Tag Archives: regulators

When Regulation Offers Opportunity

Have you ever wondered, “Where would basketball be without the three-point shot?” It has been my husband’s favorite shot as a player, coach and fan, and it’s mine as we watch Big East Creighton basketball games, because the energy, excitement and momentum completely change in seconds! You may never have considered this (and you may not even care), but it bears real relevance to what is happening within the insurance industry right now regarding the relationship between innovation and regulation.

The history behind the development of the three-point shot is fascinating. The rule was actually tested as early as the 1940s, but it didn’t become mainstream within the NBA and NCAA until the mid-1980s. Suddenly, a team that was down by two points with only seconds left could do more than tie the game — they could win! A dunk used to be thrilling (and it still it is), but there is no question that the three-point shot (one simple new rule) has generated greater popularity, attendance and income for basketball teams – literally a game-changer!

But here’s the nugget: The reason that the rule became mainstream was NOT because coaches and players wanted the rule. It was because fans loved how it transformed watching the game, and league commissioners wanted to please fans. The regulating organizations and the fans were jointly instrumental in bringing about the change.

Moving Innovation From Concept to Precept

Today’s insurers are finding themselves at a similarly historic point on the pathway to innovation. Customer needs, expectations, desire, lifestyles and technologies are driving change in insurance. Some insurers have been innovating and testing their ideas, with some success. But now, regulatory organizations that govern our industry are fostering innovation with sandboxes for testing new products, and rating agencies are planning to score carriers’ innovation efforts and outputs as part of the ratings process. This completely changes the nature of the word “innovation.” It borrows the idea of innovation as a conceptual word and recasts it as a formal precept.

Some insurers might see enforced rigidity, but it is the exact opposite. It is the freedom to innovate in the direction of customer and market opportunity, with potential guidelines that may help insurers invest wisely. This is just another example of the customer driving the change, with the regulatory bodies listening well enough to bring validation and accreditation to the change. As we’ll see throughout the rest of this blog, insurers are now free to make three-point shots and have them count!

In our latest thought leadership report, The Future of Insurance: Optimization, Growth and Innovation, we explored the idea that companies should take this opportunity to reinvent themselves. Last week, we started by looking at this opportunity from the standpoint of strategic alignment. How does a two-speed model for transformation fit the strategic alignment needs of insurers that are trying to innovate while they also need to optimize their current business?

See also: An AI Road Map to the Future of Insurance

This week, we’re looking at how two recent regulatory events signal innovative opportunity for insurers. Can we use the changes in our game to learn and innovate? Can we use the rule-book as a tool for optimizing our processes and growing through innovation? We begin by looking at the details of regulatory possibilities. We will then follow up with some suggestions for insurer response.

Innovation and Regulation — Is there really an opportunity here?

With the rise of insurtech, the flow of capital into insurtech, changing customer demographics, shifting market boundaries and the pace of emerging technologies adoption, insurance regulators have noticed.

  • The National Association of Insurance Commissioners (NAIC) established an Innovation and Technology (EX) Task Force to monitor insurtech developments and help regulators stay informed and educated. One of their tasks was to explore the use of a sandbox to accelerate innovation.
  • A.M. Best proposed a new innovation assessment to be included in the annual AM Best rating review.

So, the regulatory gears are in motion for change. Let’s look at both of these signals in light of their impact on insurers.

The Sandbox Concept — “You are now invited to innovate.

Potentially, one of the most important changes considered by regulators is the sandbox. In November 2016, Munich Re America submitted a proposal to the NAIC to lower the barriers to test new ideas, address how innovative ideas can be quickly developed and launched in an environment that is strictly regulated via a “regulatory sandbox.”

This legislative proposal for the sandbox, similar to what has been used in Europe, would allow an insurance commissioner to receive an application from an insurer or other licensee that essentially says, “We can meet the consumer protection need of that law in another way,” but still in a supervised environment via the sandbox.

Adding support to the concept, the American Insurance Association in December 2017 presented a model law to the National Association of Insurance Commissioners that would allow for the creation of a regulatory sandbox in which insurers could test digital innovations without fear of running afoul of regulations.

