Tag Archives: Financial

3 Money Mistakes Newlyweds Make

Being a newlywed is awesome. I reflect on that season of my life as one filled with joy and anticipation. Sure, that first year of marriage was full of challenges, enormous adjustments and unexpected changes, but on the whole it was great.

We found such relief in finally being married and out of engagement. Engagement is a funny time. You often take on new priorities and responsibilities you’ve never had before (like part-time event planner), and that can wear on you and the relationship after awhile. Engagement is meant to be a temporary phase in life, and most friends I know, myself included, have been thrilled to see an end to it — the lists, planning, preparation, etc. In the midst of all of the planning and celebrating, the topic of money is often overlooked (aside from the wedding budget). Yet studies tell us money is a top cause of conflict and divorce among couples. Money can be hard to talk about. Our culture has made money-talk a taboo subject, which can make it all the more difficult to start talking about money (regularly) with another person, especially if you were used to keeping your money matters private for so many years.

Here are a few money mistakes I see newlyweds make. Regardless of how long you’ve been married, though, it’s always important to check in and make sure you’re not letting the important things fall by the wayside.

1. Forgetting to Update Important Plans and Documents

When you start a job and enroll in your employer’s various benefits, you are prompted to assign beneficiaries to things like your 401(k), group life insurance, even an emergency contact in some instances. Getting married means it’s time to review these beneficiary designations.

You should also review current insurance policies and see if you need to add your spouse to the plan or review your coverage entirely. If you are both on individual health insurance plans through work, it’s worth comparing the cost of keeping your individual plans versus one of you joining the other’s plan. It’s possible you’ll save money by being on the same plan. When evaluating the cost, consider monthly premiums, deductibles, co-insurance and co-pays.

If you happen to have estate-planning documents like wills, health care proxies, living wills, etc., these documents also warrant review and updating when you get married.

2. Overlooking the Need to Get Organized

I know, it’s one more administrative thing that’s not fun to think about or act on, but it is important to be organized. If you don’t talk about it, habits will naturally form, and you’ll likely end up with unnecessary confusion and stress, which can lead to conflict. Don’t be scrappy with your finances. I survive by being scrappy as a parent (I’m a mom of two toddlers). But this ability doesn’t translate as well with finances.

Try this: Sit down and list out all the accounts each of you have and then talk about which accounts you want to join, leave separate, combine, close, etc. Simplicity is a wonderful thing. Decide which account(s) you’ll use for routine expenses, where you’ll keep your emergency savings, longer-term savings and investments. Even if you plan to keep accounts separate, have this conversation so it’s intentional and there’s no confusion about how bills and shared expenses will be handled.

You can also make your credit reports a part of this process — so you both have an understanding of each other’s credit history, and create a plan for building better credit, or maintaining your great credit if you have it. If you’re not familiar with your credit reports, you may find them to be overwhelming at first — here’s a guide to deciphering your credit report. You can get your free credit reports once a year from each of the three major credit reporting agencies, and you can get a free credit report summary on Credit.com, updated monthly.

3. Avoiding Money Talks

Money is a leading cause of conflict and stress for couples, which can be enough to discourage some people from discussing the topic at all. If you learn to talk about money early on (especially when times are good and emotions aren’t running high), you’ll be prepared when money issues arise.

Talking about money feels like creating a new habit. Sometimes you just have to start doing it, even before you’re comfortable doing so, and allow the habit to take shape.

Here are a few starting points for your conversations about money:

  • Your history with money (What lessons about money did you learn as a child?)
  • Current stress points with money
  • Goals you hope to achieve with your money
  • Expectations for your current lifestyle and how you want to use your money
  • Spending habits (Where do you spend money the easiest, with most resistance?)

A Word of Encouragement

Financial unity and stability with your spouse is a process. You don’t have to have all the answers or all of the kinks worked out from the beginning.

