Tag Archives: nancy germond

Top 10 Emerging Social Risks in 2015

Risk managers make many decisions – building valuation, vendor management, employment issues, budget allocation, to list a few. However, in our rapidly changing society, managing risk is more than simply choosing the best insurance package or retention level. We must monitor our world to watch for emerging societal risks that can abruptly increase our day-to-day challenges.

What is an emerging risk? I’m going to borrow a definition from Donald Donaldson of LA Group in Montgomery, Texas. He defines emerging risk as: “A new loss exposure for which a risk treatment has not been identified, or an existing exposure that is evolving and becomes difficult to quantify.” The Organization for Economic Co-operation and Development (OECD) describes “emerging constructs” as “major trends or new and persistent threads of behavior driven by a particular alignment in incentives or a technological innovation.” Whether you define societal risks as emerging risks or constructs, many challenges lie ahead for today’s risk managers.

Using my education, which includes a master’s degree in sociology, and my experience as a risk management professional, I forecast 10 social risks emerging — in some cases swiftly — in 2015 and beyond.

1. Europe, Asia and North America face increased risk of “sleeper cell” terrorist attacks. As attacks increase, so will hate crimes against all Muslims. In response to such attacks, formerly moderate Muslims may become increasingly radicalized. Houses of worship will become much more difficult to insure as hate crimes increase.

2. U.S. police forces will face pressure. They will come under increased scrutiny by the public because of societal tensions, social media and a general distrust of authority. The use of body cameras and ramped-up training will increase, in part to satisfy the demands of insurers, which bear the brunt of adverse claims actions.

Increased terrorism may cause police departments to devote more resources to tracking down and isolating suspects. This may, for a time, tip the scales in favor of police forces. However, an increased focus on terror training leaves police with fewer resources to investigate property and day-to-day crime that we now rely on them to handle expeditiously. Losses will increase and further erode the public’s confidence in the police. The belief that the police are here to protect only the rich and powerful may spread, adding to the public’s growing distrust of authority.

Homeowners’ carriers may find themselves facing unusual risks as more homeowners arm themselves or buy personal protection dogs. Zdenek Blabla, owner of Alpine K-9, imports Czech Border Patrol protection dogs for his clients. “In the past year, I’ve sold several German shepherd dogs to special forces combat officers who don’t want to leave their families without protection during their activation,” he says. “They understand probably better than anyone the dangers we face in today’s society.”

3. Policing agencies across the nation will face increased recruitment and retention difficulties because of a less robust candidate pool and the need for officers who are better-qualified to interact with diverse communities. For years, U.S. police chiefs complained of their inability to attract highly qualified recruits. According to one textbook on policing tactics, “Poor recruitment and selection procedures result in hiring or promoting personnel who cannot or will not communicate effectively with diverse populations, exercise discretion properly or perform the multitude of functions required of the police.” It is clear that today’s U.S. police forces face significant and growing challenges.

4. Schools will focus more on instructing schoolchildren how to protect themselves in risky situations. Examples include how to cooperate with the police in a routine traffic stop or other police intervention, what to do in a hostage situation and “duck and cover” exercises for students in newly emerging earthquake zones. This increased focus on situational awareness will drain resources from already depleted public school funding, ultimately reducing the time spent for the actual education of students.

5. Corporations that rely heavily on suppliers both here and abroad will closely analyze their supply chain risk. With political disruptions likely to increase supply line disruptions, risk managers must analyze sole-source and global suppliers and ensure the organization’s insurance will respond appropriately to these unique risks. As recently as 2014, one major university referred to supply chain disruption from civil unrest as “not a major concern.” Given the recent disturbances in Oakland, CA, New York City and Ferguson, MO, civil unrest is a growing concern for risk managers worldwide in 2015.

6. Employers will realize the need to increase security while also purchasing kidnap and ransom coverage for employees who travel abroad or face domestic terrorism threats. The Charlie Hebdo massacre starkly revealed that Stéphane Charbonnier’s bodyguard was completely unprepared for that brutal attack. Business owners will face the need for improved security measures at their homes and businesses, as well as when their family members travel.

7. Communities will experience an increase in social unrest, driven by social media “flash mob” actions or spontaneous reactions after incidents with racial or equality overtones. Other controversial issues, such as environmental measures and other governmental actions, will trigger increased public discord and civil disruption.

8. Continued weather swings will result in property damage and loss of life from natural disasters. With more money allocated to fight the new wave of terrorism both at home and abroad, fewer federal dollars will be available to help weather-ravaged communities. As we saw after Hurricane Katrina, civil unrest follows when authorities cannot provide adequate protection.

