Fun With Stats - Key Person Disability Planning

Let's start our Monday with some fun statistics...

The Brewers have a 5.6% chance of winning the World Series this year according to Las Vegas.  The Cubs have a 0% chance due to my unofficial odds-making.  They always manage to screw it up (Right Steve Bartman?).  3.3% of all births result in twins.  0.5% of the U.S. population has run at least one marathon.  8.5% of the people in the world own a car.  Less than 5% of the world’s population owns a computer.  You have a .02% chance of being struck by lightning in your lifetime.  .08% of high school football players will play professional football. 

Here’s two more: Just over 1 in 4 of today’s 20 year olds will become disabled 3 months or more before they retire.  1 of 8 workers will be disabled for five years or more during their working careers.

Being invincible, I’m more concerned about the Brewers winning the World Series this year.  I’ve already been a statistic with the twins, marathon, car, and computer.  Surprisingly enough, these are all very much less likely to happen than missing significant time at work.  A U.S. Social Security Administration study shows that 64% of wage earners think they have a 2% or less chance of being disabled during their working career.  Where do you fall? 

If you’re a business owner, think about who you can’t afford to lose for three months or more at a time and start there.  Is it you?  Your business partner(s)?  Shop foreman or office manager?  Chances are good that at least one of you will miss some serious time before you retire.  What have you done to protect your business from something like this from happening?  Aside from a disability, what if that person leaves the company to pursue another career or worse, death?  I’ll cover the latter two a different time.

Let’s consider maternity leave for a minute.  Everywhere I’ve worked, when we knew someone was close to maternity leave we had a well-defined plan in place to figure out who would split the workload, cover the phones, do some other quirky stuff, etc.  When that person would leave and be out for twelve weeks, we were a little swamped but not overwhelmed.  We had a well-prepared plan and a little cross-training before that person left, and that helped us get by until the maternity leave was over.  It also helped from a career development standpoint to learn more jobs.

While we all get a bit of a heads up before someone has a baby, let’s think about what we did to prepare for that person’s absence.  It was nothing overwhelming or time consuming, but it was very effective in helping us keep our service standards while that person was gone.  Now’s the time to ask yourself what sort of cross-training or plan do you have in place to cover the absence of some of your other key employees or yourself.  Are there jobs so important and difficult that cross-training is not an option, or are you not large enough to assume that sort of void?  For these types of situations, a key-person disability insurance policy might be a good investment for you.  It’s relatively inexpensive, and it can help you pay bills, cover overhead, and make up for lost revenue as you wait for that person to return or need to hire and train a replacement.  I’ve worked with businesses that have lost a key employee and have seen the results.  It can take several years to get things back to the old normal if you even manage to survive.

I’m not a doom and gloom type of a guy, but I am realistic.  Cross-training is the most inexpensive way to manage an unexpected leave of absence.  As a bonus, it can also prepare employees for future leadership positions.  If cross-training in your situation doesn’t make sense, it’s probably time to think about how key-person disability insurance can help keep you afloat while you manage to find a temporary or permanent solution. 

I’ve been on this earth for 28 years, and I still have yet to see my Brewers win a World Series.  Our odds are 18/1 this year.  Your odds of you or an employee being disabled are much higher than that.  I can cheer until my face turns blue, but I can’t affect the outcome.  Lucky for you, you can.  If you haven’t already, today is a good day to start planning for the future.  And if you’re like me, be happy – you’re not a Cubs fan J

(Disability statistics are from: http://www.disabilitycanhappen.org/chances_disability/disability_stats.asp.  For those of you English majors out there screaming that I didn’t cite my source correctly, my apologies

Andy Bertram CPCU, ARM-E

Risk Advisor

 

Phone: 651-800-6173

 

abertram@cobrown.com

   

The Monday Morning Quarterback: Product Recall Coverage

Have you ever said or done anything that you instantly wanted to take back?  Maybe you got talked into staying for “just one more round” which we all know never ends at just one.  Perhaps you were trying to distract someone in a basketball game and did something embarrassing?  Said something you wish you hadn’t at a work golf outing?  Or if you’re like me, you walked into a business and asked for “Bill” only to find out that “Bill” passed a year and a half ago.  That wasn’t the first time that one’s happened to me, nor will it be the last.  Actually, all of these things have happened to me in the last few years.