If you and your spouse have different approaches to money, (how you spend versus save, what you value, etc.), this doesn’t have to mean never-ending conflict. It’s possible you both need to learn to compromise, and pushing each other toward a middle ground may be the healthiest thing for both of you. And that’s one of the great benefits of marriage — the messy but beautiful process of refining each other and growing together in ways you never could alone.

This article originally appeared on Credit.com and was written by Julie Ford.

Simplifying Enrollment for Optional Products

Financial education is crucial when it comes to helping employees understand the roles that optional products such as disability, critical illness and accident insurance play in protecting their financial futures, but education isn’t enough.

Making it easy for employees to sign up is equally crucial, to increase enrollment. Insurers can increase the opt-in for optional products by streamlining the enrollment process with modern technology.

Let’s take a look at four ways use of technology can increase enrollment through greater efficiency and awareness.

  1. Provide quotes through the enrollment system. The fewer barriers to entry that employees have, the more likely they are to sign up for optional products. By having quote data sent through the enrollment system, you remove the necessity of employees having to enter data multiple times. They can get quotes and sign up for benefits through the same system. Providing instant quotes and more options for plan comparisons reassures employees they’re getting a good deal.
  1. Have a portal site for opt-in. With a specially designed user-friendly worksite portal, you can automate quoting, proposal generation and enrollment. When employers make enrollment mandatory and employees are required to log in to the portal site, employees are more likely to review the options available to them and sign up even if they initially intended to simply opt out. You can up-sell and cross-sell worksite marketing and optional individual products on the employee enrollment portal site. Employees can select what products they require and the payment method.
  1. Allow for digital signatures. Providing authenticated signatures on multiple paper documents can be frustrating for employees and employers. Digital signatures are the perfect tool for collecting authenticated signatures on multiple documents while saving time and reducing waste. The technology is pretty standard and straightforward once you’ve made the commitment to digital signatures.
  1. Ensure electronic data delivery for medical underwriting. In some cases, medical information is required for underwriting worksite products. This can be difficult and time-consuming to collect and dispense unless you allow electronic data delivery. Electronic data delivery also shortens the interval between underwriting and quote delivery, ensuring a better customer experience. Achieving electronic delivery requires integrating various systems and making sure they have seamless connections. It takes work, but isn’t a massive project.

Insurers that have invested heavily in legacy systems often resist change, but these systems cause problems that are costly and time-consuming to fix-and can cost insurers clients. (According to Claims Journal, 59% of senior executives surveyed in 2015 admitted that they had to spend “considerable amounts of time” dealing with IT issues in legacy systems.) If your legacy system won’t let you streamline enrollment, it’s time for a change.

No matter how you choose to increase awareness and participation in worksite optional products, make sure that you have the technological infrastructure in place to make enrollment fast, efficient and accurate. It makes a big difference.

Capturing Hearts and Minds

This article is an excerpt from a white paper, “Capturing Hearts, Minds and Market Share: How Connected Insurers Are Improving Customer Retention.” In addition to the material covered here, the white paper includes specific recommendations on how to improve retention.

To download it, click here.

Insurers currently operate in a challenging environment. On the financial side, premiums are stagnant and interest rates low, and many cost-cutting measures have already been enacted. On the other hand, customer empowerment is growing. Customers are finding the information and offers they need to switch providers more freely than in the past – customers whom insurers can ill afford to lose.

For many carriers, the key to preserving customer relationships still lies in personal interaction, executed through traditional distribution and service models with tied agents and brokers. For some customer sets – those who strongly favor personal interaction – this business model works well. Yet a growing segment of customers, especially those 30 years old and younger, differ in some key aspects. While they still look for help and advice, they seek personal contact in the context of a holistic, omni-channel experience; they communicate and find information whenever, wherever and however they want. And even traditional customers appreciate if their agents have broader and faster access to the information and specialists they need on a case-by-case basis.