9. Poverty, income disparity, unemployment and dissatisfaction among today’s youth will increase globally. Expect corporate leaders, including top insurers, to more candidly discuss poverty and income disparity, unemployment and dissatisfaction among today’s youth in America, the Middle East and Europe. Graham E. Fuller, author of The Future of Political Islam, discussed this concept in 2003: “The great question for most Middle Eastern societies is who will be able to politically mobilize this youth cohort most successfully: the state, or other political forces, primarily Islamist?” We must not underestimate the ways that unemployment and poverty may lead to the radicalization of youth both here and abroad.

10. Pandemics will threaten local medical resources’ ability to provide adequate medical care. Flu epidemics, tuberculosis, measles and other contagious diseases will make medical management much more onerous. An aging population with chronic conditions will place additional stress on available medical resources. According to the World Health Organization, there is an “emerging global epidemic of diabetes.”

Are these predictions exaggerated? I don’t think so. That advanced degree I mentioned earlier tells me that I have not overstated these predictions; they are credible and approaching quickly. As societies become more complex, yet increasingly related, breakdowns anywhere in the global chain can cause disruptions worldwide.

As risk management professionals, we must do more than simply purchase a coverage portfolio to protect our assets. We must understand and prepare for the societal risks that present unlimited challenges to America’s organizations.

What Coverage Does a Consultancy Need?

Insuring a consulting firm can pose a challenge. Many professionals start a firm today out of necessity — creating their own employment. You take years of expertise and open a consultancy, often out of your home or in an office suite. This means a tight budget.

Insurance is one of the areas where entrepreneurs may try to cut costs, but, to protect your business, you need to have your insurance agent evaluate all the exposures you face and offer solid coverage solutions.

What does the professional liability policy cover?

The consultant and its employees provide a service or offer advice, but what if it is faulty? Any professional consultant needs professional liability coverage, also called errors and omissions.

The professional liability policy may be worded as follows:

“The company will pay on behalf of the insured any loss excess of the deductible not exceeding the limit of liability to which this coverage applies that the insured becomes legally obligated to pay because of claims made against the insured during the policy period for wrongful acts of an insured or because of personal injury arising out of wrongful acts of an insured.”

In addition, the policy may say, “Coverage for allegations of bodily injury, sickness, disease, or death of any person, or damage to or destruction of any tangible property, including the loss of use….”‘

This wording shows the limited scope of the professional liability policy. The intent is to cover only negligent professional or “wrongful” acts. The policy also provides limited protection for personal injury, such as libel or slander, committed by the insured against a third party.

What does the commercial general liability (CGL) policy cover?

The CGL covers bodily injury to a person or damage to the property of others caused by a firm’s negligence. As courts have ruled repeatedly, the CGL policy is not a performance bond. A CGL policy is not intended to cover the quality of a company’s advice or service. This helps constrain the contractor from low-bidding a job, performing poorly and then relying on the insurance carrier to cover that risk.

Look first at CGL policy language under the insuring agreement, the heart of the policy:

“We will pay those sums that the insured becomes legally obligated to pay as compensatory damages because of ‘bodily injury’ or ‘property damage’ to which this insurance applies.”

Here are a few of the exposures covered under the CGL:

  • Premises and operations liability for persons injured or items damaged while on your business premises or because of your business operations.
  • Additional insured coverage when you sign certain written contracts or agreements such as leases.
  • Tenant’s liability in the event the business operations, for example, accidentally start a fire in rented premises.
  • Host liquor liability if you are not in the liquor business.
  • Defense for covered claims.
  • Bonds and court courts associated with a claim.
  • Limited financial remuneration when assisting your carrier in the defense of a claim.

In addition to bodily injury and property damage, the CGL covers personal injury liability, including libel and slander, as well as advertising injury. The CGL offers consultancies broad coverage and peace of mind. You can run your business knowing that help is available in the event of a broad range of losses.

Althought there is a great deal of uniformity between professional liability forms and commercial general liability forms, all carriers use a variety of forms. Coverage can vary widely from one insurance carrier to another, so an agent should be able to help you determine the coverage differences and help you make a strong choice to protect your growing consultancy.

What are some CGL exclusions?

There are many exclusions under the CGL, and to understand each one is tricky. Forms differ and jurisdictions that hear lawsuits vary greatly. However, here are some general exclusions:

  • Intentional injury — When a business owner acts in self-defense, there is generally coverage. For example, suppose a robber breaks into the darkened firm and brandishes a knife at the owner, who is catnapping. He heaves a computer monitor at the burglar and injures the burglar. Carriers should defend the case unless it appears the insured intended to inflict malicious injury.
  • Care, custody and control of property owned by others — For the consultancy that repairs computers or other equipment, bailee coverage may be necessary.
  • Faulty workmanship.
  • Liability arising from an aircraft, auto or watercraft — If you use any of those conveyances in your business, you’ll require specific coverage to protect your assets. However, if you provide an automobile to an employee who gets in an accident, you may have coverage, depending on the coverage form and the jurisdiction.

