Find Insurance Online

By Rick Vassar CPCU ARM

Author of the #1 Insurance Liability Book on Amazon.com Hide! Here Comes the Insurance Guy


CHICAGO, Dec 17, 2008 (BUSINESS WIRE) -- Fitch Ratings downgrades XL Capital Ltd (XL) and its property/casualty (re)insurance subsidiaries, including the Issuer Default Rating (IDR) for XL to ’BBB+’ from ’A’, and the Insurer Financial Strength (IFS) rating of its core operating companies to ’A’ from ’A+’. (See the full list below.) The ratings remain on Rating Watch Negative.

The rating action follows XL’s announcement that the company anticipates the estimated mark-to-market decline in its investment portfolio through November 2008 to be largely in line with the $1.1 billion of unrealized losses, other than temporary impairments and realized losses on sales the company incurred in the third quarter of 2008 and the $200 to $220 million in net investment fund affiliate losses from its alternative investment portfolio for the fourth quarter of 2008.

Rick Vassar’s insurance/Financial Interpretation – “Sorry, man, my bad…”

NEW YORK--Dec. 17, 2008--American International Group, Inc. (AIG) has issued the following statement regarding an article published today by Bloomberg:

"AIG reports all its derivatives at fair value in accordance with US GAAP including AIGFP’s credit derivative portfolios. In accordance with US GAAP, in its determination of fair value for its credit derivatives, AIG considers all available information including but not limited to market available data, dealer provided prices, prices used for collateral posting and recent trades including early terminations initiated by counterparties. In evaluating fair value for its Regulatory Capital portfolio, AIG also considers factors relating to the individual underlying portfolios including, but not limited to, asset type and seasoning, default history, loss history and attachment point.

"AIG has clearly described its valuation approach including key assumptions used for AIGFP’s super senior credit default swap portfolio in its Form 10-Q for the quarter ended September 30, 2008."


Rick Vassar’s Insurance/Financial Interpretation:

“Face it. You [screwed] up! You trusted us.”

-Eric ‘Otter’ Stratton from the motion picture Animal House (1978)



I have been asked on numerous occasions in the past few months how this could happen to a big insurance company like AIG.

Why are they investing money in sub-prime mortgages?

How could they not see this coming?

You see, the general public believes that insurance is quite a simple process. You charge premiums, you pay claims, and you keep the money that’s left over.

It’s sort of like that, except that there’s one component left out. The insurance companies charge premium, put some of it aside to pay claims, and invest the rest. The insurance industry as a whole loses money on the spread of premium to losses, but makes it up handsomely on the investment returns. The industry has been doing this for hundreds of years.

So what’s the problem, Rick?

The problem was outlined in my book Hide! Here Comes the Insurance Guy in early 2006:

“I believe there was a watershed decision made in 1999 that should have put the debate of the hard market to rest. In that year, Congress passed the Financial Services Modernization (Gramm-Leach-Bliley) Act. This act allowed, for the first time, banks to offer insurance products and for insurers to offer banking services through holding companies. This created a synergy between the two industries which allowed both to tap into their customer bases and mine business from the other industry. Banks and insurance companies could offer their clients a one-stop alternative for both insurance and banking.

The result was an increase in competition in the marketplace, which led to consolidation of companies that were too weak to compete in the more dynamic market. The increased competition increased supply for a fairly stable demand, reducing the prices in the marketplace. The increased competition also caused some weaker insurers to lower their qualifications for coverage, which weakened their overall book of business and made them susceptible to the vagaries of the free market. At the same time, it provided a need for coverage in the secondary market that was not being fulfilled at a reasonable price.”

In other words, instead of insurers going to the bank to invest their money, they became the bank. Insurers found that by going to themselves to invest their money to be much easier and much more profitable.

I mean, who is going to ask questions of you if you are borrowing from you.

Sarbanes-Oxley only expanded the problem, because the transactions were being reported. No one understood the investments, but they were being reported. And don’t worry, it’s mostly our money.

Then, the bottom falls out, and the bank turns back into an insurance company and tells us that they don’t know what these swaps and stuff are all about, because this isn’t our core area of expertise.

Exactly.

One needs to look only at the insurance industry’s combined ratio, which is the percentage of each premium dollar a property/casualty insurer spends on claims and expenses. The industry average has been hovering around 102%, which means for every $100 collected in premium, $102 is paid out in claims and expenses.

The combined ratio is conservatively estimated to be around 104% in 2008, with some experts saying that it could be as high as 108%.

So, what has this taught us?

Insurers began to rely on investment income to offset poor premium pricing and underwriting decisions in reaction to increased competition brought about after Gramm-Leach-Bliley. Insurers lowered qualifications to bring in more income to invest. Once claims cost began to rise due to poor underwriting, there was more pressure on the investment side to make up the difference.
The pressure for increased investment income led to lower standards in the underwriting of investments. The greater the risk, the greater the return, unless the bottom falls out
If there is transparency in financial transactions that no one understands, are they really transparent? SarBox gives the impression of accountability without accountability, which is okay, unless the bottom falls out.

It makes me chuckle to hear insurers tell me that the insurers are actually in good shape. My question is: How good would they be if that $100 billion or so didn’t come to the rescue? The insurance subsidiaries are being kept alive to sell off from the banks – I mean holding companies.

Let’s go back to banks being banks and insurers selling insurance. When they’re apart, they work pretty well. When they got together, it was real good for awhile. Premiums came down, insurance was available, investments were plentiful. When the bottom fell out, the fall was swift and severe, and there was no place to go.

Too good to be true is all well and good, unless the bottom falls out.

Hide! Here Comes the Insurance Guy takes a radically different approach to explaining risk management and business insurance. Hide! explains the insurance process, indentifies the players are and simplifies the terminology, using humor to make a mostly unpalatable subject easier to digest.

Today, the book is both the number one (paperback) and the number two (hardcover) bestsellers on the Amazon.com insurance liability book list. The paperback is also #2 on Amazon.com in the risk management category.

"It's exciting", says Vassar, "even those who are insurance novices learn a lot, and I'm amazed at how many folks find the book to be a joy to read.

"I mean, think about it; a funny yet authoritative book on insurance and risk management, two disciplines not known for their senses of humor. And the fact that these strategies can save them so much money once they crack the code is incredible."

Rick Vassar CPCU, ARM, AIS, ARM-P is the principal in The Vassar Group, LLC and Vice President of Risk Management for Valcourt Building Services.

The Vassar Group specializes in rent-a-risk manager services for emerging companies, and Mr. Vassar also conducts workshops on the risk management and insurance process. These workshops are eligible for up to eight insurance CE credits

Both books are available through the RIMS (Risk and Insurance Management Society) bookstore www.rims.org

The Envelope, please … the Top Risk Management Book of the Year …

By Kevin M. Quinley CPCU, ARM AIC, AIM, ARe

"Olly olly oxen free! Come out, come out, wherever you are!"
Reviewed by Kevin Quinley

Hide! Here Comes the Insurance Guy by Rick Vassar, iUniverse, 2006, 196 pp., $17.95

Somebody once said that a New York accent was the most effective form of birth control known to man. Others might nominate as an effective contraceptive any tendency to talk about insurance… or risk management, for that matter.

Author, risk manager and consultant Rick Vassar has penned an illuminating primer on insurance and risk management in his book, "Hide! Here Comes the Insurance Guy." The title is a take-off on the notion that, for most people, meeting with an insurance person or discussing coverage is as much fun as a root canal or proctological exam. The author – a CPCU and an ARM -- lives a dual existence. By day, he is a mild-mannered risk manager for a company in the Washington D.C. area. In his spare time, he writes and consults on risk management topics (check out http://www.vassargroup.com ). Vassar tries (successfully) to cushion the blow and counter the stereotype by presenting insurance and risk management principles in a straightforward way that can profit any business professional.

Part of his theme is that most companies have risks that are overseen by someone whose title is not "Risk Manager." Most companies do not have risk managers; you need to have a pretty big insurance budget to justify that as a full-time position. No company vies to be paying so much in insurance premium that they spotlight the problem by having a full-time individual to tend to it. Nevertheless, all companies have risks and need to manage it. For these risk managers without title or formal portfolio, Vassar's book – perhaps the best risk management book of the year even without that phrase in the title -- is an indispensable primer and guide. Reading and heeding his advice will save businesses much money, frustration and Excedrin-consumption.

Vassar divides his book into three main sections. Part I discusses business strategies to even the playing field between policyholders and insurance companies. Part II walks through the major basic forms of insurance coverage for most any business. Part III rounds out with a useful; glossary and index.

Vassar's target audience is likely not the Fortune 500 or Fortune 1000 risk pro who attends the annual RIMS Conference. There is no highfalutin discussion of enterprise risk management or views from 50,000 feet above ground level. If you are seeking information on Sarbanes-Oxley compliance or the risk management implications of global warming, look elsewhere. The storefront risk manager, though, will find a wellspring of effective tips and tricks between these covers.