How can insurers keep – and even expand – these diverse customer sets, old and young alike? What factors drive retention and loyalty? To explore these questions, we surveyed more than 12,000 insurance customers in 24 nations about relationships with their insurers, what they perceive as valuable and in what ways they would like to interact and obtain new services going forward.

We found that while insurers understand well how to cover risks, they often fail to engage their customers on an individual basis. Even though insurance is complex, customers want to be involved, emotionally and rationally. When insurers act on this knowledge, customer share can rise.


The churn challenge

As a rule of thumb, the cost of acquiring new customers is four times that of retaining existing ones. To grow market share, insurers need new customers. But for the balance sheet, retention has a much larger impact.

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For a long time, the insurance industry did not consider this lack of trust a problem. In the highly asymmetrical pre-Internet world, there was a necessary gatekeeper to information and knowledge about risks and coverages: the insurance intermediary. For insurers, the intermediary’s trusted personal customer relationship was a guarantee of fairly reliable renewals and low customer churn – thus, keeping the most profitable customers.

The technological innovations of the digital age have altered this picture. Information asymmetry is diminishing. Although many customers still seek advice on insurance matters, the empowered digital customer does not need to rely solely on the gatekeepers of old for information. With communication being swift and ubiquitous, misinformation is quickly uncovered, leading to a steady erosion of trust, even with the personal adviser and insurer.

We have come to expect that only 43% of our survey respondents trust the insurance industry in general – a number that has stayed fairly stable since our first survey in 2007 – but only 37% trust their own insurers to a high or very high degree. Most customers are neutral, with 16% actually distrusting their providers.

As we have often seen in past studies, trust varies widely by market and culture. For example, only 12% of South Korean customers responded that they trust their insurers, compared with 26% in France, 43% in the U.S. and 51% in Mexico.

Low trust translates to high churn. Even though 93% of our respondents state that they plan to stay with their current insurers for their recently acquired coverage through 2015, almost a third came to that coverage by switching insurers. Why? Most commonly (for 41% of respondents), their old insurers couldn’t meet their changing needs (see Figure 1).

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The pattern of increasing customer empowerment and decreasing information asymmetry is continuing. New and non-traditional entrants to the insurance market are taking advantage of the opportunities of digital technologies. For example, Google recently launched an insurance comparison site for California and other regions of the U.S. This presents a real threat to both online insurers and traditional providers – not because of the comparison option itself, but because Google has collected a huge amount of information about each individual through his or her surfing habits, thus allowing better personalization and higher-value offers.

The three dimensions of retention

What do insurers need to do to increase trust and customer retention with the intent of improving both the top and bottom lines? The findings of our survey point to three courses of action:

    • Know your customers better. Customer behavior is affected by experiences and underlying psychographic factors. Insurers need to know and understand customers better, not only as target groups but as individuals. Insurers also need to get their customers involved, rationally and emotionally.
    • Offer customer value. As overused as the term is, a strong and individualized value proposition is exactly what insurers need to provide to their customers. Value is more than price; it includes many factors, including quality, brand and transparency.
    • Fully engage your customers across access points. As Millennials become a significant part of the insurance market, speed and breadth of access has begun to matter much more than in the past. Insurers need to engage their customers as widely as possible, from in-person interactions at one extreme all the way to digital interaction models such as those made possible by the Internet of Things.

Customer perception and behavior

Ever since the Internet has become a viable way to shop for goods and services, much discussion has centered on the matter of price. In theory, insurance products are easy to compare, so shouldn’t the cheapest one win out?

This view assumes that, aside from the price, all else is equal. If that were true, price would indeed be the sole tie-breaker. In reality, though, all else is never equal. Insurance is a product based on trust, for which perception matters. Perception, and thus customer behavior, is shaped by the individual customer’s attitudes and experiences. Understanding a customer on an individual basis helps a carrier tailor these experiences by communicating the “right way.”

To classify our respondents according to their attitudes, we used the same psychographic segmentation as in previous studies (see Figure 2).