While the CGL policy offers the majority of consultancies broad coverage, your agent must evaluate each risk carefully to ensure the CGL adequately protects the consultancy’s unique exposures.

The CGL may still lack scope

As your consultancy grows, the CGL is only part of your coverage solution. The CGL will not cover every exposure you face, especially once you hire employees.

In most states, after you hire either one or a small number of employees, the state mandates workers’ compensation coverage. In addition, employment practices coverage is important in today’s complicated employment arena. There is no coverage under the CGL for most employment exposures like a wrongful termination or a discrimination claim.

Your consultancy may start with only one computer and a printer, but as your firm grows so does its personal property. Don’t forget to insure your personal property, as well.

For firms with even the most trusted employees, crime policies are vital. For example, suppose you hire a bookkeeper to assist with accounting and administrative tasks. Unbeknownst to you, she likes to gamble. Over time, she begins to embezzle funds, and, before you know it, you are short thousands of dollars. Crime coverage is designed to defend and pay these types losses. The Association of Certified Fraud Examiners found that firms with fewer than 100 employees were frequently hit by fraud, accounting for 32% of the incidents they surveyed.

Clearly, the CGL offers broad coverage and peace of mind for any consulting firm, but there are many other risks your business faces that may require specialized coverages. An independent agent can help you sort out the risks.

One easy approach to coverage

If you own a consultancy, you may be confused about your unique coverage needs. The way many agents approach your coverage is to tell every new business owner he or she needs general liability coverage. Then they review the consultancy’s business operations to determine what additional coverage, such as professional liability, employment practices or workers’ compensation are required.

Because most consultants have auto insurance, to some extent you understand liability coverage. The CGL is more complicated, but the general principles of coverage for bodily injury and property damage are similar to the auto policy. For the new consultant, this comparison may be a good starting point to help you understand your company’s need for general liability coverage.

In today’s complex business environment, no consultancy should go without two types of coverage — professional and general liability — at a minimum. An experienced independent agent can help you ensure your business thrives and prospers in the coming years.

 

Top 10 Mistakes to Avoid as a New Risk Manager

The transition into your first risk management job can be difficult. Whether your boss promotes you into your first risk management job or hires you from another organization, you want to excel at your new position over the long haul. In part, that means avoiding mistakes. We often learn our best lessons when we fail, but some mistakes can seriously hurt your risk management program, harm your reputation or even derail your career. Here are 10 mistakes you can avoid.

  1. Don’t rush in with all the answers. You may arrive wanting to form your own alliances and acquire your own team, but avoid making hasty decisions. Give current employees a chance to prove themselves before you transfer them or hire your own team. The same applies to vendor relationships. You can lose a great deal of knowledge about loss history and coverage negotiation if you immediately decide to switch insurance brokers. “Changing brokers can be a great way to create significant coverage gaps or an errors and omissions claim for your friend the new broker,” according to one Atlanta broker. Some vendor alliances, such as relationships with contractors and body shops, may be long-standing, especially in a small town. Rushing in and making changes can cause big ripples in a little pond.
  2. Don’t try to do everything at once. In my teens, I read a book called Ringolevio, about a kid named Emmett Groan growing up in the streets of New York City. One of his compatriots frequently warned Emmett when he was about to rush headlong into a decision, “Take it easy, greasy, you’ve got a long way to slide.” I found that advice very applicable in risk management. If you inherit a big job, you will be faced with hundreds of decisions, some big, some small. Take your time. While you may feel overwhelmed at first, chip away at the organization’s most pressing problems. Put out fires as they arise. Then schedule time for you and your advisers — your brokers, your attorneys, your actuaries and your managers – to develop sound strategies and plans.
  3. Don’t use a shotgun, use a rifle. If the organization is experiencing too many injuries, for example, don’t jump to an obvious solution like using more personal protective equipment. Talk with front-line supervisors, study historical loss data and consider several options before you throw money at a problem. Once in the door, interview employees, talk with other managers, meet with your vendors and set a few important priorities for your first six months in the job. Using a rifle approach means you’ll have to say “No” to some people. This can cause problems. When possible, explain why you’re declining to act on the problems or the specific issues others may present to you. The more transparently you operate, the less criticism you will face. Openness reduces speculation and helps avoid resentment.
  4. Don’t job hop. Most people can be very ambitious early in their careers. Yet too much ambition can hurt your career. Think long and hard before changing jobs. Bad bosses rarely outlast their employees. Deciding to change jobs because of a conflict with a supervisor is often short-sighted. The grass might seem greener on the other side, but sometimes that’s because of a septic tank (to paraphrase a famous comedian). These questions may help you avoid rash decisions.
    • Am I making the change solely to earn more money or for a more prestigious title? If so, will this change “pay for” what I will lose?
    • Am I making the change because I’m feeling unchallenged or bored? If so, what steps can I take to make my current job more challenging? For example, would becoming more active in a trade association, offering expertise to a local nonprofit or mentoring an up-and-coming risk management professional add challenge and interest?
    • How will this affect my retirement financially? Will I be changing retirement systems, or will I lose significant bonuses or vacation because of the change? Always factor those figures into the salary decision. This question becomes more important as retirement age nears.
    • How will this change affect my family and my coworkers? Our coworkers can turn even a challenging job into an appealing one. Do you really want to leave your coworkers? As for family, what ages are your children? Disrupting school-aged children can have negative, long-term consequences.
    • What are the odds I will regret this decision? Go ahead, we’re numbers people. Put a percentage to your decision, then ask yourself if you’re really ready to take that gamble.