Vassar's focus is practical and hands-on, leavened with a self-deprecating sense of humor. Did I say "humor"? Yes, though few comedy clubs are likely to feature an Open Mike night for insurance reps, Vassar takes the human antipathy toward insurance and turns it into a source of mirth and amusement. (Some end-of-chapter checklists would have been a nice addition to the text, but this is a minor quibble.)

So run -- but don't hide - and get your copy of "Hide! Here Comes the Insurance Guy." Get out from under the desk. Leave the closet and face your fears. Insurance and risk management may not be fun (though they are occasionally funny), but Rick Vassar has come as close to anyone in blending sharp wit with moneysaving risk management insights.

Kevin Quinley CPCU ARM is the author of over 500 published articles and nine books. His articles have appeared in publications including Business Insurance, The National Underwriter, Risk Management, Occupational Safety & Health, Best's Review, CPCU Journal, Insurance Settlement Journal, The Risk Report and For the Defense. He is the author of Time Management for Claim Professionals, Claim Management, The Quality Plan, Litigation Management and Winning Strategies for Negotiating Claims and Managing Product Liability Risks. His seventh book, Bulletproofing Your Medical Practice: Risk Management Strategies that Work, was published in October of 2000. His eighth book, Well-Adjusted: 185 Career Tips for Adjuster Success was published in mid-2001. The ninth book – coauthored with Don Schmidt -- Business at Risk: Risk Managing the Terrorist Threat was published in 2002.

Posted on August 30, 2007

Blogcritics.org reviewer MaryAnna Clemons gave high marks to Rick Vassar's Hide! Here Comes the Insurance Guy "I would not be surprised to find this book as required reading in future business courses in colleges throughout the U.S...I tend to shy away from self-published work - I'm glad I did not in this case...Hide! Here Comes The Insurance Guy: A Practical Guide to Understanding Business Insurance and Risk Management

By Rick Vassar CPCU ARM

This valuable and practical resource will help risk managers and businesses alike improve and control insurance costs, potentially saving your company millions of dollars.

Bulk Discounts Now Available - Quick Turnaround...contact us @ info@vassargroup.com

"Part two of the book is worth the cover price alone..."

by MaryAnna Clemons

Rick Vassar has found a niche subject (business risk insurance) that was lacking in coverage, so he wrote the book on it. And he did a great job doing it. The book, Hide, Here Comes the Insurance Guy; A Practical Guide to Understanding Business Insurance and Risk Management, is a job well done...

We all have to buy insurance for our cars, our homes, even our lives. But business insurance is a totally different animal. If you run a business, you have to have insurance. It's that simple.

Rick spells out what that insurance is, why you need it and why you'll be sorry if you don't have it. He has demystified more than a few insurance terms, opened up the world of risk (and the risk is all yours without insurance) and given compelling case scenarios to show what can happen without insurance.

If I had to pick on something to critique, I'd say that some of his headlines don't seem to match his later words, for example "Why people hate insurance" is the headline and then the anecdote that follows is about algebra. I would argue that people hate insurance because they pay and pay and pay and pay, and then finally, they submit a claim and they get hassled and hassled and hassled, until they finally settle for less than they should be getting from an insurance company. To me, that's why people hate insurance.

I think, though, that Rick was tying Algebra — the subject everyone thinks they'll never need --- into insurance, because at some point in life you'll need both. That is a pretty picky critique on my part, because nothing is perfect.

Back to the good stuff, I really like the way Rick has broken it down for you on the ins and outs of the insurance game. For one, he tells you to get more than one quote - at first that seems like common sense, but when was the last time you got a quote?

I had to think about it and for my car insurance, it's been at least four years. How would I know if I'm getting the best rate if I haven't bothered to shop around in four years? Nice reminder to me.

The same applies for business insurance and going through a broker. The broker is in business for himself or his company, not you. You are the payee and if you aren't paying, they don't make money, which is just part of the reason your insurance rates tend to go up every year, instead of down.

The book breaks down the claims process, defines your risk criteria, gives you the difference between self-insurance and no-insurance (personal alternative risk financing), brokers, lawyers and more.
When you are done reading this book you are going to understand:
The language of insurance
The insurance players who want your money
How to develop a sound insurance strategy
How to invest your time and efforts regarding insurance
And whether you are properly insured or not

Part two of the book is worth the cover price alone: Insurance 101. In this section Rick breaks down the different insurance policies, from cars to homes to worker's compensation: what is covered, what isn't, what you can expect from your insurance, time periods, and more.

Worker's Compensation 101: worker's compensation is mandatory in all states, but Rick explains that small businesses, based on the number of employees, can file for exemptions. He then goes on to explain why you may not want to do that. After all, even if you have two employees, if both of those employees get hurt, you aren't covered (let the lawsuits begin). Even if you think that your cousin Fred would never sue you, or that he won't get hurt because he's super-athletic, think again. Accidents (and fraud) do happen, even with friends and family.

Rick's enduring message through the whole book (174 pages, including Index) is to protect yourself and your business with insurance, while protecting your pocketbook from the insurance man. It's a great book and I'm glad I have it on my business reference shelf.

Since the book is published by iUniverse, I'll take moment to point out that it's very well edited. The book has a great binding that I've been bending, pulling and adjusting on and it's stuck together wonderfully. I would not be surprised to find this book as required reading in future business courses in colleges throughout the U.S. and for new insurance agents to give to their clients (smart marketing in action: educate the customer). The layout is professional and easy on the eyes.

As an avid book reader and buyer, I tend to shy away from self-published work - I'm glad I did not in this case. It's a well done book that hands you information to make your life easier.

http://blogcritics.org/archives/2007/08/22/185635.php


MaryAnna Clemons is a freelance journalist based out of Colorado Springs, Colo., with three children, five horses, five cats, five dogs and one husband. Writing about removing chemicals from our daily lives, the dangers of aspartame and vaccines, as well as book reviews, she is continually trying to cram as much writing into her day as she can. More information can be found @ www.maryannaclemons.com.

By Kay T. Vassar

"Mark, can you pass me the ham?" Mrs. Tippett requested at dinner.

"No." Mark replied simply, and just kept eating.

"Mark honey why won’t you pass me the ham?"

"Because it’s not nice to touch a pig unless it’s alive."

“Then just touch the plate." Mrs. Tippett said, sounding kind of annoyed.

"I don’t even want to look at it!" Apparently, Jake, Mark’s brother, had been totally tuned out of the conversation because right when Mark said that, Josh picked up a piece of ham and ate it.

"HOW DARE YOU?!" he yelled at Jake.

"What?" Jake yelled back at him.

"You know that ham is made out of pigs! And you just ate ham!"

"Yeah, so?"

"Pigs are people, too!"

Mark got up, shaking the table. "How much better would the world be, if we didn’t eat animals? Take this paper, you could benefit from reading it!" He slammed it down on the table and walked away.

Jake picked up the paper, and read the title out loud:

The theory of PETA - Eat people, not animals.

Mr. Tippett, Jake and Mark’s dad, was laughing along with Jake. Mrs. Tippett gave both of them "the look."

Mr. Tippett stopped laughing, cleared his throat, and said, " Heh-hem, well, uh, Jake Tippett, you should respect your brother’s eagerness to, uh, help the society, and to, um, make the world a better place, one pig at a time." He said that in his deepest possible voice, trying to keep himself from laughing.

In his room, Mark had put up stickers that said, "EAT PEOPLE, NOT ANIMALS" like it said on the paper. That day, PETA had come to Mark’s class, and told them that eating animals was wrong, so Mark got really into it. He was sitting in his room, writing a letter to his family saying how he was running away to join PETA, and how he was "disgusted" with the things that they ate.

He set the letter on his nightstand, and walked out the door, because he had a door in his room. He walked next door to his friend Josh’s house whose parents were a part of PETA, and he decided to stay there until his family changed their minds about what they eat.

When Mark got to the house, he knocked on the door. Melissa, Josh’s older sister, answered the door. The family was a hippie family, and they still lived in the 70’s.

"Like heeey little mannn." she said in a relaxed, laid-back voice. "Come innn, we’re like about to do some yogaaa."

Mark looked at her kind of weird and answered,"Yeah, is uh, Josh there?"

"Like one second maaan." She went behind the door, as Mark heard Josh’s parents talking.

"Meeeel, like whos at the doorrrr?" Josh’s mom said.

"It’s the little man next door like totally lookin’ for Josh." She popped out in front of the door again, and told Mark, "He’s comin’ lil’ mannn."

Then behind the door, Mark heard, "JOOOOOOSH!"

"WHAT!?"

"YOUR FRIEND’S HERE!!!!"

She popped out in front of the door again, said "Like, come on innnn."

Mark replied, "Um, like, thanks."

He took a step inside the door, and there were posters of salads and animals up on the walls. One of the posters said, "Celery is your friend" under a big piece of smiling celery.


"Hi Mark." Josh said coming down the stairs. His dad came out of the kitchen with his hair in a ponytail, and his big sunglasses on, holding his guitar.

" Liiike hey lil’ maaan! We’re just about to liiike do character charaaades. You wanna join usss?"

"Um actually I was hoping to join your PETA thing."