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One size seldom fits all

Overall, our respondents stated that the three most important retention factors are price (63%), quality of service (61%) and past experience (33%) – leading back to the price as the main tie-breaker. Yet a closer look across segments paints a more diverse picture: For a demanding support-seeker, quality is by far the most important (74%), while a loyal quality-seeker bases his renewal intentions on past experience more strongly than any other group (43%).

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Assuming an insurer is targeting all these customer segments, it will need a diverse set of customer communication options, as each segment requires approaches tailored to its specific preferences (see Figure 3). This figure shows the five most-used insurance search options in the three segments where we are seeing the biggest shift among Millennials, who represent future customers.

The power of emotional involvement

Our data show that appropriate communication with customers sets off a positive chain reaction. First, it increased the use of that type of interaction. Customers perceived the interaction as more positive, and ultimately this increased emotional involvement with their providers – the “heart share” of our study title. Finally, emotional involvement is strongly connected to customer loyalty, so increasing involvement from medium to high had a dramatic impact on the loyalty index (see Figure 4).

What is the right way to communicate and increase involvement? As seen in Figure 3, the answer is “It depends,” so there is no one right approach for all customers. But using current technology – specifically, social media analytics – can help insurers improve involvement.

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With this tool, providers can “listen” to various online sources, understand how they are seen by customers, uncover trends and quickly tie this knowledge to specific actions. Providers can combine the findings of social media analytics with psychographic segmentation and an individual customer’s place within the segmentation; the latter gained via more traditional customer analytics. With this customer view, insurers can even go beyond the personalized knowledge their tied agents tend to have: As customer wants and needs change and they articulate it on social channels, insurers will know and can react in close to real time.

Social media analytics

Social media analytics is a set of tools that allow insurers to analyze topics and ideas that are expressed by their actual or potential customers through social media. This can be on an individual basis, or per customer group. Through social media analytics, insurers can apply predictive capabilities to determine overall or individual attitude and behavior patterns, and identify new opportunities.

This article is an excerpt from a white paper, “Capturing Hearts, Minds and Market Share: How Connected Insurers Are Improving Customer Retention.” In addition to the material covered here, the white paper includes specific recommendations on how to improve retention.

To download it, click here.

Failing ACA Co-Ops? Not a Surprise

During the congressional deliberations that led to the Patient Protection and Affordable Care Act, strong support emerged for a government-run health plan to compete with private carriers. The “public option” failed but did create political space for the concept of consumer-owned, non-profit, health insurance co-operatives. The co-ops found their way into the ACA, but now, as a group, are in big trouble. Eight of the nation’s 23 health co-ops are going out of business, and more may follow.

The Case for Health Co-ops
Then-Sen. Kent Conrad championed health co-operatives during the healthcare reform debate. He saw them as health plans owned by local residents and businesses, modeled after the electrical co-ops in his home state of North Dakota. They would receive start-up money from the federal government but otherwise would compete against private carriers on a level playing field.

Co-op advocates hoped they would bring competition to markets dominated by too-few private carriers. Advocates also expected these non-profits to provide individual consumers and small businesses additional affordable health insurance choices. With focus on the first goal, health co-ops might be in a better place today. Unfortunately, too often they sprung up in states where competition was already strong.

The ACA set up a roughly $6 billion fund to help get “consumer-operated and -oriented plans” up and running. The long-term financial viability of health co-ops was to flow from premiums paid by those they insured and the “Three Rs“-programs established by the ACA “to assist insurers through the transition period, and to create a stable, competitive and fair market for health insurance.” Specifically these were the ACA’s reinsurance, risk adjustment and risk corridor programs.

It’s Tough Being New

A (not so) funny thing happened on the way to the health co-ops’ solvency. Starting a health insurance plan is difficult and failure always an option. (I know. I was executive vice president at start-up SeeChange Health, an insurer that failed last year.) New carriers, by definition, have no track record and no data concerning pricing, provider reimbursements, claim trends and the like. The first foray into the market is an educated guess. Worse, new plans usually have a small membership base. This provides little cushion against the impact of miscalculations or unwelcome surprises.