    It takes months to settle into a new job. It’s often a year or more before we feel comfortable. Some studies show that many people who change jobs would have done much better if they had stayed put longer. Change for the sake of change frequently is not positive.

  5. Don’t entertain gossip about your predecessors. Some at your new organization may try to build an alliance with you at the expense of your predecessor. Short-circuit these conversations whenever possible. Tactfully turn the conversation to another subject or excuse yourself from the conversation. Try not to make an enemy of the person who is trying to get into your good graces.
  6. Don’t revisit your predecessor’s decisions. Especially when working with unions, you may find people lined up at your door asking you to revisit your predecessor’s judgments. Unless your predecessor’s conclusions hurt your overall program, don’t rush into undoing the decisions and the work he or she completed. You may not be operating under the same set of facts or with the same long-term vision that the former risk manager had at his or her disposal.
  7. Don’t believe your own PR. Never pretend you know more than you know, and don’t start believing your own “press.” While others may soon invite you to participate on panels and present at conferences, remain humble and teachable. It’s terribly painful to learn humility through humiliation.
  8. Don’t fail to communicate. A lack of communication is one of the most damaging mistakes a risk manager can make. A risk manager must have the ear of employees across the organization, from line supervisors to senior management. According to Don Donaldson, president of LA Group, a Texas-based risk management consulting group, “A risk manager needs to be an excellent communicator and facilitate his or her message across the entire organization. In my mind, that requires getting out of the office and pressing the flesh; seeing and being seen and listening, really listening, to determine what is going on in the organization.” Management by walking around is one strong tool in a new risk manager’s tool bag. Once people see that you’re willing to leave your office to discover what is happening, whether it’s on the shop floor or on the sewer line, they’ll more readily accept your expertise and counsel.
  9. Don’t get discouraged. “New risk managers may make the mistake of thinking that risk management is as important to others in the organization as it is to them,” according to Harriette J. Leibovitz, a senior insurance business analyst with Yodil. “It takes time, and more time for some than others, to figure out that you're more than an irritation to the folks who believe they drive all the revenue.” Over time, you will prove your value to the organization many times over. Until that day, quietly do your job and find encouragement from your risk management peers.
  10. Don’t forget to laugh. You will be privy to the peculiarities of human nature both at its finest and at its worst, so don’t forget to find the lighter side of situations when you can. A robust sense of humor will help you through the rough spots and build bonds with your coworkers.

While these are just a few tips to help you in your new role as a risk manager, your peers probably can offer many more ways to ensure success. Over my career in risk management, I have found my fellow risk management professionals to be some of the most generous people in my life, always willing to share their expertise and provide me with a helping hand. Develop and lean on your network. If this is your first job as a risk manager, you’re in for a wonderful experience. Take time along the way to enjoy the experiences, appreciate the great people you will meet and appreciate the lighter side of risk management.

Brain Drain: 22 Steps to Reduce the Impact of Retirement and Increase Employee Retention

Is your organization ready to lose as much as 25% of its intellectual capital in the next decade? You need to be, because more than one quarter of the U.S. working population will be old enough to retire in less than three years, according to the U.S. Bureau of Labor Statistics.

This may lead to a shortfall of nearly 10 million workers. Add this flight to an average job stay of four years, where today’s employees switch to a competitor without so much as a backward glance, and businesses in America are at risk.

America is poised for a brain drain so dramatic that many companies will find themselves unprepared to face the coming talent shortage. Yet it appears few companies are taking steps to deal with the crunch. 

This article explores actions companies can take to manage looming intellectual losses. Some are straightforward; some will take more planning. Any organizational change comes from the top, and industry leaders must deal swiftly and strategically with the changes our work force will undergo in the coming years.

As companies increasingly rely on intellectual capital, the value of work force intelligence to an organization cannot be overstated. There is little doubt that the insurance industry, so reliant on intellectual capital, should be at the forefront of addressing the looming loss of intellectual capacity.

Where Did All the Experts Go?

Brain drain historically has been defined as the loss of human skills in developing nations, usually because of the migration of trained individuals to more industrialized nations or jurisdictions. However, as baby boomers begin to retire, the term is increasingly used to describe the loss of intellectual capital at U.S. organizations. Downsizing also takes its toll on work force intelligence.