In 2018, I had the opportunity to speak to a few state insurance commissioners and some of their staff, sharing our consumer and SMB research that reflects the changing customer needs and expectations. At the end of one discussion, the commissioner commented to staff that they needed to understand these changing needs because these are the customers they serve. What an insightful comment!

Since that time, states have been taking differing approaches. Some believe sandboxes are not necessary or that their legislature would not allow for sandboxes. Others, including Connecticut, Illinois and Wisconsin, believe their current regulatory environment allows them to provide guidance to innovators without the need for a sandbox. Arizona, Utah, Vermont and Wyoming are taking steps to encourage sandbox environments.

In late May 2019, Kentucky became the first state to pass a bill to create a sandbox for the development of creative risk management. The launch of the sandbox concept in various forms offers one of the most potentially important shifts made by regulators to encourage insurance innovation.

This is a potential game-changer — one that aligns regulators with customers! Where previously some innovations might be stifled by regulatory constraints, the NAIC is signaling that it would like for these innovations to count toward the improvement of the industry. Those that embrace new ideas and test and learn are free to capture the growth opportunities in a changing marketplace.

The Innovation Assessment “You can talk the talk, but can you walk the walk?”

In early March 2019, A.M. Best published a draft document, “Scoring and Assessment of Innovation Methodology and Criteria.” The document states, “Given the accelerating pace of innovation and magnitude of change, insurance companies that fail to innovate may find it difficult to sustain long-term success/profitability and may ultimately be subject to anti-selection and loss of relevance. Those insurers that successfully incorporate innovation will likely strengthen their organizations, increase their customer base and improve efficiency, which will support their financial strength.”

Hence, they are introducing new innovation scoring criteria.

The report states, “A.M. Best defines innovation as a multi-stage process whereby an organization transforms ideas into new or significantly improved products, processes, services or business models that have a measurable positive impact over time and enable the organization to remain relevant and successful. These products, processes, services, or business models can be created organically or adopted from external sources.”

How does this look in practice?

The innovation scoring and assessment includes two components: innovation input score and innovation output score, both of which have sub-components.

The innovation input subcomponents include leadership, culture, resources (allocation, strategy, management) and processes and structure for innovation.

Innovation output subcomponents include results and level of transformation.

The natural tendency for insurers will be to look at the criteria and find out what they need to do to “look innovative.” But when insurers examine the criteria more deeply, they will quickly realize that this is impossible. A.M. Best has created a framework for analysis that is transparent from top to bottom. The goal for insurers won’t be to look innovative, but to take the innovation criteria as a helpful guide to actually become innovative through and through.

See also: Future of Insurance Looks Very Different  

If the A.M. Best proposal moves forward, insurers will be tagged, like this:

  • Non-innovator: Companies receiving an innovation score of less than 12
  • Reactor: Companies receiving an innovation score between 12 and 17
  • Adopter: Companies receiving an innovation score between 18 and 22
  • Innovator: Companies receiving an innovation score between 23 and 27
  • Innovation Leader: Companies receiving an innovation score of 28 or higher

The best part about the innovation scoring is that it is holistic, covering people, process, leadership, transformation and results. With the knowledge of what may be coming from A.M. Best, insurers are now able to ask themselves some important questions.

Are we investing our resources in areas of innovation where we are likely to see transformative results? Cloud-based platforms, such as Majesco CloudInsurer and Majesco Digital1st Insurance platforms will help insurers achieve the transformation results and launch innovative products in weeks rather than years that can lead to higher A.M. Best innovation scoring.

Are our processes and structure designed to make the most use of real-time data and digital connectivity? A.M. Best will be scoring the alignment of strategy and innovation in light of data’s use in decisions, solutions, problem-solving and data governance.

Are we ready for insurance’s innovative three-point shots? The lesson that we gain out of these regulatory signposts is that we are close to a day when innovation is no longer optional, but it becomes an embedded tool for buzzer-beaters against the competition. Regulation and innovation are not incompatible. When combined effectively, they will please customers and open new markets and opportunities. Insurance will see a resurgence of popularity and the game will never be the same.