If you answered “no” to that question, you’re lying to yourself or you’re Chuck Norris.  Of course we’ve all done things at least once in our life that we wish we hadn’t.  It might not be something we regret today, but it can make you feel pretty foolish for awhile.  While we may not be able to take these things back in our personal life, there is a silver bullet available that gives some businesses the ability to do this at a minimal cost.

Product recall coverage is a beautiful thing if you are a manufacturer.  For our sake, let’s say you are a manufacturer of an incredible device that doubles the fuel economy of a car while at the same time boosting its horsepower.  It’s such a great product that my Chevy Impala now sprints like a Ferrari while getting the fuel economy of one of those ridiculous Smart cars.  There’s one problem with this miracle product – it has a tendency to cause cars to explode due to an electrical short in this new product.  Luckily for you, this problem was detected early, but because it was such a hot item you’ve already sold over 500,000 units.  Or in the case of GM, a real world example, you saved a few pennies on an ignition switch that has caused irreparable damage to many families.

Instant regret right?  In our example, had you spent another $.10 on the better electrical circuit, you wouldn’t have had this issue.  In hindsight, that extra $.10 is looking like quote the bargain right now.  Luckily for you, your broker had done a nice job of helping you plan for something like this.  You conduct mock recalls throughout the year and also have a solid recall plan in place.  Additionally, not only has he helped you put together a PR recovery plan to handle the bad press, but he also suggested you purchase product recall coverage.

What does product recall coverage protect you against?  While coverage depends on the carrier, it usually includes costs such as customer notification, shipping costs and disposal costs. Coverage generally applies to the firm itself, though additional coverage can be purchased to cover the costs of third parties.  Essentially, it covers those instant regrets that you and I only wish we could for ourselves. 

From personal experience as an underwriter, I can tell you that these costs add up real fast.  I’ve seen a small manufacturer rack up $750,000 in recall expenses in one week.  If you’re a manufacturer and have never discussed this with your broker, it’s time to find a new one.  You should at least know this option is available so you can make a conscious decision as to whether you want it for your business.
 

We’ve all said and done things we wished we hadn’t.  So the next time you do something truly embarrassing, just think about how great it would be to be a manufacturer.

 

Andy Bertram CPCU, ARM-E

Risk Advisor

C.O. Brown

Phone: 651-800-6173

Fax: 651-388-8443

www.cobrown.com

abertram@cobrown.com

 



 

 

Beating the House – Betting on Yourself

Winning is one of the best feelings in the world.  Whether it’s a sports bet, at the casino, or beating your competition, it always puts a smile on my face.  Because I love to win, I avoid the casinos.  They can smell my money like a shark smells blood.  During my first trip to a casino, I got cleaned out playing blackjack after only making it through five hands.  Being broke, I decided to go watch a friend who was playing slot machines.  He had finally broken even, and I tried my best to convince him to quit while he was ahead.  It’s a good thing he didn’t listen because he walked away with about $700 that night.  True story.  That was my first and last time at a casino.  For the fishermen out there, I am a human cold front.

The reason I don’t like the casinos is not because I’m a terrible gambler (I am).  It has more to do with the fact that there aren’t a whole lot of things I can do to increase my chances of winning.  It’s like betting on the Broncos to cover a 2.5 point spread in the Super Bowl – you have no way to affect the outcome of the game.  You can’t get out there and play the shutdown corner on Doug Baldwin (not that it would help in your case) to help keep Seattle out of the end zone.  You’re completely relying on someone or something that you have absolutely no control over. 

Here comes a much safer bet – you, your business, your drive and passion to succeed in whatever you are doing.  It’s a great way to gain an edge on your competition.  Congratulations!  Either by choice or by necessity, you’re one of about 10% of Americans who had the audacity to start their own business.  Venturing out on your own was a gamble in its own right, but a calculated risk for sure considering you can affect the outcome. 

You cannot control all the factors that will affect the success of your business.  What you can control is your greatest asset – you.  Your hard work, skill, dedication and drive all are going to play an integral part of your business’s success.  As such, you have probably planned or have strategic actions you are taking each day to help improve your odds.