The U.S. work force has changed dramatically. A baby boomer’s parents may have held one job in their entire careers; experts estimate a typical young American will hold from seven to 10 different jobs before retirement. Insurance organizations are experiencing brain drain as long-term employees retire, switch employers or change careers. There is little doubt—insurance organizations are about to see drastic changes resulting from this exodus.

Future employment demographics should sound an alarm to insurance companies in America. Over time, the lack of top talent can be devastating to an organization, especially in an industry as complex as insurance. Add an increasing dependence on technology, and future employee skill deficits are a certainty, not just a theory. While this exodus is beginning to hit the insurance industry now, it will accelerate greatly in the next few years as aging boomers, those best placed to assume senior management roles, retire. This talent shrinkage must be managed now, before organizations find themselves in crisis.

Penny-Wise, Pound Foolish?

It may seem profitable to replace an older, more costly employee with a younger person. However, organizations may lose a great deal more than they bargained for with that replacement. With the departure of these highly experienced employees, companies lose more than their individual expertise. Also lost is what psychologist Daniel Wegner calls “transactive memory.”1 Transactive memory is information a person accesses that is outside of his or her own memory, information routinely called up by using another person’s memory.2 Groups where this transactive memory is understood and valued function better than groups that lack this trait.3

Take co-workers. On a difficult property claim, an adjuster may turn to a co-worker and ask, “What is the name of that engineer we used a few years ago in Georgia on that storm-surge claim?” Our brains can store only so much information. If we have access to people around us who may be more suited to remember a particular type of information, then we don’t have to work as hard to remember items that we don’t understand, don’t recall or don’t need at the time we hear it.

Brain drain slows the work process and impairs a company’s product quality. It can result in inefficiency because of the time it takes employees to find new co-workers with the information they may need. It can also result in costly mistakes resulting in lawsuits, lost subrogation opportunities or claims paid that, with a thorough investigation, would have been denied. Probably most importantly, a work force lacking robust intellectual capital loses its strategic advantages and abilities to respond quickly to business opportunities.

Insurance professionals are concerned about brain drain, yet even a casual review of insurance literature shows that much of the focus in industry research centers on improving technology to enhance operations. Even the term “human-resource management” seems to be morphing into a robot-like term, “human-capital management.” This disembodied approach seems to negate the fact that we’re still dealing with people; yes, they may be “capital’ to a company, but most employees would be offended to hear themselves referred to in that manner. “Talent management,” the new euphemism for recruiting and retaining employees, again seems to dehumanize the worker. Few people appreciate being “managed” or referred to as “capital.”

The emphasis in insurance companies seems to have shifted away from quality toward quantity. How much faster can we complete a process, appears to be the question. Can we settle a claim in 30 days, even if we have to throw more money at it? Has customer service and quality been forgotten in the effort to improve company operations? Have we, in an effort to increase profits, driven much of our brightest talent right out the door?

The Devalued Older Worker

Insurance message boards are filled with complaints from older, highly experienced insurance professionals who cannot find work, some with two to three decades of knowledge. “I have a solution to the brain drain in the insurance industry. Hire me and all those still looking for work … and some of the people whose resumes are posted on the Broward County RIMS website, among others,”4 one frustrated professional said in a June 2007 on-line risk management discussion. If these complaints are true, the widespread reluctance by insurance organizations to hire older, experienced workers may backfire because of the lack of new talent breaking down doors to enter the industry.

Nowhere is brain drain felt more acutely, it appears, than in claims departments nationwide. According to Conning Research & Consulting,5 70% of the nation’s adjusting staff is age 40 or older. “I have found this [talent leakage] particularly true in the claims arena,” according to James Brittle, a producer in the National Accounts division of Cobbs, Allen & Hall in Birmingham, Alabama.  “Coming from the highly engineered chemical and energy field, try to find one carrier that still has experienced and knowledgeable adjusters to handle property claims. There are two options — young and inexperienced or experienced and independent. The latter group is getting smaller and smaller. It’s not real comforting.”

How can companies prevent brain drain? Here are some possible solutions.6

1. Analyze current workforce strengths and talents to determine core competencies.

If an employee’s store of knowledge is known only to a few co-workers, then it is largely useless to the organization as a whole. It becomes an information silo, a vertical information cluster that is not transmitted laterally to co-workers, usually to the detriment of the organization. Analyzing employees’ expertise and knowledge and categorizing it so that it becomes accessible by other employees and departments is critical to improving and strengthening the work force.

2. Determine, through surveys or informal meetings or email queries, where employees go for specific information.

Who are your employees’ “information agents” in given areas? Imagine this scenario—a Lloyd’s underwriter wants to issue a binding authority to an agent in Florida. Before agreeing, however, the underwriter must determine wildfire hazards in the counties where the agent wants to write business. If the underwriter can, with a few keystrokes, search a database that shows Lloyd’s experts who understand catastrophe modeling and perhaps understand wildfire exposures particularly well, the decision to issue the binding authority can be made more easily and accurately, not to mention more quickly.