"Ohhhh." He walked over to Mark and patted him on the back. "Liiike yeah man. You can stay in our veg rooooom."

"What?"

Josh leaned over and whispered, "That’s the guest room." Mark nodded and told Josh’s dad "Yeah, thanks Mr. Trustier."

"Duuude, I thought I like told you to call me Bright Moon."

Back at the Tippett’s house, Mrs. Tippett walked into Marks room. "Hey, Mark what was that at dinner- What’s this?"

She found the letter. "TOM! TOM!” She called down to Mr. Tippett. "Come here! Mark’s gone! All he left was this note!"

Mr. Tippett came up behind her and asked her, "Really?"

Here’s what the letter said:

Deer Dear Famly,

I am disgustd with yur your eeting habits, and desided too go and join the pida peeple. i mite com back if yu find me but you nevr wil find me.

Mark Tippett

Jake came around the corner to see his mother crying. "What’s wrong with mom?"

Mr. Tippett turned around and answered, "Mark ran away."

"Again?"

"Yep."

Mrs. Tippett turned around and said, "Jacob! How c-c-can you say that when my baby’s missing!?"

"Um, yeah, and I, uh, I’m, uh, bye!" He ran away before he could get in any more trouble with his parents.

Back at Josh’s house, Mark was trying to fit it with the family’s "rituals." They were naming the vegetables in their salads, and Mark was trying to figure out what to name his broccoli.

"Liiiike how’s ‘Carl’ for my lettuce lil’ maaan?", Melissa asked Mark.

"Uh, well it’s cool."

"Ok. Let’s eat!" Josh said.

At dinner, the Trustiers were sharing their "names." Melissa’s was Cloud Shine, Josh’s was Plate Warmer, and Mrs. Trustier’s was Flower Poker.

"And your name isss Raymond." Melissa told Mark.

"Raymond?"

"Do you liiike have a problemmm with that name?"

"No." Mark said nervously, then looked down and kept eating his pet salad.
Mark had started thinking, "These people are kind of weird..." They all heard a knock on the door, and Melissa got up to answer it. The person at the door kept knocking and knocking.

Suddenly, they heard barking, and Mark leaned over and asked Josh, "What’s that barking; it sounds like a Chihuahua!"

"Oh, that’s our pet cauliflower. She gets worked up when someone knocks on the door."

"Um, ok."

"Heeeey, Raymond, your parents are here."

"THANK GOODNESS! MOMMY! DADDY!" he yelled as he ran down the hall, grabbing his stuff and hugging his parents.

"Mark, we missed you soooo much!", said his mom.

Jake chimed in, "He was only gone for an hour and a half! I sleep over at my friend’s house for whole weekends at a time, and when I get home, all I get is a ‘Hey Josh, go clean your room!’"

"Liiike bye, Raymond." the Trustiers all shouted as Mark walked out the door, but when he took a step out of the door, he felt a bite on his ankle, and when he looked down, there was a cauliflower sitting there, panting.

"AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA!!!" he screamed, and ran away.

"Duuuude, I guess like some people don’t like, like animals." Melissa said, as she picked up the cauliflower and walked inside.

When they got home, Mark ran upstairs and into his room, followed by his dad.

"So, uh, Mark."

"Yeah dad?"

"Um, what made you want to join PETA in the first place? And do you still want to join? Because if you do, we're behind you all the way."

"Thanks, dad, but I am REALLY over my PETA stage. I mean after meeting the Trustiers, I don't think anyone will want to."

His dad laughed with Mark and asked him, "Sooo, do you want to go have a cheeseburger?"

"Well....."

"Mark, buddy, come on, we're supposed to eat animals! Why do you think God made so many? So they can eat us? Yeah, I don't think so!"

Mark laughed, and replied, "Ok, you may have a point there."

Reprinted with Permission from The John Liner Review Winter 2007

Commentary

Insurance professionals learn about risk management — but not, apparently, about what a risk manager actually does. The need for education goes both ways.

A Risk Manager in an Insurance World: Odd Man Out

Rick Vassar

It’s always the same old story.

I go to a party, family gathering, church — it really doesn’t mat-ter. Eventually, someone will ask me what I do for a living. I tell them I’m a risk manager, and it’s always the same follow-up: “What does a risk manager do?”

There was a time when I would spin into the old Risk Management 101 song and dance, filling their heads with probability versus possibility, losses contingent upon this and that, subrogation stuff, until their eyes glazed over and they stumbled away dazed and confused, avoiding me like a plague, not only that evening, but forever.
Now, I give them the short answer: “I purchase insurance for my company.”

“Oh, so you’re like a broker.”

“No, a broker sells insurance; I buy insurance.” I remember using this explanation on a brother-in-law about 20 years ago. Whenever I’m with him and I meet someone new, he introduces me as “This is Rick; he sells insurance.” So much for communicating what a risk manager does in a social setting.

Stranger in a Strange Land
In an insurance setting, I would expect a better understanding of what I do. So imagine my surprise when I attended the Chartered Prop-erty Casualty Underwriter (CPCU) Society national meeting a few months ago. Here I was, amongst the greatest minds in the insurance industry, celebrating the fact that I had achieved the most presti-gious insurance designation in the property-casualty side of the business.
Then it happened, early and often — “So, what do you do?”

Actually, the first question was always, “Who do you work for?” since it was assumed that you work in the insurance industry. It didn’t matter what you do — the question was, “Who do you work for?” I heard responses such as “North American Life,” “Aon,” “Marsh Mac,” “AIG,” and “Zurich.”

“So, Rick, who do you work for?”

“I work for Valcourt Building Services.”
“What is Valcourt Building Services?”

“Why, it’s the premier building services company in the United States.”
“Seriously, who are you with?”

“That’s who I work for. I am a risk manager.”

“Really? What’s a risk manager?”

“I’m your customer!”

Slight pause.

“Of course you are.”

Pulling Back the Curtain
As implausible as this may sound, this is exactly how it seemed conversations went at this convention. It was like I was invited into this club, and the members were looking around to figure out who in-vited HIM. It wasn’t lack of courtesy; these folks couldn’t have been any nicer. I just got the feeling that they really didn’t know what to think of me, and they certainly didn’t know what to do with me.

I showed up at a meeting of a national committee that I had some interest in joining. Everyone was very warm and receptive until the meeting started, when one of the first questions asked of me was how I ended up on this committee. (How did HE end up here?)

It was pointed out to me time and time again that the president of the CPCU Society was a risk manager. I didn’t have the heart or the energy to tell them that she was a risk management consultant, not a risk manager, because they just wouldn’t understand the difference.

A Side Trip to Oz
Maybe it was because the lack of understanding of the risk manag-er’s function was so unexpected or maybe it was because it wasn’t so unexpected, but for the first time in my life, I truly felt as Doro-thy must have felt when she landed in Oz.

The Risk Manager as Dorothy
You see, I never started out to be a risk manager. Twenty years ago, no one knew what a risk manager was. I was a regional operations manager who kept asking for more to do, until one day they put me in charge of claims. I stayed with that organization for 15 years, be-coming a director of risk management and learning as I went along. And, “in the land of the blind, the one-eyed man is king.” I knew just a little bit more than anyone else in the organization about risk management, so I looked like a genius.

I supplemented my experience with education, receiving the Associate in Risk Management (ARM) in 1996 and the aforementioned CPCU in 2005. I also received the Associate in Insurance Services (AIS) and Associate in Risk Management for Public Entities (ARM-P) in 2005 as well.

What I didn’t know until I passed all these courses is that, of the 27,000 CPCUs in the world, less than 2 percent are risk managers and less than 1 percent work outside the insurance industry. The fact that I have never worked in the insurance industry makes me even more of an anomaly — an insurance customer who has always been a customer!

So, just like Dorothy, I was thrust into a world that I did not un-derstand, and it was fraught with danger. I charted a path, arming myself with allies who were often as clueless as I, and we set out to find the wizard, which in this case was the insurance industry, and the explanation of how it all worked.

Dorothy’s Adventures in Oz
When I received my CPCU designation, it was as if I had made it to the great hall of the wizard, and I was allowed to take a peek behind the curtain, where I was shown how it all works. I was invited to stay, but I decided to return to Kansas and report on what I had seen. The book I wrote as a result of my foray into the Oz of insur-ance chronicles my experiences in an effort to make the road easier for other risk managers who choose to make the journey and for those organizations that want to know more about what the journey entails.

Meanwhile, Back at the CPCU Meeting …
The one part of the meeting that made me most uneasy was when this committee started to try to figure out how to increase membership, not only for this section, but also for the CPCU Society as a whole. The committee decided to look into how RIMS (Risk and Insurance Man-agement Society) has steadily increased its membership and assigned people to look into RIMS’ marketing techniques. Since I wasn’t sup-posed to be there, I didn’t tell them what I thought was obvious:

“Stop Treating Your Customers Like They Are Outsiders!”

The Educated Insurance Customer
Clearly, there is a need for the insurance industry to understand the role of the risk manager in the insurance process. Then, risk managers won’t feel like outsiders at professional insurance gather-ings. But education goes both ways — the risk manager needs to know the intricacies of the insurance industry, too.