Is your organization ready to change its game in light of an industry that is driving toward innovation?

What Should Future of Regulation Be?

It is of course much easier to look back and second-guess regulatory actions. It is far more difficult to propose a way forward and to do so in light of the emerging hot-button issues, including data and the digitization of the industry, insurtech (and regtech), emerging and growing risks, cyber, the Internet of Things (IoT), natural catastrophes, longevity and growing protectionism. The way forward requires consideration of the primary goals of insurance regulation and raises critical questions regarding how regulators prioritize their work and how they interact with one another, with the global industry and with consumers.

We offer below some thoughts and suggestions on these important questions and on how regulation might best move forward over the next 10 years.

Establish a reasonable construct for regulatory relationships.

Relationships matter, and it is imperative for there to be careful consideration of how regulators organize their interactions and reliance on each other. We have some examples in the form of the Solvency II equivalence assessment process, the NAIC’s Qualified Jurisdiction assessment process (under the U.S. credit for reinsurance laws), the NAIC’s accreditation process for the states of the U.S., the U.S.-E.U. Covered Agreement, ComFrame, the IAIS and NAIC’s memorandum of ynderstanding and the IMF financial sector assessment program (FSAP). Each of these provide varying degrees of assessment and regulatory cooperation/reliance.

These processes and protocols, however, have largely emerged on an ad hoc, unilateral basis and in some cases have had a whiff of imperial judgment about them that may not be justified – and certainly is off-putting to counterparties. We would urge regulators to give careful consideration to the goals, guiding principles and the process for achieving greater levels of cooperation and reliance among global regulators.

We hope these efforts would include an appreciation that different approaches/systems can achieve similar results that no jurisdiction has a monopoly on good solvency regulation. There must also be respect for and recognition of local laws and a recognition that regulatory cooperation and accommodation will benefit regulators, the industry and consumers. Most importantly, regulators need to work together to develop confidence and trust in one another.

The IAIS first coined the phrase “supervisory recognition” in 2009. In March of that year, the IAIS released an “issues paper on group-wide solvency assessment and supervision.” That paper stated that:

“To the extent there is not convergence of supervisory standards and practices, supervisors can pursue processes of ‘supervisory recognition’ in an effort to enhance the effectiveness and efficiency of supervision. Supervisory recognition refers to supervisors choosing to recognize and rely on the work of other supervisors, based on an assessment of the counterpart jurisdiction’s regulatory regime.”

See also: Global Trend Map No. 14: Regulation  

The paper noted the tremendous benefits that can flow from choosing such a path:

“An effective system of supervisory recognition could reduce duplication of effort by the supervisors involved, thereby reducing compliance costs for the insurance industry and enhancing market efficiency. It would also facilitate information sharing and cooperation among those supervisors.”

This is powerful. We urge global insurance regulators to take a step back and consider how they can enhance regulatory effectiveness and efficiency by taking reasonable and prudential steps to recognize effective regulatory regimens − even where these systems are based on different (perhaps significantly different) rules and principles, but which have a demonstrated track record of effectiveness.

As noted above, we have seen some efforts at supervisory recognition. These include Solvency II’s equivalence assessment process, the NAIC’s accreditation process for other U.S. states, the NAIC “Qualified Jurisdictions” provisions for identifying jurisdictions that U.S. regulators will rely on for purposes of lowering collateral requirements on foreign reinsurers, the E.U.-U.S. Covered Agreement and the IAIS’s Memorandum on Mutual Understanding. Some of these processes are more prescriptive than others and have the danger of demanding that regulatory standards be virtually identical to be recognized. This should be avoided.

One size for all is not the way to go.

The alternative approach to recognition of different, but equally effective systems is the pursuit of a harmonized, single set of regulatory standards for global insurers. This approach is much in vogue among some regulators, who assert the “need for a common language” or for “a level playing field” or to avoid “regulatory arbitrage.” Some regulators also argue that common standards will lead to regulatory nirvana, where one set of rules will apply to all global insurers, which will then be able to trade seamlessly throughout all markets.