Knowledge Asset Mapping, written about extensively by British researcher Bernard Marr, allows organizations to locate and diagram internal knowledge. This visualization of intellectual capital, which Marr states is the “principal basis for competitive advantage,”7 can then be used as a strategic planning tool so that organizations can predict future intelligence gaps before they occur.

Today’s organizations must be agile to compete. Classifying employee knowledge to make it more accessible to others in the organization can help companies make decisions rapidly. It goes without saying that companies like Apple have seized marketplace opportunities to catapult themselves into leadership positions. Without sufficient intellectual capital, however, a company may not be robust enough to respond to opportunities as they arise.

3. Prepare to replace exiting information agents when those employees retire.

In smaller organizations, this process may not be formal. It may be as simple as acknowledging that an employee who is an expert on a subject is leaving. Notify all employees of the loss of this person, then direct them to another employee who may not have as much knowledge, but has some knowledge in that area. The company must develop incentives and time frames so that newer information agents can become experts on specific topics as gaps arise, and even before they arise.

4. Determine which employees are potential flight risks, whether to retirement, recruitment or family pressures such as aging parents.

Talk openly with employees who are considering retirement or having home/work difficulties to determine how you can retain them. Flexibility is the key—the employee may need more time off or greater leeway to work non-core hours or to work at home. If the Family and Medical Leave Act (FMLA) is voluntary, your organization should consider allowing FMLA leave.

5. Hire retiring employees as consultants on a part-time basis to retain their expertise.

With increasing cost of medical care for retirees, many welcome a supplement to their retirement income. Adding benefit package components that appeal to older workers, such as long-term care insurance or prorated health coverage for part-time work, may help retain them, as well.

6. Provide incentives for employees to consider postponing retirement.

When an organization considers the total impact of losing a long-term employee, it is generally cheaper to retain that employee than to hire and train a replacement, especially if the employee’s knowledge routinely saves the company money. Consider the following scenario:

A claims manager will retire in two years, after working more than 30 years for just two carriers. He is one of the top arson investigators in the Midwest, taking dozens of arson claims to trial or to closure. Currently, there is no one else in his company who handles arson files without his supervision, and no one who remotely approaches his level of expertise.

What happens to this company when he leaves? How much will his departure cost the company in terms of claims payments that might have, with his expertise, been compromised or denied? Can this organization really afford to lose the employee’s expertise without a solid exit strategy?

7. Use technology to drive intra-company communications.

Intranets, videoconferencing, peer-to-peer technology and podcasts are information ways that allow workers to communicate over distance and varying time zones. Encourage disparate and divergent workers to develop virtual relationships to share ideas and solve problems using these tools. Why not take advantage of your global work force?

8. Establish “practice communities” where individuals from various departments — claims, underwriting, marketing and reinsurance — meet regularly to solve problems.

According to James Surowiecki, author of The Wisdom of Crowds, a crowd is a group of diverse people with differing levels of intelligence and information who collectively make smart decisions. A good example of this wisdom, as many claims managers have found, is “round tabling” a claim. Allowing a group of adjusters with varying amounts of experience to determine a claim’s value or to develop a plan of action to kick a stalled claim forward often provides excellent results and acts as a learning tool for less experienced team members.

Surowiecki defines four elements that make a smart crowd. He recommends a diverse group because each person will bring a different set of experiences to the process. The crowd should have no leader, so that the group’s answer can emerge. But there must be a way to articulate the crowd’s verdict. Finally, people in the crowd must be self-confident enough to rely on their own judgment without undue influence from other group members.

With today’s sophisticated technology, organizations don’t have to rely solely on local talent. A company-wide initiative can be implemented readily with some help from your organization’s information technology department. Practice communities build virtual relationships that, in turn, make employees more connected to the organization.

9. Organize and memorialize your practice community results with wikis, a decade-old web application that allows many people to collaborate on a single document.

There are several sites dedicated to collaborative writing, including https://www.zoho.com/docs/. Visit http://www.wikipedia.org, the on-line encyclopedia written by collaboration, to view an example of wiki technology at its finest.

10. Implement a formal mentoring program.

Some insurance organizations have implemented mentoring programs. The National Association of Catastrophe Adjusters formed a mentoring program in 2005. While not online, it matches new adjusters eager to learn CAT adjusting with experienced field adjusters.

Aon Services is almost a year into an ambitious mentoring project. With 600 Aon employees in the pilot program developed with assistance from Triple Creek Associates in Colorado, Aon expects to roll out the program companywide. The program was not limited to senior manager mentors; anyone in the organization with good performance was eligible to participate. “This challenged our operational paradigms, to have a junior person mentoring a senior person,”8 according to Talethea M. Best, Aon’s director of U.S. talent development.