Risk Managers Are Essential to the Insurance Process
The easiest way to get involvement from the risk management commu-nity is to recognize risk managers for what they are: an essential component of the insurance process. Far be it for me to point this out, but without an insured, there is no insurance process. There is no need for a provider if there is no customer.

But the antiquated thinking prevalent in the insurance industry seems to indicate that the less the insured knows, the more insurers can sell. The more insureds buy, the more money the industry makes. This makes absolutely no sense. The insurance industry needs to real-ize that an informed consumer makes the best customer.

If a representative of an insured (the risk manager) is given an education on risk financing, risk control, and managing his or her organization’s insurance program, the insured will see the need for insurance because the risk manager understands the process. Educating the consumer doesn’t mean lower commissions because of lower pre-miums; it means being able to insure better risks, which will allow the insurer to go out and secure more good risks, strengthening and expanding its overall book of business.

Risk Managers Are Professionals
The reason more risk managers don’t pursue the CPCU designation is because they are often not considered to be insurance professionals by the insurance industry, especially if they do not have insurance industry experience. Yet, most risk managers come from the purchasing side of the insurance equation and are usually appointed from within an emerging organization to fill a need. The more professionalism they can bring to the job, the better. Doing their job almost always involves purchasing insurance, and education aimed at insurance pro-fessionals is vital to performing their job effectively.

I was in operations and had risk management thrust upon me, and, over time, it became a career. I truly believe that those of us who have an understanding of business first and then learn the insurance side are just as effective, if not more effective, as those who come out of the insurance industry and become risk managers, because we understand that in the minds of owners, executives, and operators, production is king, and the trick is to fulfill the objectives of a good risk management program within the constraints of the production mentality. The insurance industry can benefit from our expertise.

Risk Managers Understand Risk
By its very definition, business is a risk-taking enterprise. The key for the risk manager is to determine the tolerance for risk with-in the organization and work within that established box while striv-ing to improve upon the existing controls by proving that they are working. This allows for improvement and insures against a regression that could dissolve into intolerable uncertainty.

An owner asked me once why I thought his company was losing money. Without hesitation, I told him that I thought it was the company’s “production at all cost” mentality. Of course, he told me that with-out production, there would be no company. I agreed, but pointed out that I was not worried about the production. It was “at all cost” that concerned me. If your organization’s solution to problems is just to throw money at them in order to make more money, that atti-tude will catch up with you, probably sooner than later.

A Win/Win/Win Situation …
So, why is it a win for the insurance industry to have an educated insured?
… for the Insurer …An insured that knows how the insurance process works will see the value of lowering the frequency and severity of losses and will take active steps to lower its losses and reduce its premiums. While pre-miums become lower, so do combined ratios, which will increase profits. The customer will become more loyal both to the broker and to the insurer when the insured sees that its association with both has consistently lowered its costs and increased its profits. From a transactional standpoint, the need to move the insured’s program will become a nonissue if the insured knows it is getting a good deal.

… and for the Insured …The Associate in Risk Management (ARM) designation gives the desig-nee the understanding he or she needs to be an educated insurance consumer. I would advocate that all risk managers pursue the ARM de-signation. An educated consumer makes the most efficient choices when dealing with insurers and brokers.

… and for the Risk Manager Who Has Earned the CPCU Designation
I would strongly advise all risk managers to pursue the CPCU desig-nation, and I would also encourage their companies to advocate this training for their risk managers. The reason I never pursued the de-signation earlier in my career was twofold.

1. I thought it was too hard.
2. I didn’t see the value to my position as a risk manager.

I passed all the courses in 176 days — not bad for a risk manager. I am asked time and again how I was able to do this so quickly, and the only honest reply I can give is this: “It’s what I do.”

The value of the CPCU designation is this: instant credibility in my dealings with the insurance industry. When I send an e-mail or correspondence, I am afforded the respect that comes with attaining this level of excellence. It is assumed that I am an insider, and my job is made much easier with the CPCU next to my name. Insurance in-dustry people just assume I know what I’m talking about.

So, you have instant credibility for the risk manager, lower premium for the insured, and increased profits for the insurer, just by letting the insured take a peek behind the curtain. Sounds like a win/win/win situation to me.

Conclusion
In business, insurance has always been the 800-pound gorilla in the room. It’s always there, and it’s not going anywhere. Hardly anyone in business really understands it, and most don’t want to commit the time to learn. The only way to maximize your organization’s potential is to manage your risk and your insurance, and you can do this effec-tively only by learning the product and services and how to effec-tively manage them.

In this day and age of information technology as well as increased competition, it is imperative that insurance costs are managed. If you are informed, you may no longer have to accept the “hard market” as the only excuse for increased premium, and you will certainly be able to easily tap into the market, should you be given that excuse by your insurer.

There is a bit of mistrust between the insured and insurer, and the only real way to bridge this gap of trust is for each side to have a better understanding of the process and its role in the process. Sav-ings will go up and so will profit, and that’s all we are really looking for.

Bring the risk managers in.

We’re not in Kansas anymore.

Rick Vassar, CPCU, ARM, AIS, ARM-P, is the principal in The Vassar Group, LLC Risk Management Consultants as well as Vice President of Risk Management for Valcourt Building Services, LLC, both located in Virginia. Vassar has over 20 years experience in risk management and has written on various risk management topics. Vassar could never find a primer on business insurance for the business person, so he wrote it. Hide! Here Comes the Insurance Guy — A Practical Guide to Understanding Business Insurance and Risk Management (iUniverse Press 2006) was published in June 2006.


Reprinted with Permission - The John Liner Review Winter 2007 Standard Publishing

I had the opportunity to reflect on some of the experiences I have had in my life, as well as some of the situations in which I've realized that some people are just plain stupid. To me, it seems as if there has been a progression over the years:

1955- Diner: “Waiter, there’s a fly in my soup.”
Waiter: “Don’t worry, flies don’t drink much.”

2005- Diner: “Hey, there’s a finger in my chili.”
CSR: “Cool! Hey, anybody missing a finger back there!? I’m sorry, ma’am but we charge 99 cents extra for human fingers, but don’t they taste just like chicken?”

So now this lady's in jail. I hope they investigated Uncle Louie, who was once arrested for petty theft, or as the police report called it, a “four finger discount”. Or was it Grandma Edna, who accidentally chopped her finger off cutting up a ham, prompting her daughter to say, in a most sympathetic of ways: “Get Grandma a band-aid. Anybody want to go to Wendy’s?”

As a career risk manager, I take these things with a grain of salt—naw, I’ll leave that one alone. Maybe she found it on the street. Maybe she found it on e-bay, and successfully bid $89.95 for it, and needed to make her investment work for her. It gives me pause, though, to reflect back on my life, and the wonderful ruses all perpetrated in the name of cash.

First, a little risk management 101. When someone tells you it’s not the money, and it’s the principal of the thing, don’t let them fool you—it’s about the money; it’s all about the money, and it’s always about the money.

My favorite story involves a guy who thought he was smart but was actually very stupid. He worked with my wife, and in 1987, he got married, and his wife got pregnant. The baby was born in February, 1988. This guy claimed the baby on his 1987 taxes. When the IRS came a-knockin’ on his door, he told them that the U.S. Supreme Court declared that life begins at 24 weeks after conception, and since his kid legally “came alive” in 1987, he was entitled to the tax deduction. He is still to this day paying off the interest and penalties on that stroke of genius.

Then there was the guy who was a car wash supervisor for a rental car company I worked for. He went to the doctor and was diagnosed with tennis elbow. He promptly came into the branch office and made a workers comp claim. When I took the report over the phone, I deviated from the script a wee bit. I asked name, address, date of birth, and in the middle of this line of questioning, I asked him if he considered himself an active person. Yes, he did. Do you play any sports? Yes, I played softball, basketball, tennis and soccer.

I’m sorry, did you say basketball? Okay, good, got it. Social? Okay. Safety equipment provided? Okay. Now let me go back and make sure I got these activities right. You said you like tennis? Yes, I love tennis. Okay, great. One more question: Do you think that maybe your tennis elbow could have come from… playing TENNIS!?

I loved the people who would rent a car, smack it up, and then drop it off at a suburban branch after the office had closed. When the vehicle was found the next day, the manager would call the customer to find out what happened:

Customer: I don’t know. It was fine when I dropped it off.

The customer would then call my office after they received a bill for $8,000, and say they didn’t do it. Yea, 40 cars parked all neatly parked on the lot, and the only one that ever seems to come up totaled is the one that was dropped overnight. What are the chances? And every person who tries this believes they had thought of it first.

You know those highway signs that have a blinking area to direct you either left or right. There is also a middle switch (or so I assume) so the sign blinks a straight line. I had a customer tell me that they came to the fork in the road, and there was a blinking straight line, so they went straight—into the sign. I believe alcohol was involved in that one.