There are, however, a variety of solvency and capital systems that have proven their effectiveness. These systems are not identical, and indeed they have some profoundly different regulatory structures, accounting rules and other standards such as the systems deployed in the E.U. (even pre-Solvency II), the U.S., Canada, Japan, Bermuda, Australia, Switzerland and others. Attempting to assert a signal system or standard ignores commercial, regulatory, legal, cultural and political realities.

Moreover, we question some of the rationale for pursuing uniform standards, including the need for a common language. We suggest that what is really needed is for regulators to continue to work together, to discuss their respective regulatory regimes and to develop a deep, sophisticated knowledge of how their regimes work. From this, trust will develop, and from that a more effective and efficient system of regulation is possible. The engagement and trust building can happen within supervisory colleges. We have seen it emerge in the context of the E.U.-U.S. regulatory dialogue. We saw it in the context of the E.U.-U.S. Covered Agreement. No one, however, has made a compelling case for why one regulatory language is necessary to establish a close, effective working relationship among regulators.

Similarly, the call for a level playing field sounds good, but it is an amorphous, ambiguous term that is rarely, if ever, defined. Does the “playing field” include just regulatory capital requirements? If so, how about tax, employment rules, social charges? How about 50 subnational regulators versus one national regulator? Guarantee funds? Seeking a level playing field can also be code for, “My system of regulation is heavier, more expensive than yours, so I need to put a regulatory thumb on the scales to make sure you have equally burdensome regulations.” This argument was made for decades in the debate surrounding the U.S. reinsurance collateral rules. We hear it now regarding the burdens of Solvency II. It must be asked, however, whether it is the responsibility of prudential regulators to be leveling playing fields, or should their focus be solely on prudent regulatory standards for their markets.

Finally, the dark specter of regulatory arbitrage is often asserted as a reason to pursue a single regulatory standard, such as the development of the ICS by the IAIS. But one must ask if there is really a danger of regulatory arbitrage today among global, internationally active insures? Yes, a vigilant eye needs to kept for a weak link in the regulatory system, something the IMF FSAP system has sought to do, supervisory colleges can do and the IAIS is well-equipped to do. But using regulatory arbitrage as an argument to drive the establishment of the same standards for all insurers does not seem compelling.

Proportionality is required.

Often, regulators roll out new regulatory initiatives with the phrase that the new rules will be “proportionate” to the targeted insurers. Too often, it seems there is just lip service to this principle. Rarely is it defined – but it is tossed out in an attempt to say, “Do not worry, the new rules will not be excessive.” Greater debate and greater commitment to this principle is needed. Clearly a key component of it must be a careful cost/benefit analysis of any proposed new standard, with a clear articulation of the perceived danger to be addressed – including the likelihoods and severity of impact and then a credible calculation of the attendant costs – economic and otherwise to industry and to regulators. In October 2017, the U.K. Treasury Select Committee published a report criticizing the PRA for its excessively strict interpretation of Solvency II and its negative effect on the competitiveness of U.K. insurers. The report concluded that the PRA had enhanced policyholder protection at the expense of increasing the cost of capital for U.K. insurers, which hurt their ability to provide long-term investments and annuities. Although the PRA emphasized its mandate of prudential regulation and policy holder protection, the Treasury Committee reiterated its concern with how the PRA interpreted the principle of proportionality.

Simplicity rather than complexity.

Over the past 10 years, there has been a staggering increase in proposed and enacted regulatory requirements, many of which are catalogued above. There is a danger, however, that increasingly complex regulatory tools can create their own regulatory blind spots and that overly complex regulations can create a regulatory “fog of war.”

Andrew Haldane, executive director at the Bank of England, in August 2012 delivered a paper at a Federal Reserve Bank of Kansas City’s economic policy symposium, titled “The Dog and the Frisbee.” He graphically laid out when less is really more by talking about two ways of catching a Frisbee: One can “weigh a complex array of physical and atmospheric factors, among them wind speed and Frisbee rotation” − or one can simply catch the Frisbee, the way a dog does. Complex rules, Haldane said, may cause people to manage to the rules for fear of falling in conflict with them. The complexity of the rules may induce people to act defensively and focus on the small print at the expense of the bigger picture.