The results have been positive, she reports. 86% of the mentees and 62% of the mentors who responded to a recent survey felt that the process improved their own performance. 85% of the mentees and 78% of the mentors would participate again if asked.

“We encouraged a protégé-driven process,” Ms. Best said. Potential mentees used a computerized platform with specific parameters to search for what they wanted in the mentor relationship. “It was a win/win for all involved,” Ms. Best said.

“This [mentoring project] was an opportunity for us to think more strategically,” Ms. Best reported. “To retain employees, it is critical to make people feel invested and engaged. How do you make folks feel like they make a significant contribution? Mentoring is a way to address that,” at a cost of pennies per employee, Ms. Best said.

Not all managers are mentor material. To be effective, mentors must receive some training. Aon addressed this concern with initial employee development workshops.

To ensure the highest quality mentorship for your employees, it is critical that mentors are carefully selected not only for their technical skills, but for their ability to communicate effectively in an increasingly diverse work force.

11. Pool knowledge across organizations.

Your Encore, founded by Procter & Gamble and Eli Lilly, is a society of retired research scientists and engineers who “continue to provide value―at its highest level—to companies on a consulting basis,” according to its website. The insurance industry is particularly well-suited to this approach because risk pools changed the face of insurance, so the models to implement this approach are already well-accepted by our industry. Don’t be unreasonable with information, but do set some ground rules and ensure employees comprehend which information is proprietary and which can be shared.

12. Cross train employees.

“A former employer of mine combined the loss control and underwriting functions,’”9 and it worked out well, reports Mike Benisheck, director of risk management for Pacific Tomato Growers. “They had a historical loss ratio of 30–32% annually for about 15 years.” When the functions were separated, losses spiraled, Benischeck reported.

Cross training can limit employee burnout and provide new motivation for employees who feel stymied in their careers. It also strengthens an organization’s operational team.

13. Cultivate a culture that values expertise.

To prevent brain drain, an organization must provide an atmosphere that values aging workers and the knowledge they possess. Recognizing, but more importantly acknowledging, their contributions to the organization, not just the number of claims they close or the amount of new business they produce, may mean keeping employees a few years longer. Small changes in any organization, as anyone who read the book The Tipping Point knows, can mean enormous changes overall.

Younger workers should be made aware of demographic trends and what they mean to their careers. Many younger workers are eager for career advancement. The demographics pointing to a sharp talent drop are in their favor if they prepare themselves, and organizations help them prepare, to take supervisory and management positions. Few younger workers recognize this trend. Organizations that speak frankly of these developments and what they mean to each person, not just the organization itself, will build loyalty and perhaps help to cultivate patience in generations that are used to quick answers and quick solutions.

14. Encourage employees to join online insurance groups like RiskList or PRIMA-Watch.

Insurance professionals are notoriously generous with their time and information when it comes to helping their counterparts, as any insurance industry employee knows who belongs to a professional organization. Insurance server lists have been online for many years with a faithful membership. List members will respond to just about any inquiry with an impressive depth and breadth of knowledge, with some humor thrown in, as well.

15. Support employee membership in professional organizations like your local claims association, Insurance Women, RIMS or CPCU Society.

“Support” means paying dues and supporting the absences necessary for employees to both attend conferences and to hold committee positions. This gives employees a strong network to turn to for information and support. There has been a mindset in the industry that allowing employees to network outside the company increased the employee’s flight risk. More enlightened managers realize that if employees feel valued for their expertise and encouraged in their professional development, they are generally more loyal to their employers.

16. Offer incentives for obtaining professional designations. Offer greater incentives for attending classes rather than online participation.

According to the CPCU Society, in 2006, 88% of CPCUs were age 40 or older. Taking a class from an experienced instructor with students from other companies and disciplines gives students a much broader experience. It also exposes them to others with whom they can network or seek advice. Designations are a clear indicator that employees see insurance as not just a job, but a career.

17. Avoid the human resources “silo.”

An information silo is a pool of information that is not well-integrated in an organization. Human resources departments often act as “silos,” gatekeepers in the hiring process, by determining which applicants get interviewed. Forming inter-departmental hiring panels, teams that develop job descriptions, review applications and give input on general hiring and other personnel issues like employee retention, can greatly improve a company’s work force.

18. Don’t underestimate the impact that younger generations and their different work standards have on older workers.

There are four generations of workers in today’s increasingly diverse workforce. With Millennials, Gen Xers and Yers in the employment mix, many young people are either intimidated by older workers or are downright contemptuous. Older workers, in turn, often cannot comprehend their younger peers’ thinking and may be intimidated by their ease with technology.