I’ve had employees call for an ambulance, and call an attorney on the way to the hospital. I had an employee who took a car home and totaled it on the way. He called it in, and was absolutely flabbergasted when he clocked in the next day and was promptly arrested. I had a customer tap another vehicle while parallel parking in Washington, DC. The two occupants got out of the car, saw it was a rental, and called for an ambulance. I didn’t think this was too unusual, until the customer told me the two occupants were uniformed police officers and the vehicle he tapped was a police cruiser.

Am I jaded? You bet I am. The sad aspect of all this is that there are individuals out there for which the tort system is necessary to compensate for the negligence of others. Unfortunately, the system is mired in cases in which folks just want to make a buck. As risk managers, we lose faith as well as focus, and it becomes a war zone. And the path is paved with recidivism. Once someone so inclined finds out he or she can sit at home and collect almost the same amount in pay from work comp (I like to call it the “Watching the Beav”), they are inclined to do it again. And who can blame them. It beats working.

And don’t get me started on class action lawsuits. I tried one of those once. It was against my power company. I signed up and sent it back. A year later, I received a notice saying that the suit was settled, and my bill would be surcharged $20 a month for five months as an offset. I figured we lost. To my surprise, I found out we had actually won, and the power company was going to issue an apology. The settlement, though, didn’t quite cover the attorney fees, which was the reason for the surcharge.

Oh, well, it was the principal of the thing anyway. Although… if I had that cash now, I could have gone on e-bay…

Anybody want to go to Wendy’s?

Hide! Here Comes the Insurance Guy
Expert offers up eleven crucial questions to help people determine their risk management needs

(Arlington, VA) Rick Vassar is not your ordinary run-of-the-mill insurance person. Rick Vassar does not sell insurance. He buys insurance. He is a risk manager. He’s refreshing and totally committed to making people trust him in spite of his chosen profession!

His new book, Hide! Here Comes the Insurance Guy, educates and entertains with energy and enthusiasm, and it’s a must-read for anyone who owns or operates a business.

This is a truly unique concept – an authoritative explanation of business insurance and practical cost-saving risk management strategies from the business perspective.

With a no holds barred and no prisoners taken approach, he takes the mystery out of the most mind-numbing insurance questions that plague everyone who’s ever sat down with an insurance policy and tried to make sense out of the minefield of questions that have to be answered.

“We all need insurance,” he says “but let’s face it – most of us can’t understand a single word insurance people are saying.”

With humor and a bit of spunk, you can go to Vassar for the answers!

In any organization, not managing your insurance program can cost a company thousands, if not millions, of dollars.

Hide! Here Comes the Insurance Guy is a guide to business insurance written by a businessman.

For example, here is a sampling of some of this truly sane advice about how you can attack the subject and divide up the risk management process into four distinct steps to control & improve your insurance costs:

1. Understand the language

Like any other specialization, insurance has a language and cadence all its own. You must learn the language to understand the process.

2. Know the players

Once you understand how all the pieces fit together, you will better understand the process. Better understanding leads to better management, which leads to savings.

3. Develop a strategy

Just as your business has a game plan (for example: goals, vision, mission, five-year plan), there are subtle yet distinct ways to work your insurance program to maximize your coverage for minimal cost.

4. Invest the time

You spend years and years going to school so you can get a good job or start your own business. You go to conferences and seminars to aid in your development as your career progresses. If you take the time initially to learn about insurance, how it works, and how you can make it work for you, it will help you reap real financial benefits while providing the maximum coverage for your company.

One of the biggest questions that business owners face is whether they are properly insured. Vassar provides a really helpful set of questions to help business people answer that question. In a section called the ABC’s of Risk Management, he offers up eleven crucial questions to help people determine their risk management needs.

Some of these questions are:

1. Do you own the facility? If yes, is the replacement amount on the policy sufficient to cover a total loss to that facility? If no, do you have the proper coverage as required by the lease?

2. Are customers regularly on the premises? If yes, does your present coverage adequately protect you from them?

3. Are there employees on the premises? How many? Who does what?

4. Is there inventory on premises? Is it properly valued to cover a loss?
5. Is there equipment on-site, which is leased and, if owned, properly valued?

6. Would the loss of a piece of equipment interrupt the entire process? If the
answer is yes, would this disruption cause a significant loss to the organization? Is the company covered under any of the present coverage?

7. Do you depend on suppliers for key aspects of this process, and if so, would the loss of this supplier interrupt the process in any way?

And more.

Rick says he designed this analysis for super simplicity, which will allow you to define your risks and determine what you will need to protect yourself in the event of a accident or disaster.

Hide! Here Comes the Insurance Guy also provides valuable strategies for interacting with the insurance industry from an insurance professional who has operated on the business-buyer end of the process. Here are some of the most effective tactics you’ll ever find in the areas of business insurance and risk management demystified by a businessman who has actually achieved real cost savings for himself and his clients.

Hide! Here Comes the Insurance Guy provides insight into an aspect of business life that few people readily understand. This wonderful little book can show you how to protect your company from losses and save lots of money in the process.



Hide! Here Come the Insurance Guy – A Practical Guide to Understanding Business Insurance and Risk Management

The hard market is the stuff of legend as far as I’m concerned. To me, it appears to be a cyclical and arbitrary theory promulgated by the insurance company to justify the need for increased premiums to fuel shortfalls caused by free market conditions and certain disasters that adversely affect the insurance industry.

But that’s just me.


First, let me say that there may have been a time that the theory of a hard or soft market may have been justified. I’ve only been in the business since 1986, but the research on the issue is a little sketchy.

From what I have gathered, soft markets, in which insurance premiums drop and the market is more advantageous to the buyer, generally lasted two to five years and would follow the cyclical trends of the economy.

By 2001, we were almost nine years into a soft market, and there were no real signs that it was going to turn anytime soon. By the insurance industry’s estimation, we were at least four years overdue for the market to harden, which would have led to significant and, in my opinion, arbitrary price increases, and all I heard from the industry professionals was this:

“Be prepared. The market is starting to harden. These low rates can’t last for long.”

And so it went.

Then there were the bombings of the World Trade Center and the Pentagon on September 11, 2001. Now, there is no doubt that this was a catastrophic event, the likes of which have never been seen on American soil. But from an insurance standpoint, and particularly from a property casualty standpoint, this was not a catastrophe that should have ushered in the hard market in the insurance industry that came about immediately after these events—especially in the property casualty market.

Much of the loss of life was covered through life insurance. As of this writing, the property claim at the World Trade Center has yet to be resolved, although a federal jury has categorized the event as two occurrences, meaning that the ownership group could collect the limits twice because the policy was written on an occurrence basis.
The losses that ensued from business interruption and loss of revenue coverage were well funded prior to this loss, and therefore should have been a non-factor. I firmly believe that the insurance industry took this event and used it as an excuse to arbitrarily “harden” the market. The losses were well funded, and although the fallout from 9/11 did result in the bankruptcy of some insurance carriers, these companies can find no fault beyond their own parking lots because of their internal reserve and surplus policies before the event.

Now that the industry has had the opportunity to review the economic fallout from these attacks, these appear to be a consensus of understanding:

 Total economic loss due to the attacks was around $38 billion.
 Insurance losses amounted to roughly 50 percent of that total ($19.1 billion).
 The property damage to the World Trade Center alone was approximately $7 billion of the total
 Much of the losses were covered by life insurance, which would not significantly affect the property casualty side of insurance.

Thus, you are looking at property casualty losses, independent of the WTC loss, which was absorbed by one group of insurers and reinsurers, of less less than $10 billion. In contrast to this, the economic effects of Hurricane Katrina are estimated to be in excess of $50 billion. Hurricanes Ivan and Charley in the summer of 2004 have estimated losses of $19 billion. Yet, neither of these events seem to have had the impact on the insurance markets that the 9/11 attacks did.

I believe there was a watershed decision made in 1999 that should have put the debate of the hard market to rest. In that year, Congress passed the Financial Services Modernization (Gramm-Leach-Bliley) Act. This act allowed, for the first time, banks to offer insurance products and for insurers to offer banking services through holding companies. This created a synergy between the two industries which allowed both to tap into their customer bases and mine business from the other industry. Banks and insurance companies could offer their clients a one-stop alternative for both insurance and banking.

The result was an increase in competition in the marketplace, which led to consolidation of companies that were too weak to compete in the more dynamic market. The increased competition increased supply for a fairly stable demand, reducing the prices in the marketplace. The increased competition also caused some weaker insurers to lower their qualifications for coverage, which weakened their overall book of business and made them susceptible to the vagaries of the free market. At the same time, it provided a need for coverage in the secondary market that was not being fulfilled at a reasonable price.

These market conditions were becoming evident prior to 2001 and fell back into line fairly quickly after 2001. From an indemnity standpoint, the 9/11 attacks should have been a nonevent but for the insurance industry’s need to have an excuse to raise premiums and rid themselves of some bad risks they were forced to take due to the increased competition from FSMA.

Now be forewarned. I'm told the market is going to start to harden later this year.

These days, it seems all we hear about in the risk management arena is the advent of enterprise risk management. Now, I am sure that the qualification of risk management on all levels of an organization has great merit, and that the quantification at each level is very important.