Gambling has a place in risk management as well.  There is such a thing as “over-insurance”.  I’d describe it as buying coverage for anything and everything you can think of while at the same time assuming very little risk.  While your agent or broker would probably love you for purchasing all of this insurance, there are plenty of risks you would be better off retaining yourself. 

By assuming some of the risk, several things are likely to happen: 1) You’ll be more proactive in risk management.  Either through preventative maintenance, training, or strategic planning, your additional buy-in will help decrease the chance of certain losses from occurring.  2) Your insurance carrier’s underwriter is going to appreciate this.  Knowing you’ve assumed more of the risk, he or she is likely to cut you some slack on the premium.  3) You’ll find these actions will cross into other areas, i.e. you’ve taken steps to prevent auto accidents by implementing driver training, and at the same time you are reducing workers compensation claims because the employees won’t be getting injured in these accidents.  4) By assuming more risks, the insurance company is paying less towards claims, and as a result you are more likely to see your premiums decrease.

Insurance at its core is meant for catastrophic risks.  If the risk is something that would put you out of business or create a severe setback, it’s probably one that you should buy coverage for.  These will be different for every business, so it’s important to know where you stand and what you can afford to do.  Remember that by just taking on a little risk yourself, you can realize some significant cost savings that you can reinvest in other areas of your business. 

Betting on yourself can be a great way to save money and help you gain an edge on your competition.

Andy Bertram CPCU, ARM-E
Risk Advisor
620 Main St
Red Wing, MN 55066
Phone: 651-800-6173
Fax: 651-388-8443

www.cobrown.com

Potty Training (sort of) Your Employees - Implementing a Culture of Safety

Anyone who has or has ever had one or more nose miners around the house can understand how difficult the potty training war can be.  For those of you who pulled it off without nearly going mad, I envy you.  One of the single greatest things that has ever happened to me, minus being born and meeting my wife Heather was getting our kids out of diapers. 

Having twins can have its challenges.  My hope was to drum up a competition between the two and get them trained in less than a week.  With no experience around toddlers much less as a parent, this seemed like a brilliant solution.  Our first attempt got off to a great start.  Jack was just about ready, but Hunter could not have cared less.  The problem was that every time Jack would leave for the bathroom, Hunter would steal his toys.  To a toddler, this is basically an end of the world scenario, and so we were back to square one again.  While my ego took a hit, we kept working at it.  It took another ¾ of a year, but we eventually got the job done.  Halleluiah!  Hello extra $$$ each month, goodbye diapers.

Changing a culture of safety in business is a lot like potty training.   It isn’t something that will happen overnight, and it's going to test your will and patience from time to time.  You’re going to get pushback.  You’re going to get people kicking and screaming because it’s a lot easier to do things the old way instead of the new and improved way.  I believe most people are naturally inclined to avoid change, and the older we get the more stubborn we often get as well.  As a result, it’s going to take some time.

In order to get people to change, you have to understand two things: 1) your motivation and end goal, and 2) what makes them tick.  With us, our motivation was saving time and money.  For the boys, we needed to find out what would motivate them to change their lifestyle.  It took a few months and several different attempts, but we eventually figured it out.  Through trial and error, we found that they were motivated not to get their new train underwear wet.  It was as simple as that, but we had to try several things before we figured it out.  Bottom line: we never gave up.

Implementing a culture of safety can work the same way.  While you can appreciate the potential workers compensation cost savings, improved production, and reduced accident and lost time claims, your employees aren’t going to look at it the same way.  Finding their motivation can take some time and will be different for each person and/or company.  Maybe not worrying about getting injured at work will be enough.  Perhaps it’s an extra vacation day for hitting safety or no lost time benchmarks.  It could be an incentive program where they are rewarded with gift cards or company credits.  Or it’s an inter-company competitive campaign.  Whatever it may be, it’ll be a lot easier to create some buy-in once you figure out what makes them tick.

Just like with potty training, a complete culture change won’t happen overnight.  It may be frustrating at times, and you may take one step forward and two steps back from time to time.  Just keep reminding yourself why you are doing it, and don’t give up.  If you can help your employees align their goals with yours, you can work towards the same end and make life a lot easier. 

