large quantities, and, financially, it was too late to find causes. The costs were already sunk.
Our client borrowed capital to purchase nine machines, leased the appropriate space to house them and purchased electricity, water, and cutting fluids, as well. Each machine had affiliated tool and dies, and mechanics to service them. In other words, when you own nine machines, you need the gear, people and money required to operate and maintain nine machines. And all of this cost was based on 46-minute setups.
Think about that for a moment.
If the client didn’t need nine machines, it wouldn’t have had to spend all of that money and for all of those years! And a wrong assumption in setup times could be leading to loss that never appeared on any income statement. What would show would be the known labor, materials, machinery and overhead costs. But what wouldn’t show would be what wasn’t needed if the team could complete a setup in less than 46 minutes.
After videotaping, collaborating and measuring cycle times on the existing operations and processes, it was evident: The team had ideas that would challenge the 46-minute setups.
After some 5S housekeeping, the team produced a 23-minute setup. One more day of tweaking, and the team got it down to 16. By the last day, the team was consistently producing 10-minute results.
Now let’s talk about the impact.
Under the better state, the client could indeed produce parts faster. It also needed far less capital, insurance, labor, gear, electricity, fluids, tooling, floor space, etc. And because our client’s customer would now get parts faster, the company would get paid faster.
While banks may not like these facts, clients and employees do. Employees can do their jobs more efficiently, and the company makes more money while borrowing less.
Here’s an explanation of the 5S tool the team used to make their setup times faster. This tool–when used properly––not only improves operating efficiency but removes or reduces safety hazards like: tripping, standing, walking, reaching, handling, lifting and searching for lost items.
In addition, the kaizen event itself creates an opportunity for employees to improve their own job conditions and use their curiosity and creativity to solve production-related problems. The event also creates a more engaged employee, one less likely to file future work comp and employment-related claims.
The 5S Process consists of five steps.
Sort the work area out.
Straighten the work area out, putting everything in the right place.
Clean the entire area, scrub floors, create aisle ways with yellow tape, wash walls, paint, etc.
Create standardized, written work processes.
Sustain the process
Using the tools like 5S, I continue to improve my thinking relating to identifying, and managing work comp risks. But during each kaizen event, I also gain perspective about why stakeholders rarely change their ways. What I’ve learned is this: Clients typically need to have one of two conditions met for good change to occur.
They need to have something to motivate them––which often means facing a crisis.
They need to physically see and experience things to believe them.
The lean assessment helps find improvement opportunities. That’s because assessments study and measure cycle times, customer demand, value-adding and non-value-adding activities. The assessment helps everyone—including the executive team— see how people physically are required to do their work and understand why they are required to do it the way they are.
In the week-long assessment process, we’re no longer studying the costs of just safety; we’re studying all of the potential causes that drive productivity and loss away from the nominal value. Safety is not necessarily why we are measuring outcomes. Safety is the benefactor from learning how and why the company adds value, and precisely where it creates loss.
That is the power of good change. And good change comes from the power of lean.
“The best approach is to dig out and eliminate problems where they are assumed not to exist.” – Shigeo Shingo
What if we told you that “pry, poke, prod and punish” wellness programs are bad for morale, damage corporate reputations and cost more money than they save?
You’d say: “Al, you, Tom Emerick and more recently Vik Khanna have been telling us that for years.” You might add: “And while your opinions are usually well-reasoned and based on good data, we’d have to hear the true believers’ side of the story.”
But what if we told you: “That is the true believers’ side of the story”?
Yep, the wellness industry’s leading luminaries – 39 of them, representing 27 vendors and one consulting firm (Mercer) — have all gotten together under the aegis of both their trade associations – Health Enhancement Research Organization (HERO) and Population Health Alliance (PHA) — and reached that “consensus.”
We don’t know if they simply didn’t read their own report before reaching this consensus, or whether they just all decided to tell the truth. Frankly, we’re fine either way. (This is also the second time in five months that a major wellness true believer admitted wellness doesn’t save money. The first time was a meta-analysis in the American Journal of Health Promotion that concluded that “randomized clinical trials show a negative ROI.” After we started quoting the analysis, the editor wrote a 2,000-word essay walking it back.)
Because our claim that we are laying out “the true believers’ side of the story” would otherwise require a certain suspension of disbelief, we are going to rely more heavily than usual on screenshots. We also recommend reading the report itself, or at a minimum our analyses of it. (Our analyses are going to be a 10-part cycle. Make sure to “follow” the website They Said What? to not miss a single episode.)