The issue I have is the same issue that any good risk manager has with this premise: Risk management, to be effective, must be identified at all levels of the organization, or it won't work. It has always been like this, way before we started calling it "enterprise risk management." If your company does not have an awareness of the need for risk control in the backroom as well as the boardroom, then production needs will outweigh all concerns, and preventable losses will occur.

An owner and chief executive ask me why I thought the company wasn't making any money. I replied that the organization was motivated by production at all costs. "Well," came the reply, "if we don't have production, we have no company." I replied that it was not the production side of the equation that concerned me, it was the "at all costs" part that was troublesome.

Only with a top-down commitment can a risk management program succeed at all levels of the organization. The risk manager who has that commitment in words and deeds will be able to elicit systematic changes in the production chain, leading to a healthier workforce and reduced costs. If not, then let's face facts—at that point, all you're really doing is insurance.

You know what I'm talking about-- dealing with a car accident, your neighbor's tree falls on your house or perhaps you added a teenager to your auto policy.

Tell me your insurance nightmare story. And, as impossible as it may sound, please edit out the profanity. I get it...

In the comments below, tell me your insurance or claims horror story...

The top two stories win a signed copy of Hide! Here Comes the Insurance Guy, the powerful new book that has taken the business and insurance industries by storm


Yes, It's True - I Am An Insurance Guy on Purpose

Why I Wrote a Humorous Book On Insurance


When you mention the term "insurance guy" or "insurance gal", many different images come to mind.

You may think of these well tailored, professional types who stroll through those beautiful downtown insurance company offices, off to wherever those people go to do whatever it is they do.

Or perhaps you envision the slightly harried insurance adjuster or appraiser who comes out to look at your car when it gets smashed up.

You know the one I’m talking about-he comes out with a camera around his neck, a clipboard in his hand and at least one pen in his shirt pocket.

It doesn’t matter how much damage is on the vehicle; he always looks at you and says "Where was it hit?" He feels around, takes a couple of pictures. For some reason, he always rubs a mark of the roof with his thumb.

He then gives you an estimate, and disappears, calling out "any questions, call your adjuster". As you leave, you hear faintly in the background: "Where was it hit?"

Maybe you think of your insurance agent, whom you call when you add another car to your auto policy, and she says she needs the check today, so if you could meet her at her son’s cello recital at the elementary school at 3:15.
You pull up next to her Escalade and hand her the check. You decline an invitation to see the show, resisting the urge to tell her you have other things to do, like making a living.

If you work in the insurance industry, it doesn’t matter what you tell folks. All of them think one thing-he works in insurance; he does insurance; he must SELL insurance.

I am a member of a lesser known community of professionals that choose to interact with the insurance community on a full time basis. I’m that guy in your organization who always seems a little disheveled, slightly distracted and just a tad odd.

I am a risk manager.

"Hey," you might ask "What does that guy do?"
"He’s the risk manager," is the reply. "He does the insurance. Whatever you do, don’t talk to him. Nobody ever talks to him. If you do, he’s going to bore you with all that insurance nonsense, and since people rarely ever talk to him, he won’t let you get away. Some folks say he’s brilliant, but I’m not really sure. No one really knows what he’s talking about, so they leave him alone. Actually, in a big company like this, that alone makes him a genius. He hangs out with the IT guy. Go figure."

I am a risk manager. I work for a company, trying to make sure that all the risks and loss exposures a company has can be afforded, and for those exposures that cannot be afforded without a negative financial impact on the organization, I purchase insurance.

I lead a kind of lonely professional life. When I walk the halls, people know that if they talk to me, I may try to work insurance into the conversation. So they duck around a corner or dive under a desk. Some will even get on the phone to other departments:

"Joe? Hi. Hide! Here comes the insurance guy!"

Thus, Hide! Here Comes the Insurance Guy was conceived. In 1986, I was in an operations position at a regional car rental company. My boss got mad at me and decided to punish me by putting me in charge of claims.
As time went on, I became the full time risk manager. I remember when I fell into the risk-management role at the company I was working for at the time.
I almost had a nervous breakdown. Was it because of the pressure of handling insurance for the entire organization? Or was it because that same year, the company had decided to self-insure its entire fleet of 5,000 vehicles?

Nope. It was because I couldn't understand a single word they were saying!!

For every insurance professional who takes a position as a risk manager, there are nine or ten of us who fall into the job because a need develops as the organizations grow. That need may be filled by someone who has interacted with insurance companies, or like me, due to a short term anger episode.
Regardless, I only wished I could have found a book that explains how business insurance works and what a risk manager does.

All of the information on business insurance comes from the insurance industry. In fact, most companies rely on their insurance broker for insurance expertise.

But wait, aren’t they the ones who are selling you the insurance?

I am an anomaly in the insurance industry. I currently hold four insurance designations, including the Chartered Property Casualty Underwriting (CPCU) designation, which is considered the highest and most prestigious designation conveyed in the property/casualty insurance industry. Yet, less than 2% of CPCUs are risk managers and less than 1% work outside the insurance industry.

I am a risk manager, and although I am considered an insurance professional by the insurance industry, I have never worked in the insurance industry.

Hide! Here Comes the Insurance Guy is an approachable text on how to manage your insurance program to protect the assets of your company in a cost-effective manner. The book de-mystifies the process, and educates as well as entertains.
When was the last time you could say that about an insurance book?

If you are a risk manager, you will identify. If you are an executive, a business owner or just someone totally baffled by insurance (and you're not alone), it’s a must read.

Rick Vassar CPCU, ARM, AIS, ARM-P is the principal in The Vassar Group, LLC, in Sterling, VA, specializing in risk management and insurance consulting.
Copyright 2006 by The Vassar Group, LLC. All rights reserved. Reproduction in whole or in part without permission is prohibited.
Hide Here Comes the Insurance Guy – A Practical Guide to Understanding Business Insurance and Risk Management, 2006 iUniverse, Inc. ISBN 0-595-38608-6 (pbk) ISBN 0-595-83388-7 (cloth).

Invariably as a risk manager, I am asked the question I would anticipate with fear and trembling:

“So, what exactly does a risk manager do?”

In earlier times, I would begin to explain risk control, identifying losses, insurance, risk retention, blah, blah, blah. After about 30 seconds, the puzzled look is replaced with the rather uncomfortable “eyes glazed over”, and I imagine that I begin to sound much like the parents in the Charlie Brown cartoons. Even my beautiful wife of over 16 years tells people that it has something to do with insurance… or something. She does show a remarkable interest in captives, and not due to their cash flow or tax implications. She just wants to go to Bermuda.

As a risk control specialist, I knew that there had to be a way to explain my chosen vocation without causing folks to run the other way the next time they see me. A loss exposure which affects everyone, male and female, with no accurate forecast of when and where it might occur, and the consequences of improper preparation coupled with an inadequate response could lead to catastrophic results.

Then it dawned on me. Smacked me right in the face, it did. A circumstance and situation every man has experienced or will experience in his lifetime:

“Honey, does this outfit make me look fat?”

You’re smiling, aren’t you? Admit it. You have either asked it, or had it asked of you. It is a question so fraught with peril and danger that it could lead to losses for years to come.

For me it came around the second year of my marriage to my aforementioned beautiful wife. I will forego the details of the actual encounter, and blame it on long term memory loss. I had been a risk manager for a little over a year, but it didn’t matter. I was in the middle of a disaster, I had not done any pre-event planning, and I really had not entertained the possibility of this loss exposure. I was in big trouble.

You see, ladies, there is no good answer to this question. If I answer yes, it begins a dialogue on weight, body image (“So, you think I’m fat?”) etc. If I say no, I risk being untruthful to my sweetie. She also goes out looking like the Michelin man in an outfit at least two sizes too small, which she will eventually rationalize, and then I’m really cooked.

So what do I do? I have to say that I was very proud of my response, which did not prevent a loss from occurring, but did help to reduce the loss significantly and prevent future losses of mammoth proportions. I looked her straight in the eye, pointed a finger at my midsection, and said:

“Does this shirt make me look stupid?”

Now don’t get me wrong. I was still in big trouble, but I was able to minimize my losses, as well as set the groundwork for future loss exposures. I explained that no, I didn’t think she was fat, and that even Olive Oyl would look fat in a too small outfit. I also explained that I love her too much to lie to her, and that she needed to know that she could trust me to tell her the truth. Then I gave her the one truth that is universal in this situation—

If you feel the need to ask this question… it does!! So don’t ask—CHANGE!!

So that is how I explain what I do. Identifying, controlling, reducing, preventing, and now contingencies based on loss history. This makes me sound much more exciting than I am, living a life in the reckless and carefree world of risk management. And wouldn’t you know, I had some guy ask me about loss control and the cost of risk in a social situation.

I told him about Bermuda.

I really don’t like dealing with my HMO. If I asked for a show of hands for all those who find interfacing with their health insurance company a pleasant experience, you would probably get the same response if you asked the same group if they enjoy sticking a needle in their left eye.