Focusing on the complexity of the banking world, Haldane compared the 20 pages of the Glass-Steagall Act to the 848 pages of Dodd-Frank together with its 30,000 pages of rulemaking, and compared the 18 pages of Basel 1 to the more than 1,000 pages of Basel III. The fundamental question is whether that additional detail and complexity really adds greater safety to the financial system or has just the opposite effect and significantly increases the cost. Haldane’s analysis provides compelling evidence that increasing the complexity of financial regulation is a recipe for continuing crisis. Accordingly, Haldane calls for a different direction for supervisors with “…fewer (perhaps far fewer), and more (ideally much more) experienced supervisors, operating to a smaller, less detailed rule book.”

Although Haldane’s analysis and discussion focuses on the banking system, his assessment and recommendations should be considered carefully by global insurance regulators. The sheer volume and complexity of rules, models and reports that flood into regulatory bodies raise the real question of who reviews this information, who really understands it and, worst of all, does a mountain of detailed information create a false confidence that regulators have good visibility into the risks – particular the emerging risks – that insurers are facing? A real danger exists of not seeing the forest for the trees.

See also: To Predict the Future, Try Creating It  

Regulation should promote competitiveness rather than protectionism.

At a time when competition has been growing not only from within the established companies but also more importantly from outside the traditional companies, protectionism will only inhibit growth and stifle better understanding of risk in a rapidly changing business environment. The goal must be to make the industry more competitive and to encourage transfer of innovation and create better ways to address risk, distribution of products and climate changes. Protectionism will only limit the potential of growth of the industry and is both short-sighted and self-defeating.

Recognition of the importance of positive disruption through insurtech, fintech and innovation.

The consensus is that the insurance industry is ripe for disruption because it has been slow (but is now working hard) to modernize in view of an array of innovative and technological advancements. Equally, regulators are trying to catch up with the rapid changes and are trying to understand the impacts through sandbox experiments and running separate regulatory models. The pace is fast and presents challenges for the regulators. Solvency and policyholder protection remain paramount, but cybersecurity, data protection, artificial intelligence and the digital revolution make advancements every day. Where this will lead is not clear. But changes are happening and regulators must work to understand the impact and need to calibrate regulatory rules to keep up with the industry and encourage innovation.

Regulation must be transparent.

Too often, regulation is drafted in times of crisis or behind closed doors by regulators believing they know better how to protect policy holders and how to prevent abuse of the system. As we have said, getting it right matters. A strong and healthy industry is the best way to protect consumers and policy holders. Industry engagement is essential and acknowledging and actually incorporating industry’s views is critical. This is particularly true given the dramatic changes in the insurance sector and the need to adopt regulation to new economics, business practices and consumer needs and expectations

This is an excerpt from a report, the full text of which is available here.

How to Get Ahead of the Watchdogs

The compliance and ethics functions within insurance organizations face continued regulatory pressure. But, nowadays, they must also deal with new threat vectors that are shaping a higher-stakes global compliance environment. More and more, investigative journalists are analyzing big data to spot fraud as well as compliance violations. Third-party agencies are increasingly using technology to identify incidents and monitor corporate behavior. Enforcement agency whistleblower programs are motivating employees to speak out about perceived violations. And, rapidly escalating grassroots campaigns, such as the #metoo movement, are making strong corporate culture and rapid-response capabilities even more critical. When these watchdogs form the genesis of a complaint, social media channels and the round-the-clock news cycle can rapidly increase awareness of the incident – in some cases even before the company itself is aware.

Compliance functions need the agility to adjust to business changes and to the inevitable surprises inherent in a dynamic business climate. But, without a strong technological underpinning to help them operate efficiently in real time, it will be challenging, if not impossible, to get ahead of new threat sources and changing business dynamics. From dashboards for improved decision-making, to sophisticated tools for monitoring employee compliance, to training informed with data from compliance monitoring, technology-based capabilities are now cornerstones of effective compliance management. By using the best available tools and information to protect their organizations and to scan the horizon for new requirements, trends and risks, compliance functions can keep pace with their organizations’ changing compliance needs.