Page 10 of the report lists 12 elements of cost. The first element itself contains about 12 elements, making this a list of 23 elements of cost. (Add consulting fees, which were overlooked even though three Mercer consultants sat on the committee and even though page 14 calls for use of “consulting expertise,” and you get 24.)
You’ll see damage to employee morale and corporate reputations listed as “tangential costs.” But, as two people who run a company, we would call damage to those intangibles much more than tangential. Our company runs on morale. Pulling people away from their workstations to poke them with needles, weigh them, measure their waists and test to see if they are lying about their smoking habits couldn’t possibly be good for morale.
We are equally curious about the blithe dismissal of legal challenges as a tangential cost. No firm wants its name dragged across the wire services because it is being sued for its wellness program (just ask CVS and Honeywell). Getting dragged into the courts (and, hence, the media) for running a wellness program isn’t a tangential cost — and it’s an unforced error.
On Page 15, as the report discusses how to measure the return on investment, the authors select only one of those 24 costs – vendor fees – as the basis for comparison. Omitting the other 23 costs, plus incentives, makes it easier to show an ROI. The fees are listed as “$1.50 per employee per month,” or $18 a year, even though the rule of thumb is that wellness programs cost many hundreds of dollars per employee per year.
Further in, on page 23, the authors list the related savings: $0.99 per “potentially preventable hospitalization,” abbreviated as PPH. (The fact that we have to do the math on our own by comparing figures across pages suggests this admission of losses was a gaffe rather than deliberate honesty.)
The savings figures are based on reductions in event rates that (1) are about twice what typically gets achieved; and (2) somehow overlook the natural decline of 3% to 5% a year in cardiac events even without a wellness program.
Even without adjusting for those two mistakes, savings fall $0.51 PMPM short of vendors fees alone.
And losing $0.51 per employee per month is the best-case scenario. The “savings” includes benefits from disease management (which is not covered by the $1.50 PMPM in vendors fees), and omits the offsetting costs of all the extra doctor visits that come from overdiagnosis and overtreatment.
So, here are the two conclusions:
According to proponents’ own consensus, wellness loses money.
Even worse, their savings are wildly overstated (yes, according to government data), and their costs, by their own admission on page 10, are wildly understated.
Don’t take our word for either of these. Write to us, and we will send you an ROI spreadsheet that you can use to do your own calculations.
One way or the other, what RAND’s Soeren Mattke called the wellness wars are over. Wellness has surrendered.
How Will the Wellness Industry Respond?
HERO and its assembled luminaries will probably ignore this gaffe, to prevent a news cycle that their customers might notice. However, if the problem gets covered broadly, they will respond. This was their modus operandi the last time they got “outed.” We had shown them in 2011 that one of their key slides, for which they even gave themselves an award, was made up. We presented our proof many times and even put it in both our books…but it wasn’t until Health Affairs shined a bright light on it that they acknowledged wrongdoing. They said that the slide “was unfortunately mislabeled” by an as-yet-unidentified culprit, but that no one noticed for four years. (Rather than relabeling the slide in a “more fortunate” way, they took the slide off the site.)
To clarify that their position is indefensible, we have offered a reward of $1 milliion for them to simply convince a panel of Harvard mathematicians that they have any idea what they are talking about beyond the fact of the gaffe itself. Their refusal to claim this reward speaks volumes.
Implications for Brokers
The implications for brokers are profound. First, stop placing wellness programs — or at a minimum get a “release” from your clients saying that they’ve read this article but want to proceed anyway. The disclosure by the wellness industry’s own trade association that wellness loses money increases your liability because you “knew or should have known” that losses were to be expected. Second, you can probably offer your client the chance to abrogate vendor contracts, especially if the vendor was one of the 27 that reached this “consensus.” That might reduce your revenue in the short term but will cement your relationship. And you want your clients to find out about wellness’ problems from you, not from the media.
But whatever else you do, follow future installments here on Insurance Thought Leadership as we plow through this report and deconstruct more of not just their crowd-sourced math but also of their crowd-sourced alternative to reality, in which prying into employees’ personal lives, poking them with needles in blatant disregard for government guidelines, prodding them to get worthless checkups and punishing them when they don’t is all somehow going to save employers millions of dollars.