When my family must interact with our HMO/PPO, this task falls to me, since I have a little more patience, being “in the business.” My wife did try to call one time. I begged her not to, but she insisted, saying we should share this burden. I reluctantly agreed, gave her the number, and walked upstairs to change. I came back down 10 minutes later, and she was sobbing into the phone, yelling “I don’t want to speak to a supervisor, I just want an answer to my question!” Last time she volunteered for that duty.

I really don’t have much trouble with customer service at our PPO. When I was in college, I sold books over the telephone. You know, the kind that once they start, they never stop coming? We had little flip charts: If they say no, go to chart 2, if they say no again, go to paragraph four on chart 3. If they say yes, get their info, etc. I lasted one half of one shift, and never went back, but it gave me enough experience to imagine how my PPO probably works.

I call the toll-free number, and keep hitting zeros until I am queued up. I listen to the Muzak version of Christopher Cross’ “Sailing,” and I am connected to my rep, Ted. This is one of the largest health organization’s in the country, and I get...Ted.

I always get Ted.

CSR: Thanks for calling. How can I help you?

Me: This is Rick Vassar, My member number is—

CSR: Dude, it’s me, Ted. What’s happening?

I began to think that Ted was the only one who works there, and my suspicions were validated the day I unknowingly and accidentally hit the prompt to speak to someone in Spanish. I was put on hold, listened to some song by Carlos Santana, and just before the guitar solo, I hear:

CSR: Hola, como le puedo ayudar?

Me: Uh, this is Rick Vassar, my member number—

CSR: Vato, soy Ted.

Me: Ted, I don’t speak Spanish, can you help me?

CSR: Lo siento ese, vato. Tienes que llamar otra vez y que te pasen con los que hablan Ingles loco.

I hang up and call right back, hit zeros, and get the “Sailing” hook again.

CSR: Thanks for calling. How can I help you?

Me: Yes, this is Rick Vassar, my—

CSR: Dude, it’s me, Ted.

Me: Hi, Ted. Listen, I have this claim—

CSR: Sorry, dude. Not covered.

Me: Why is that?

CSR: Uh, no referral—

Me: Well, if you look at the evidence of insurance, on page seven, paragraph four, it states that coverage should be afforded without a referral.

Silence.

Me: Ted, what’s the problem?

CSR: I told them this was going to happen.

Me: What’s that?

CSR: They told me nobody ever reads the contract...

In the past few years, class actions have been filed against carriers alleging unequal and improper claims handling, offering incentives to doctors not to make referrals, direction of care being dictated by managed care professionals and skyrocketing premiums. In 2003, some of these insurers settled their cases with doctors, agreeing to allow doctors to be doctors, increasing sensitivity to the patients’ needs and speeding up claims payments. Meanwhile, each doctor received enough cash after attorney’s fees to buy a venti latte at Starbucks. Many of these insurers have used this settlement as a marketing tool, reaping free good press well in excess of the amount settled in this “landmark” case. In fact, one of these companies’ stock price has increased over 250% since the announcement of this settlement.

But nothing has really changed. HMOs are still denying claims on a less than equitable basis, and they are denying portions of claims that are not usual and customary (to that particular company), and the patient is the one left holding the financial bag.

As a risk manager, I have a little better handle on what a company can and cannot do, so I can show them how they steered off the path. But millions of people do not know what their rights are, pay what they are told to pay and make healthcare decisions based on economics.

I have been very fortunate to get most of my claims paid, and I would have to hope that things are getting better. In the meantime, I have one assurance that I can guarantee with the utmost certainty.

I have Ted.


Reprinted from Risk Management Magazine.
Copyright Risk and Insurance Management Society, Inc. All rights reserved.

In 1973, the Supreme Court, in Roe v. Wade, ruled invalid any law which would prevent a woman from terminating a pregnancy if she chooses. Let me say up front that I believe this to be the moral equivalent of thinning out the herd for most, since it seems to be one of the most fervent arguments of those who support this “right”.

What will we do with all these unwanted babies? Who will pay for them? The government can’t do it all. Besides, I have the right to choose whether I want to have this baby, and it’s none of your business.

Now, along comes Gardisal. Gardisal is being marketed as the newest miracle drug, a vaccine against the HPV virus, a sexually transmitted disease linked to cervical cancer.

Excellent! Great! Wonderful! Someone told me it could be the greatest medical breakthrough since Thalidomide.

You remember Thalidomide. It was the great miracle drug of the late 1950’s, used to relieve morning sickness and induce sleep in pregnant women. The side effects: Thalidomide stunted the growth of limbs and organs in the womb, and led to severe birth defects in the children of mothers who took Thalidomide.

Now, don’t get me wrong. I hope this stuff works, and if it is proven to be effective without any long term side effects, I will be the first to stand and cheer. The problem is that we just don’t know.

In West Virginia, Maryland, and Virginia, the states have introduced or are planning to introduce legislation that would make it mandatory for prepubescent females to receive this vaccine to protect them against the risk of HPV and in turn cervical cancer. This is where it gets really dicey.

As with many other drugs approved by the FDA, the long term effects are not known. If a parent should choose to have their child receive this vaccine, and it’s approved by the FDA, they can.

But to make it mandatory by statute is obscene. And where are the “pro choice” folks in this discussion. It appears they are lining up on the side of mandatory shots. If they aren’t, their silence on this issue is deafening.

Feminists should wise up. If you are for the right to choose, be for the right to choose. But if you are going to use the legislature and the courts to mandate your vision of the best interests of women, then your agenda is less rational and coherent than you have attempted to forward.

The long term effects of this vaccine have yet to be determined. Yet, the long term emotional and psychological effects of abortion on families in general and women in particular is well chronicled.

Disposable pregnancy (abortion) is forwarded, as is mandatory vaccination of females for sexually transmitted diseases. Yet the long term effects of these life decisions are not considered.

So, ladies, what is it:

Are you controlling the right to choose, or choosing the right to control?

In the fall of 1986, I was managing a small suburban car rental office outside of Washington, DC. Around that time, my boss came by and offered me another position as district operations manager, an opportunity I immediately accepted. There was a catch, though. I had to take over the management of claims.

No way, I thought. Who would want to do such a thankless job? But since the other position was tied to the claims job, I reluctantly accepted.

Over the next five years, the company grew by over 300%, and I became the Director of Risk Management in April 1989, a position I held until January 2002. Along the way, I received the Associate in Risk Management (ARM) designation (1996), which provided the educational foundation for this profession that I had not chosen, but had chosen me.

To be completely honest, I would probably still be at that job if not for the events which unfolded after the terrorist attacks on September 11, 2001. Due to a variety of circumstances, the company filed for Chapter 11 bankruptcy less than three months after the attacks. I decided it was time for a change. At 43 years old, this risk manager thing wasn’t going anywhere.

So I took a job selling cars, and supplemented this doing some risk management consulting. The problem with car sales is that it is not very family friendly, and with two small girls at home and a wife with a chronic illness, I decided to quit car sales and go home and take care of my family. I figured I’d just go get another risk manager’s job. Very few companies, though, were willing to take a chance on a risk manager with experience in only one industry. There was also this recession thing going on.

After about six months of doing odd jobs, substitute teaching, and some consulting, I went back to car sales, since we needed the job for the health insurance. I continued to look, and in May, 2003, I was offered a position at Valcourt Building Services. This company had been growing very rapidly, and had decided to commit resources to their insurance program in the hope of controlling their costs.

In a little over 18 months, I was able to facilitate significant savings in insurance. I also assisted in the implementation of a comprehensive safety program that complemented the insurance program and led to more savings.

This is where the CPCU journey begins.

In January 2005, during my review process, I asked permission to apply for a broker’s license, since the company had thoughts of purchasing an insurance agency. Since their plans had changed, and a broker’s license would be of little value to the company, my boss asked if there was anything else I would be interested in studying.

It was then that I mentioned the CPCU, and I explained that it was a series of eight courses, and generally takes two to five years to complete. He told me to go ahead and get started.

Well, I passed the first test on February 28, 2005, and I guess I got on a little bit of a roll, because I passed the eighth and final test on August 22, 2005. This was a total of 176 days from start to finish, or an average of one part every 22 days. I received my designation letter on September 6, 2005.

I also had a little trouble decompressing from this furious pace, so I also passed the Associate in Insurance Services (AIS) and the Associate in Risk Management for Public Entities (ARM-P) programs before the end of 2005. During this time, I also wrote four articles for publication in RM Magazine, the premier publication in the risk management discipline. A fifth article was published in June 2006.

I have also written a book Hide! Here Come The Insurance Guy™ A Practical Guide to Understanding Business Insurance and Risk Management. The book is written from the viewpoint of the business insurance consumer, and offers practical strategies and practices that serve to educate those who want to reduce the cost of their insurance programs. The book was published in June 2006 and has been overwhelmingly well received.

According to the CPCU Society statistics, only 2% of its membership are risk managers, 1.7% characterize their job function as “Risk Management/Buyer” and only 0.5% work in non-insurance industry related organizations. Achieving the CPCU designation affords me a unique perspective on the insurance industry; a credentialed insurance professional who does not work in the insurance industry.