But as a group, insurance sector compliance functions have some work to do on the technology front. According to the PwC 2018 State of Compliance study, only 41% of insurance organizations use policy management technology within the compliance department (compared with 44% across industries and 54% in banking, for example). Just 47% use technology to monitor employees’ compliance with ethics and compliance-related policies and procedures (compared with 50% across industries and 52% in banking). While progress is being made, it lags that of certain other industries.

See also: How to Collaborate With Insurtechs  

However, our study identified 17% of insurance survey respondents as “Leaders,” where executives were very satisfied with the effectiveness of their organization’s compliance program. This is on par with other industries in the study. The study’s overall Leader group shares a common denominator: Leaders take a more comprehensive and current approach to compliance risk management as enabled by technology. Leaders differ substantially from their peers in many of the operational aspects of compliance risk management, including executing differently in four key ways.

Leaders invest in tech-enabled infrastructure to support a modern, data-driven compliance function. Technology helps organizations manage compliance in a dynamic and expansive risk universe. Leaders more often use data analytics tools, dashboards and continuous monitoring than their peers. More than half (54%) of Leaders in the study use data analysis tools, and nearly half have dashboards (49%) and engage in continuous compliance monitoring (48%). The effective use of cloud infrastructure, machine learning, advanced analytics and natural-language processors help organizations quickly analyze vast amounts of data and gain insights into business and customer behaviors, assess potential compliance issues and cost-effectively meet risk and regulatory challenges.

Leaders increase compliance-monitoring effectiveness through the use of technology and analytics. Analytics, together with automation technologies, make the continuous monitoring of employee compliance across many areas of the business far more feasible. Two-thirds (66%) of Leaders use technology to monitor employees’ compliance with ethics- and compliance-related policies and procedures. And they more often use technology to monitor specific risk categories, such as fraud, gifts and entertainment, privacy, social media and trade compliance. Leaders are also gleaning more benefits from technology use in monitoring efforts – compared with their less effective peers, they are more responsive and even proactive in mitigating compliance issues.

Leaders streamline policy management to increase responsiveness and boost policy and procedure effectiveness. Leaders take several steps to strengthen their policy management. They more often keep their codes of conduct, policies and procedures current and make them easily accessible across the organization. They also more often enable this streamlining through policy management technology, such as GRC tools, and measure the effectiveness of policies and procedures more comprehensively. Nearly two-thirds use technology to facilitate the policy management process.

Leaders take advantage of information and technology to provide targeted, engaging and up-to-date compliance training. Leaders’ compliance training and communications are more comprehensive and current. They are often using multiple sources of information to inform and target their training and are thinking creatively about new ways to digitally engage employees in training activities. Leaders’ approaches to training positively affect their organizations’ overall risk profile as they aim to minimize activities that potentially place the organization at higher risk.

See also: Guide for Insurtech Work With Carriers  

Effective compliance risk management must be grounded in strategy and business engagement. Establishing the right tone at the top, assessing compliance and ethics risks and building governance structures that provide high levels of confidence in regulatory matters are all critical to effective compliance leadership. But operational aspects of compliance are where the rubber meets the road. With multiple new, highly motivated watchdogs now providing their own forms of oversight, the case for strengthening compliance risk management through technology is strong. Technology is more critical than ever in building programs that boost compliance program value, better manage risks and drive cost-effective compliance.

The Sad State of Continuing Education

About 25 years ago, I attended an education committee meeting at the Southern Agents Conference in Atlanta. Continuing education (CE) had really just gotten started in some states. At this meeting, legendary insurance educator Bob Ross, of the Florida Big I, literally stood on his chair at the conference table and declared that mandatory CE would be the death of quality education. Has his prediction come true?