A new health plan launching in the midst of the industry’s transition to a post-ACA world faced exponentially greater difficulties. In 2013, when most of the health co-ops launched, no one knew what the market would look like in 2014. Exchanges, metallic plan requirements, guarantee issue of individual coverage and more were all happening at once. Were employers going to stop offering coverage? How were competitors going to price their offerings? Would provider networks be broad or narrow? The questions were endless; the answers at the time scarce. In a speech during the lead-up to 2014, I described the situation as carriers “playing chicken on tractors without headlights in a dark cave while blindfolded — at night.”

This is the world into which ACA-seeded health co-ops were born. That they now face serious financial problems should surprise no one. They saw themselves as “low-cost alternatives” in their markets. If they were going to err in setting prices, it was not going to be by setting premiums too high.

Besides, if they priced too low, they were protected by the risk corridor program. As described by the Centers for Medicare & Medicaid Services, which manages the ACA’s financial safety net, the “risk corridors program provides payments to insurance companies depending on how closely the premiums they charge cover their consumers’ medical costs. Issuers whose premiums exceed claims and other costs by more than a certain amount pay into the program, and insurers whose claims exceed premiums by a certain amount receive payments for their shortfall.”

The majority of the nation’s health co-operatives saw claims exceeding premiums. With the co-ops on the “shortfall” side of the equation, the government was to come to their rescue like the proverbial cavalry with the money needed to keep them going.

Except the cavalry is a no-show. Too few carriers had too little claims surplus to cover the too large losses of too many health plans. Only 12.6 cents on the dollar due under the risk corridor program is expected to make it to plans on the shortfall side of the equation, the Centers for Medicare and Medicaid Services (CMS) announced on Oct. 1.

The Math Always Wins

Several of the health co-ops were in financial trouble before this news. Losing millions of dollars in expected relief doomed more. As of today, the dollars-and-cents have failed to add up for CoOportunity Health (the co-op in Iowa and Nebraska), the Kentucky Health Cooperative (which also served West Virginians), Louisiana Health Cooperative, Health Republic Insurance of New York, Health Republic Insurance of Oregon, the Nevada Health CO-OP, Community Health Alliance (a Tennessee co-op) and the Colorado HealthOP. Just to use the Colorado situation as an example, the Colorado HealthOp needed $16.2 million; it expects to receive $2 million.

Do these failures mean health insurance co-ops are a bad idea? Not necessarily. What they point to is that health co-ops may have been better off focusing on bringing competition to markets where there were too few plans, not joining a pack where there were enough. Even then, the collapse of the risk corridor program may have doomed them, but they’d have stood a better chance.

As noted above, Sen. Conrad modeled the health co-operatives on electrical co-ops found in some rural communities. Where too few customers make it unprofitable for traditional utilities to invest in the infrastructure required, consumers, seeking electricity, not profits, come together to extend the grid.

Those implementing the ACA should have followed this model. Instead of funding 23 health co-operatives, the administration should have offered seed money to fewer co-ops located where they would be the alternative in the market, not just another one. This may have allowed them to extend financial support long enough to at least partially offset the risk corridor shortfall. Then, just maybe, we could have avoided the “surprise” of failing health co-ops.

How to Reengage a Disengaged Spouse

My partners and I spend a lot of time writing about how difficult it is to be a family successor to-be or child working for a parent. We also have many articles detailing how business owners can communicate more effectively with employed family members so they can have positive working relationships while protecting their familial relationships. We’ve explained how important it is to establish boundaries so that work issues stay at the office to provide quality family time at home.

What we haven’t spent enough time on is recognizing how tough it is to be the spouse of an ambitious, successful and highly driven business owner. Typically, although not always, these roles are cast stereotypically, with the husband running the business while the wife holds their personal lives steady raising the children and managing the household. For the sake of simplicity, we’ll talk in terms of the stereotype, but the description works with the gender roles reversed.