Forming intergenerational teams can bring divergent employees together so that they can benefit from each others’ strengths, not just complain about their weaknesses. Utilizing younger workers who are good communicators and technologically proficient to train older workers in new technology can bridge two gaps—the generation gap and the technology gap. In turn, older workers can mentor younger employees and model appropriate and ethical behavior.

19. Consider the Total Cost of Jerks (TCJ) to the organization.

Verbal abuse, intimidation and bullying are widespread in the American work force.10 But some companies are taking notice. There is a growing trend in companies to consider the TCJ impact on the work force, including several organizations on Fortune’s “100 Best Places to Work.”

Robert Sutton, Ph.D., professor of management science and sngineering in the Stanford Engineering School, views “jerks” in a much more explicit light. Sutton wrote The No Asshole Rule, a business bestseller that provides steps organizations can take to quantify the cost of jerks and eliminate them.

He lists the “dirty dozen,” the top 12 actions taken by those who use organizational power against those with less power. “It just takes a few to ruin the entire organization,” Sutton writes.11

Older workers may have seen it all, but they don’t always have the patience to put up with twits. That jerk in the cubicle next to a long-term employee may be the final nudge that pushes a valued older worker out the door. Most employees who have options like retirement tolerate jerks for just so long, and then they clean out their desks.

Eliminating toxic employees can improve more than the organization’s internal structure, because if an employee treats coworkers badly, how is he treating your customers?

20. Make the most of the existing work force.

Studies have found that as much as 40% of the time spent handling a claim can be spent in administrative tasks that don’t affect the claim’s outcome significantly. It makes sense, then, to drive work down to its lowest possible level of the organization. Are adjusters still issuing checks, composing the same letters over and over and answering calls that could be delegated? According to employment consultant Peter Rousmaniere, some corporations are outsourcing their claims-support systems.  “[Outsourcing] offers the potential of injecting into the claims management process some very intelligent, well-educated people who are very motivated to perform functions [that], due to global information systems, they can do proficiently.”

21. Don’t overlook diversity.

Many employees are overlooked in the promotional process because they are of different nationalities, ethnicities or gender than the dominant makeup of an organization. Whites follow a different career path than their non-white counterparts, according to David A Thomas, author of an article on minority mentoring that appeared in the Harvard Business Review. Whites frequently get more attention from their managers and hence more opportunities.

Thomas’s research showed that the one common attribute people of color who rose to the tops of their organizations had was mentorship, but mentorship that went beyond what he termed “instructional.” They had mentors who provided a deeper relationship that increased their mentees’ confidence and did not shy away from frank discussions about race.12 If we fail in our organizations to see beyond employees’ gender, skin color or religious beliefs, we may overlook our brightest talent.

22. Address the problems of brain drain strategically.

To date, there is a great deal of discussion on brain drain in the insurance industry, but little empirical evidence to use to determine which methods might avoid this loss. Many insurance executives are talking about the problem in conferences and trade journals, but what are insurance companies doing to address it?

To create organizational change, an organization must start with a vision. What are the problems we face, and what are their consequences both short-term and long-term? Where will our work force needs and realities stand in five years?

Effective Organizational Change Begins with a Plan

Without a roadmap, even the savviest traveler occasionally gets lost. To address brain drain strategically, a company must develop a strong vision and a stronger plan. This plan can be implemented over time, but it must have clear goals and time frames to avoid becoming mired down in processes.

From top management to line supervisors, there must be a shared sense of urgency about this problem, because any critical initiative can go astray because of the competition that all organizations face in today’s highly competitive global market. To solve the coming talent crunch, organizations must commit the resources to tackle this problem strategically, while there is still time.

1 Wegner, Daniel, Paula Raymond, and Ralph Erber. “Transactive Memory in Close Relationships,” Journal of Personality and Social Psychology 61 (1991): 923––929.

2 Gladwell, M. (2000). The Tipping Point: How Little Things Can Make A Big Difference. New York: Little, Brown & Company.

 3 Ibid.

4 RiskList Users Group, June 23, 2007.

5 “Generational Talent Management for Insurers: Strategies to Attract and Engage Generation Y in the U.S. Insurance Industry,” Deloitte & Touche, 2007.

6 Private communication.

7 Marr, Bernard, and J.C. Spender. “Measuring Knowledge Assets – implications of the knowledge economy for performance measurement.” Measuring Business Excellence 8(2004): 18–27.

8 Private communication.

9 Private communication.

10 Lutgen-Sandvik, P., Tracy, S. J., & Alberts, J. K. (in-press). Burned by bullying in the American workplace: Prevalence, perception, degree, and impact. Journal of Management Studies.

11 Sutton, Robert. The No Asshole Rule: Building a Civilized Workplace and Surviving One That Isn't. 1st. New York: Warner Business Books, 2007, p. 180.

12 Thomas, David A. “The Truth About Mentoring Minorities: Race Matters.” Harvard Business Review April 2001.