Four years ago, I posted the following on a LinkedIn discussion:

“A colleague related a recent experience to me last week. He went to one of the best known online insurance CE web sites and signed up for a course titled “Consumer Insurance.” He registered as a new user in the system, perused the course catalog, signed up for the course, skipped the course material, took the test, and earned 3 hours of CE credits. All in 16 minutes.

“He was also able to save the exam and email it to me (and, of course, anyone else taking the course). The test was loaded with vaguely worded questions and misspelled words and insurance terms (like “vessals” and “ordinance IN law” coverage). For some test questions, no right answer was listed or more than one answer was correct.

“In the spirit of one-upmanship, I told him about my experience 11 years ago when online CE was just getting started. I registered at a vendor’s web site and, like him, went straight to the test. I forget the exact total time required to register and take the 50-question test, but it was around a half hour I think and definitely less than an hour. The CE credit for this personal auto course? 25 HOURS. To quote the late Jack Paar, ‘I kid you not.’

“Afterward, I browsed the material, and it was full of general consumer-type information taken directly from the Insurance Information Institute. The hours of CE credit granted by the state DOI were based on a word count with complete disregard to the difficulty level.

“One thing I remember about this vendor was that it used what it called “Split Screen Technology.” What that meant was, while you were taking the test on one side of the screen, you could view the course content that went with that test question topic on the right side and browse for the answer to the question. Browsing for the answer was easy, given that the relevant information was highlighted.

“So where are we 11 years later? Apparently in the same boat, except that online insurance education is much more pervasive than it was then. You can get two years of CE credit for as little as $39.95. A great bargain if your interest is in regulatory compliance and not actually learning something that will benefit you, your agency and the consumers and businesses you serve….”

“Is there no accountability? Is there no desire to truly educate ourselves? Does anyone care? Is anyone listening?”

Flash forward to 2015….

An agent and friend I know – good agent, CE course instructor, upstanding guy – waited until the last minute to complete his biannual CE requirement last year. So he went online, found the course he wanted, signed up, went straight to the exam, and in 23 minutes had completed three hours of CE credits. As they say, the more things change, the more they stay the same. And, did I mention that the course was to comply with his state’s three-hour ETHICS requirement?

There is an online insurance forum with a discussion called, “Any Suggestions on Best Online CE Site?” It has comments such as:

“I use XXXXX.com. About $35 for 21 hours of credit. Takes a few hours (maybe two) to finish and is open book.”

My tongue-in-cheek response (recalling my agent friend’s experience a few months earlier) was, “I hope it wasn’t an ethics course!” The poster’s response:

“Huh? I guess you think each hour of CE should take an hour? Unless it’s a LIVE CE class… CE courses don’t take that long. I get unlimited CE from [provider’s name] for $39.95 per year… including a 16-hour Ethics CE course… that takes me about 15 minutes to complete. And, yes, they are open-book courses, too.”

On another discussion board, someone was touting a “Fast, Easy, and Affordable Continuing Education” website. No mention of the quality or relevance of the course material or whether there is any actual learning involved. The site proudly proclaims a passing ratio of “over 98%.” What would regulators do if the passing ratio of their licensing exams were more than 98%? I suspect they’d insist that the exams be made a little tougher. Is any exam a legitimate test of learning if the passing ratio approaches 100%? Then why do regulators allow online CE programs that take a half-hour to get 20 hours or more of CE credit and include exams with passing ratios near 100%? The web site in question has 91 reviews…NONE of them mention whether the reviewer actually learned anything.

(If you’re actually looking to learn, the best place to start looking is your own agent association, which has a vested interest in providing you with the best education possible.)

So what do you think? Am I just a grumpy old man? Should anything be done about the diploma mills that have proliferated? If so, what? If not, why not?

How to Spot and Avoid Your Next Crisis

Q: Can I identify my organization’s next crisis? If so, how?

A: Jim Satterfield– Undoubtedly, yes. Knowing what the next crisis might be is a way to think about planning and information. There are warning signs and indicators when we discuss human behavior. Understanding behaviors of concern and identifying them earlier in the process is imperative. It provides an idea of the frequency and severity of a situation.