The women are dynamic, intelligent, educated, assertive people – many left rewarding careers to care for their families so their husbands could fully concentrate on building a substantial family business. They have typically not been included in much of the financial and business-related decision making because they were not actively involved in the business. When families are young, this makes a lot of sense as each spouse is fulfilling a necessary role to provide and care for a growing family and business. The wife protects her husband from family distractions and worries so he can concentrate on building a business legacy and their financial security. The husband protects his wife from the day-to-day business challenges, makes sure there is enough money to run the household and generally learns it is easiest not to burden her with worrisome details of how he manages the business checkbook. However, when it comes to making the critical decisions that will provide for the financial stability of your children’s future and your financial security, you can bet it is important for both spouses to be involved and participate in the discussion if you want to maintain family harmony and have a smooth transition for the next generation.

The Disenfranchised Spouse

By the time we are engaged to develop and implement a business succession and estate plan, the business owner’s children are usually grown, working in the business and building their own families and the wife/mom is busy being a grandparent, participating in all kinds of civic/community/church activities and planning their next vacation trip. The husband/dad is still running the business and making all of the financial and business decisions.

On the surface, the couple is solid, dedicated to supporting each other, and wants to provide for each other in their declining years. But deep down, there is usually a woman who feels disenfranchised and fairly clueless as to how the business will provide for her personal financial security in the event she outlives her husband. When advisers bring documents for her signature, this is her one time to be able to voice her opinion, take a stand and even hold up progress if she feels uncomfortable with any aspect of the process. She is told not to worry, that she will be provided for – but how and who will she have to turn to after he’s gone? Her children? The managers? The family attorney? Not likely.

We have seen women known to be gentle, supportive and trusting change when it comes to protecting her financial security and whether she will have to rely on someone else running the business or get her monthly allowance from her children or, even worse, a banker.

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Re-Engaging Your Spouse

If you haven’t both been involved with your estate and succession planning team, it is likely you may be experiencing some challenges — perhaps your progress has even come to a standstill, and there may need to be some discussion on this topic before you can proceed any further. What are some of the key factors to make sure that when you are ready to begin your estate or succession planning that you will be comfortable with the people and decisions that must be made? Here are some helpful tips to keep in mind:

  • Never think that protecting your spouse from the truth is being helpful. It indicates you don’t think she will understand, that she will overreact or that she is weak. None of these assumptions demonstrate an appreciation for her inner strength, intelligence and sensitivity to your concerns. Additionally, it prevents your closest, most trusted ally from being able to be part of the solution.
  • Make sure your spouse knows and appreciates the key players you depend on each day to run and care for the business. If all she ever hears is your grumbling about a family employee’s ineptitude, it is highly likely that she will not feel very good about that successor’s ability to manage the business in your absence. The same goes for complaints about any other manager or adviser who is critical to your business stability.
  • When putting together your adviser team (estate attorney, accountant, succession planner), make sure you do the choosing and subsequent meetings together. Interview prospective members of this team together — you both need to feel comfortable with people who are going to help secure your family’s legacy and financial future. There is nothing worse than a business owner who says his spouse doesn’t need to be included in the discussions because she isn’t involved in business operations. It is amazing what kind of insight we get from spouses — about family, employees and managers, and about how their husbands are being affected.
  • Just because your spouse is not an active employee in the business does not mean she is not your partner in every sense of the word. Every decision you make, every success or failure you experience, is shared by your spouse. When you are stressed, so is she; when you celebrate success, so does she. Why then, wouldn’t you consider involving her in decisions that will ultimately affect her, too? You don’t need to discuss every operational decision made each day, but it is important to share the strategically important ones that will affect her future, too.

When you reach an agreement that you have the right people facilitating your family’s future, certain that you will each will have equal input, be respected and listened to, you will have increased your odds for achieving succession success!