To this end, I have also started my own risk management consulting practice. The Vassar Group, LLC, is being launched in conjunction with the publication of the book. For every credentialed risk manager out there in business, there are probably nine or ten professionals like me, who came into the discipline quite by accident. The book as well as the business will help them to fill in the gaps, providing practical, cost-effective solutions to their risk management and insurance needs.

Achieving the CPCU has given me the confidence to pursue these other avenues. I have also found that adding this designation has served as an introduction to contacts I would not has access to but for the CPCU. The attainment of the CPCU designation commands instant respect among those in the insurance industry.

Attaining the CPCU designation also gave me the unique perspective of how the insurance industry operates. As a risk manager, one must effectively communicate to those in both the back room and the boardroom. Seeking support for a program at the executive level and then communicating the program to the rest of the organization once consensus is reached can be a daunting task to the risk management professional. The respect that the CPCU affords me in both the corporate and insurance arenas has given me the additional strength necessary to complement and enhance our already successful risk and insurance programs.

I want to encourage everyone in the industry, both on the buying side and the production side, to pursue the CPCU designation. For those of you who are thinking about it, get yourself started. I think you will be pleasantly surprised at how approachable most of the subject matter is to the insurance professional. For those of you in the middle of your studies, take heart. You will do it, and it will be well worth it.

People ask me how I could possibly pass these courses in six months, especially those who know that I have never been much of a student. There is only one plausible answer I can give them:

It’s what I do.

Four years ago I was selling cars. My career path was unsettled at best. Now, with the help of the CPCU designation, I am truly excited about what the future holds for me. It has given me the education and the confidence to pursue a new path and the field is now wide open.

Tort reform is a hot issue these days. It was a hot issue yesterday, and it will be a hot issue tomorrow. It seems to have manifested itself in the medical malpractice area, but could probably use some restraints in all areas of tort liability.

That will never happen. The most basic reason for this is that the special interests groups are trying to get the federal government to mandate controls on tort liability. But insurance is controlled by the states.
This issue has been batted around for over 100 years, and always ends up back in the hands of the states, for better or for worse:

In 1869, in Paul v. Virginia, the U.S. Supreme Court ruled that insurance was not interstate commerce and therefore was not subject to federal regulation.

In 1890, the Sherman Antitrust Act forbade insurance companies from banding together and colluding to fix prices. This act is still in effect today.

In 1944, the South-Eastern Underwriters Association (SEUA) decision effectively gave the right to regulate insurance to the federal government after it rendered the decision that the SEUA had conspired to control 90 percent of the insurance business in six states.

Congress passed the McCarran-Ferguson Act in 1945, which restored state regulation of insurance less than one year after the SEUA decision.
It’s fairly obvious that insurance regulation is going to continue to be controlled by the states, and this right has been fiercely protected throughout U.S. history. So, although you will find pockets of state legislation that restrict the awards in tort liability cases, this issue will never get up enough steam to become a federal mandate and will probably be struck down as unconstitutional in deference to states’ rights.

This is not the primary reason, though. The real underlying reason is …

Lawyers!

It’s so obvious, isn’t it? A lawyer sues another party because of their negligence. What does the other party do? They hire a lawyer. Either the other party or its insurance carrier needs legal representation to represent its interests in this action. If the complaining party settles or wins the case, the plaintiff attorney profits. If the defendant wins or loses, the attorney for the defense profits.

If tort reform is passed, who stands to lose the most?

Lawyers!

And most of the folks in Congress, before they became representatives, were …

Lawyers!

Enough said. If all the lawyers are against tort reform, and it would be struck down even were it enacted, it will never happen.

From Hide! Here Comes the Insurance Guy Copyright 2006 Richard G. Vassar All Rights Reserved

When I was in car rental risk management, if I saw one of our cars on the six o’clock news, I knew I needed to get intimately acquainted with that file, because we were to become constant companions for a long, long time. So when I saw the Vioxx wrongful death decision on every news channel recently, I was quietly happy that I do not work there.

This case accentuates a philosophy that we in the risk management profession know can become a harbinger of bad things to come—when someone in upper management says those five dirty words: “Let the lawyers handle it.”

Now, I have nothing against lawyers. Well, most lawyers. Okay, a couple of lawyers. Seriously, though, legal representation is essential in our area because of the very nature of torts. That is not the issue. The issue is whether or not counsel should have the ability to dictate the strategy and direction of a claim, and whether that direction is in the best interest of the organization.

First and foremost, I have never been comfortable with putting my organization’s financial future in the hands of twelve people who are not smart enough to get out of jury duty. The Vioxx case exemplifies exactly why the executive branch must weigh the concerns of risk management more heavily than the concerns of the legal team. The legal team’s place is to execute the will of the organization to determine the best possible economic outcome from the mess that has been made. The company holds the map, the lawyers drive the car.

Just for the heck of it, let’s look at the numbers on this thing. Merck has reserves on this of $675 million. Let’s just say that Merck decided to settle these claims. First, you should remember that 4,200 people did not die. Although the plaintiff attorney stated over and over that this was never about the money, as I have so liberally stated in the past, it is always about the money. In a death case, it is the only remedy. There is an economic value to a 63-year-old man, and eventually you are going to hit the plaintiffs number. I would say that number would be about $2 million. If Merck decided to aggressively settle these cases, you could safely say that its legal fees would amount to about $25 million.

Conservatively assuming that 25% of these cases go away for nuisance value, it would leave about $200,000 per case to settle. If a wrongful death case is worth $2 million, $200,000 per claim should be plenty to settle out.

This case in Texas will probably cost Merck $20 million, and conservatively about $3 million to litigate. There are 4,200 other cases out there which will grow to over 10,000 cases because of the publicity in this case. Kenneth C. Frazier, Merck’s senior VP and general counsel, was quoted as saying “There are other Vioxx cases coming to trial and we will vigorously defend them one by over the coming years.” Litigation costs will conservatively top $100 million, leaving about $550 million to settle. Using the same 25% in nuisance cases, this leaves a little less than $75,000 per case.

Settling leaves about 167% more per claim to pay out. Litigating increases legal fees by over 400%. If you use all of the $200,000 per case for this scenario, total paid losses would amount to about $1.5 billion plus the $100 million for legal fees. I rest my case.

I have two very simple standards when it comes to the direction of a claim and whether to litigate or settle. One, if I like their case better than mine I settle, period. Second, if the cost of litigation could exceed the total amount for which the claim can be settled, I am inclined to settle.

Even if I know the plaintiff is not entitled. Even if I know that “we can win this thing.” I would rather pay someone who may not really be entitled to a settlement than to let twelve people I don’t know make that decision for me.

Again, let me state that I have the greatest respect for attorneys. An organization needs to understand that claims management is economic, and upper management must be involved in the decision making process, since their allegiance is to their company, while attorneys and outside vendors have primary interests which may be secondary to the company.

Rick Vassar, CPCU, ARM, is the corporate risk manager for Valcourt Building Services located in Arlington, Virginia. Seriously, some of his best friends are lawyers.

Reprinted with permission from Risk Management Magazine.Copyright Risk and Insurance Management Society, Inc. All rights reserved.


Risk and Insurance Management Society (RIMS) · 1065 Avenue of the Americas · 13th Floor · New York, NY 10018 ·

Check out the intro to the book. Informative yet humorous... Who knew!!?

It's like Novocaine before getting root canal - it makes the whole process a little less painful. Enjoy!

The first thing people ask me about this book is: “Why a book on insurance? And business insurance, to boot?”

To me, this question really means: “You’re kidding, right?”

In fact, when I initially pitched this idea to the publisher, I was met with an uncomfortable silence on the other end of the line. Fortunately, being in the insurance end of business, I’m pretty accustomed to stunned silence.
After about five seconds of this, I gave it my best marketing effort:

“Sounds kind of like death, doesn’t it?”

The reason for this book is simple. There are too few insurance professionals who work outside of the insurance industry. The insurance industry is a wonderful career choice for those who pursue it and stay with it. Most who go into this line of business stay in the business until they retire—or die.

I am an anomaly in the insurance industry. I have spent my entire career in business and not in insurance. I am not a purveyor of insurance; I am a consumer of insurance.

I am a risk manager.

A risk manager determines the financing needs of an organization, provides coverage for the company, and works the insurance program on behalf of his or her employer.

I am a buyer, not a seller. I look out for the needs of the commercial consumer, and I have no ties to the insurance industry other than as a consumer. At no time have I ever worked in the supply side of insurance.

On the other hand, the insurance industry has certified me as an expert in the property casualty field, conferring on me four professional insurance designations (certifications) including the Chartered Property Casualty Underwriter (CPCU), which is considered the gold standard in the property/casualty insurance industry.

I am not saying this to toot my own horn but to point out that I have always represented the interests of the business consumer, whether a sole proprietorship or a Fortune 100 company.

Yet there are precious few of us who have remained untouched by the supply end of the insurance food chain. Most, if not all, of the information that is communicated concerning business insurance is generated by the insurance industry itself.