Potty training (sort of) your employees can take a little time and commitment, but it can pay big dividends in the end if you stick with it.

Andy Bertram CPCU, ARM-E
Risk Advisor
620 Main St
Red Wing, MN 55066
Phone: 651-800-6173
Fax: 651-388-8443

www.cobrown.com

The Best Insurance Connection Ever: Hunting

It’s the opening morning of bow season, and a few weeks back, your buddy saw a monster buck on your land while clearing brush.  You’ve got on your new ScentBlocker® jacket, Tree Spider® harness, you’re covered from head to toe in cover scent, and you’re out in the woods with your Mathews Solocam bow that is spot on from 50 yards.  And you’re waiting.  And waiting.  Hours go by, and before you know it night falls and you do the same thing again the next day.  Thanks to modern technology, you are completely invisible to everything in the woods, but again you see nothing.  Every weekend, every night, same thing, same result.

What’s the problem?  You know this deer is out there, and you know it wouldn’t stand a chance if it walked anywhere near your stand.  It turns out that this particular deer spends his time on the complete other side of the woods, has plenty of does around, and has distinct patterns he follows every day meaning he’ll never come remotely close to you.  While you have the best gear and equipment available, you’ll never get a chance to actually use it because you’ve ignored one of the most important parts about hunting – scouting.  You can’t get close to a deer if it never walks by your stand.  Had you spent some time in the woods pre-season, you could have set yourself up for future bragging rights.

What in the world does hunting have to do with insurance or risk management you might ask?  Here we go…

By now you’re likely very well-versed in how to protect your business from Hazard Risks which you probably review with your broker yearly.  Whether it’s the sprinkler system in the production area, the GPS in the vehicles, safety training, formal safety policy and program, etc., you’ve got it covered.  You also bought a Cadillac insurance policy to protect yourself from anything you and your broker could gin up during hypothetical discussions. 

But when was the last time you reviewed your Strategic Risks?  Have you spent time mapping out your long term business plan?  How do you get where you want to go?  If something should happen to one or more of your owners or employees, what is your succession plan?  Will you have the access to capital you need to grow, merge, or acquire businesses as part of your long term planning?  How do you develop new leaders?  Etc.?

Or how about your Business Risks?  How often do you review the productivity of your employees?  You’re paying them a lot of money between payroll and benefits, so how are you tracking the return on your human capital investment?  How about compliance with local and federal laws, regulations, etc?  What’s your plan for profitable growth?  Etc.?

Risk management, like hunting, requires a lot of preparation and planning to be successful.  You can have the best program in the world to protect yourself from Hazard Risks, but if you ignore the other two areas you’re setting yourself up for failure.  What’s more likely to happen – your building burning down or losing a key employee to a competitor?  A catastrophic liability claim or losing market share because your products or services have become obsolete?  What would these things do to your business?  You buy an insurance policy to protect yourself from the building and liability, but what have you done to protect yourself from the others?

The entire process is called Enterprise Risk Management.  Chances are if your business isn’t large enough to hire an employee to do this, you may be ignoring some of these key areas.  You pay a lot for your insurance.  If your broker is truly a risk management professional, shouldn’t he/she be helping you with the process?

No one goes into business to fail.  Perhaps it’s time to do some scouting yourself!

Andy Bertram CPCU, ARM-E
Risk Advisor
620 Main St
Red Wing, MN 55066
Phone: 651-800-6173
Fax: 651-388-8443

www.cobrown.com

You Get What You Pay For

We purchased our house last summer, and along with it, I “voluntarily” signed up for a long list of projects.  Some I knew about, many of them apparently were put in the very fine print of our marriage contract.  Being a handy guy I figured I could knock ‘em down one by one before the end of the year.  To add to the fun, we also had our first homeowners claim when our toilet overflowed for the better part of an hour.  Props to Heather for knowing where to find the shutoff valve.

After our place dried out, my “to do” list got a lot longer.  I figured could save $100 and put in a new toilet by myself.  With no prior experience, a little help from YouTube and Terry’s Hardware, I went to work and was feeling pretty good about myself.  Three days later, the floor around the toilet was like a wet sponge.  I knew it was time to call the experts before I’d catch more hell for my mistake.