If we can see those indicators, if we can identify those behaviors, then we can intervene before they become a problem. Sometimes, they are business or financial indicators; sometimes, it’s just human behavior.

On 9/11, I was EVP and chief operating officer of a public technology firm with employees in the States and around the world. When the first plane hit the first tower, we thought it could have been an accident. When the second plane hit the second tower, clearly not an accident. We called a meeting in our boardroom and, while sitting around the table, decided it was a day unlike any that we’ve ever seen.

Our management team decided it would be better to let everybody go home. I turned to our HR director and said, “Could you send a global email out to everybody in the company telling them they could just go home”? She went back to her desk, and she typed this message: “If you want to live, leave.”

The intended message was to be: “If you want to leave, leave.” Those are two entirely different messages. “If you want to live, leave.” “If you want to leave, leave.”

Thinking about your messages when you’re not under stress is very, very critical, and planning makes a difference.

Q: I already have a detailed and updated copy of our organization’s crisis plan. Do I need to have a digital copy, as well?

A: Jim Satterfield– Unless you’re planning to add a psychic on your crisis management team, it’s not going to do you any good to have an outdated or out-of-reach plan. Keeping your plans current and available is crucial. If you can’t get access to the right information at the right time, it’s not going to do you any good. “Oh, the plan’s back in the office, and I’m at home.”

Speed is quality. Getting the right answers to the right people at the right time becomes a critical element in every crisis.

Q: What should my organization’s key messages be to each stakeholder group for vulnerabilities and threats?

A: Jim Satterfield– What we’re going to say internally will be different than what we’ll say externally. Think about who your stakeholders are. If you’re in a business that’s heavily regulated, you have regulators as a stakeholder group. You have employees and investors, as well. If a school, you have parents, students and possibly church affiliation. You have various elements to be dealt with, and that makes a difference in approach.

Q: What resource can help with quick decision-making?

A: Jim Satterfield– What you do is list in one column things that could happen, things that could damage:

  • The facility
  • The employees
  • The data
  • The brand
  • The reputation

Across two more columns, we indicate what would qualify as a minor event and what is considered a crisis. You then include descriptive terms and circulate it to the entire company.

Immediately, when something comes up, refer to the matrix. If an employee is injured, but did not receive emergency treatment, it remains a minor event. If the employee had to have some medical attention, it rises to the next level. If an employee dies, that’s crisis. It’s at the highest level that management would want to be involved, so creating an event activation matrix is the fastest way to get that quick response with everyone on the same page at the same time.

Q: What are common mistakes people have made during a crisis?

A: Jim Satterfield– These are the five failures that we see over and over and over again in a disaster or crisis:

  • Failure to control critical supply chains
  • Failure to train employees for both work and home
  • Failure to identify and monitor all threats and risks
  • Failure to conduct exercises and update plan
  • Failure to develop crisis communications plans
  • About 70% of employees don’t know what they’re supposed to do in a disaster or a crisis. In addition, 95% don’t have a disaster plan at home. If something happens in your area, and you think your family is at risk, family wins. That’s why people don’t show up in a crisis, because they’re concerned about their family.

    We work on these failures through our Predict/Plan/Perform process. First, identify groups. Then conduct exercises and establish how you’re going to monitor and communicate. When you think about your individual plans, think about them in light of these groups. You need to build preparation in from all of these groups that could ultimately be a problem within the organization.

    Q: Are school students classified under workplace violence?

    A: Jim Satterfield– Yes, because it’s a workplace. The school is a workplace, yes.

    Q: Prevention is rare in organizations that have small staffs. Have you found organizations are willing to assign staff to conduct social media monitoring on their time?

    A: Jim Satterfield– They can, or you can use an outside service that will do it for you. This route is much more cost-effective. Why? Because that’s the specialist’s full-time job.

    Whatever your full-time job is, you’re good at that job. If you only do something every now and then, you’re not going to be as good, and you may miss an important signal or piece of information.

    We are finding organizations — both large and small — are conducting monitoring as a preventative measure, and we conduct such intelligence gathering for a number of clients.