I may have saved $100 up front on plumbing, but it wound up costing a lot more money and time in the long run.  The same thing can be true with insurance.  Everyone feels good about saving a few bucks, especially from the “evil” insurance carriers.  In fact many carriers themselves have managed to commoditize the industry by blasting you with ads about how cheap their insurance is.  I think a lot of people assume it's as complicated as picking up milk from the grocery store - do I want name brand, store brand, or the organic thing.  At the end of the day they're all the same - white, delicious, and liquid.  Back to insurance - as long as you don’t have a claim, everyone is happy – you, the insurance company, and your agent.  The problem is that once you do have an issue, that cheap quote could end up costing you a lot more in the end. 

Maybe it was cheap because 1) your claims adjuster is MIA when you need him; 2) your policy didn’t cover what you expected it to, and you’re left holding the bag; 3) your agent left out some important parts of the policy or it is not programmed correctly (get ready for a not-so-fun surprise year-end audit); or maybe 4) the carrier is buying market share and doesn’t understand your business.  If the carrier is buying market share, see #2.  And again if #4 is true, prepare for a bait and switch or the carrier leaving the market altogether in a few years because they’ve underpriced the market.  And then you’re back to square one again. 

Cheaper isn’t always better.  Saving a few bucks up front could wind up costing you way more than you had bargained for.  Whether it’s unexpected self-insured losses, wasted time, shopping for insurance every year, or dealing with other headaches, at the end of the day it doesn’t end up being a better deal.  I learned my lesson with plumbing the hard way.  Hopefully you won’t have to with your insurance. 

And for those of you wondering, I couldn’t have been happier with how our homeowners claim was handled.  Thank you West Bend Mutual for doing an awesome job!

 Next up… picking a broker.  If you have any topics you’d like me to cover, I’m always open to suggestions.  Stay tuned!

Andy Bertram CPCU, ARM-E
Risk Advisor
620 Main St
Red Wing, MN 55066
Phone: 651-800-6173
Fax: 651-388-8443

www.cobrown.com

Not Just for Old Men With Gray Hair

Let me at first be clear: I have never written a blog, so when I started this blog I wasn't exactly sure where to start.  I'm a younger (not new) insurance professional, but when you compare me to the rest of our industry, I may as well have just come home from the hospital with blue socks.  I'm half the age of a typical insurance broker, underwriter, claims adjuster, you name it.  At 28 years old, I'm 7 years in with life to go.  That would sound like a bad prison sentence to most folks, so it's a good thing I love what I do. 

Our industry is filled with folks well on their way to the golden years.  Most people in our generation's eyes glass over when you bring up insurance, including my own at a boring seminar topic that I've heard a million times.  It's sort of like those Geico commercials when I'm at some of these seminars hearing the same thing.  I feel as if I'm in another episode of Groundhogs Day every time I hear those commercials  We get it, you can turn around a fast quote.  It's not always the cheapest but it's fast.  Thank you for making insurance a commodity where everyone expects that cheaper and faster is better.  That was sarcastic in case you didn't catch that.

Going back to my original point now.  My generation is at the point where they are starting to take over mom and dad's business, venture out on their own, or buy an existing company.  Usually they don't know a thing or care a whole lot about risk management or insurance because let's face it, our industry is good at putting people to sleep.  As they ask for references from people they know, the business's current broker, agents that walk through their front door, you name it, these new millennial business owners realize that their insurance guy just bought his first computer five years ago.  To some of these gray haired folks, Facebook is as risky endeavor where people are going to try and steal all their personal information to be used against them.  A Tweet may be something they heard in a city park one time from the birds.  And a blog?  What's a blog?

So all you Millennials and anyone else for that matter, here's your big chance.  If you have any insurance or risk management related questions, please send them my way.  I'm writing this to keep you informed on what really matters in the world of insurance and risk management here in the 21st century, not just what you see on TV.  I am going to make a point of posting a new blog at least twice a week, and if the weather is really awful outside, more.  Seeing as I live in Minnesota, there's a very good chance that will happen.

Look for my next post later this week: "You Get What You Pay For."

Andy Bertram