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FACES OF LEADERSHIP AND THE IMPORTANCE OF THE VISION THING
Q&A: TYLER NICHOLSON
NINE TYPES OF CLIENTS YOU SHOULD CUT LOOSE IN 2016
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by Jon Spaugy, BIG’s Chief Executive Officer
Happy 2016 to everyone! This is a very interesting part of the year (s) as we go from reminiscing about the past year and taking stock of ourselves right to looking ahead and making plans for a great new year. Well, I suppose there’s no better time to start something than at the beginning. There’s an old adage that the longest journey begins with a single step. So let’s step off! What do you want out of 2016? One of the questions we ask our Question and Answer interviewees (see this issue’s session with Vertafore’s Tyler Nicholson) is what they would want to hear from their future selves. What would you want your 2017 self to tell you about 2016? Do more than think about it, write it down. Make a one-year business plan and stick to it. Winston Churchill once said “Let our advance worrying become advance thinking and planning.” What I take from that is that it is better to anticipate challenges and create the ability to overcome them rather than to just sit and worry about something that hasn’t happened yet. Like most years, 2016 will be full of obstacles as well as ways around them. Be creative. Capitalize on silver linings. To use a time-worn business cliché, think outside of the box. Have you been following the trends in insurance, marketing, business growth, etc.? Do you know the latest on auto, homeowners, health, and other markets? Are you content with the products you have and aren’t interested in leaving your comfort zone? Do a little research, ask around and be proactive.
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A couple of upcoming events to add to your planning calendar are BIG’s Alaska education
Big Times Magazine | Jan/Feb 2016
cruise, our 4thannual Northern California Minivention and, of course, our upcoming annual convention in Riverside. These events offer excellent opportunities for professional growth while you are having a great time. Meet with old friends and make new ones. Take advantage of the education programs available. Go to the trade show and talk to representatives from companies you don’t do business with. Walk up to a group of people you haven’t met, extend your hand and say “Hi, I’m…” Sometimes the best way to get an education is when you don’t realize you are learning. It just happens and next thing you know you have a moment of clarity and see a solution is right in front of you. One of the reasons you are a BIG member is so you are not alone. Whatever business issues you may have are not unique, and there is someone who has been through it successfully. Utilize the events I mentioned to network with colleagues and learn something new. Bring your questions and concerns. Speak up. Have a plan and execute it. Get Active. Get Involved. Get BIG.
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AUTONOMOUS VEHICLES AND AUTO INSURANCE PRODUCTION: PHASE ONE By Jon. S. Heim, Partner, Harper & Heim Lawyers California Vehicle Code section 38750 requires the California Department of Motor Vehicles to adopt regulations for the safe operation of autonomous vehicles (AVs) or on public roads, with or without the presence of a driver in the vehicle. Some call AVs “driverless cars,” but as we’ll see, only some AVs are truly driverless. DMV adopted regulations for mere testing of AVs in 2014. Big auto manufacturers, technology giants and other firms are heavily invested and greatly advanced in their development of AVs. Presently the companies certified to test AVs on California roads include automakers BMW, Ford, Honda, Mercedes-Benz, Nissan, Tesla and Volkswagen Group; suppliers Bosch and Delphi; and Silicon Valley technology companies Google and Cruise Automation. On December 16, 2015, DMV released proposed new California Code of regulations title 13, sections 227.02 through 227.86, which, if and to the extent adopted, will govern the deployment of AVs; that is, their use by consumers on public roads. The new draft regulations are outlined in the California Department of Motor Vehicles Summary of Draft Autonomous Vehicles Deployment Regulations, also issued on December 16, 2015.
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The proposed regulations address manufacturer and independent safety testing, safety demonstration, driver permitting, ongoing reporting of AV performance, safety and use, and privacy and cyber-security requirements. However to California insurance producers, the most important aspect of the regulations is an outright ban on true driverless cars – for the present. As DMV summarizes the
Big Times Magazine | Jan/Feb 2016
suggested ban: “Autonomous vehicle operators must be a licensed driver who possesses an autonomous vehicle operator certificate issued by the DMV. The operator will be responsible for monitoring the safe operation of the vehicle at all times, and must be capable of taking over immediate control in the event of an autonomous technology failure or other emergency. In addition, operators will be responsible for all traffic violations that occur while operating the autonomous vehicle. These operator requirements create the safeguard of a driver who is capable of taking control of the vehicle when needed.” … “The draft regulations exclude autonomous vehicles that are capable of operating without the presence of a driver. Given the potential risks associated with deployment of such a new technology, DMV believes that manufacturers need to obtain more experience in testing driverless vehicles on public roads prior to making this technology available to the general public. The department will address the unique safety, performance and equipment requirements associated with fully autonomous vehicles without the presence of a driver in subsequent regulatory packages.” What these regulatory concepts mean to automobile insurance brokers is simply this: your business will survive, at least for a while. As often stated, control is the foundation of responsibility in tort -- the field of law generally applying to auto accidents. In general, if and to the extent one is in control of an event or operation, one may be responsible for any harm caused by it. Conversely, lack of control generally reduces responsibility. Therefore, increased vehicle autonomy
could shrink the legal basis for vehicle operator liability, which in turn could reduce the risks covered by and the need and premium for operator liability insurance. In many brokerages, auto liability insurance is the best-selling line. Many have predicted that AVs will turn the auto insurance market away from operator liability coverage to product liability coverage. As someday there likely will be far fewer AV manufacturers than AV operators, such a sea change could submerge your market and business model, leaving your brokerage straining for air.
lower commission. Too, the requirement for and the omnipresence of an unspecified, maybe unpredictable population of diverse drivers may enhance the risks and undermine the conformity of the futuristic storage lot scenario. The AV vanguard may not be so keen on that vision if drivers are still in ultimate control of AVs and the supposedly trailblazing arrangement looks like luxury, automatic-everything car rental. These impressive inventors and developers want to be much more than the next Hertz.
Although AV proponents may be disappointed by DMV’s Perhaps worse for insurance producers, some AV pioneers, proposed deployment regulations, insurance producers notably Google, seem to imagine replacement of our current, human-operated vehicles not by AVs owned by conshould welcome the proposals as more or less the best that sumer-passengers, but rather by huge fleets of AVs owned could be expected now, and certainly less threatening than by, say, Google, and stored autonomously and locally. In alternatives. But let us not grow complacent. AVs are comthis scenario, a consumer needing a ride would request ing. Their forms are uncertain but their volume growth is one and pay for one electronically. An AV would deploy not. And it is not hard to imagine fully autonomous, cenfrom a local storage lot location and trally-owned, locally stored AVs in the future. Even comtitle LOI will never be banished from mayto be the boundconsumer’s by words that objectively mean “I ago. The yet thebecome nature of anviable LOI even when the party privately thought “well, transport the consumerdo”to his destination. Then the AV the commercial merciallexicon; AVs may (DMV’s proposed regulawill never be standardized. We’ll all keep using maybe -- if everything still looks good.” would return to the nearest or most efficient storage lot. LOIs, even tions would allow deployment of commercial AVs). though most not do either too little or too Obviously, wheneveriRobots you are entering into a much, and even if we aren’t sure what any particSound fanciful? Well then, consider and similar, legally binding contract, you need to know it. ular one really does. proven devices that, forJust example, clean your home whenInsurance producers who plan to remain in business for remember you can’t tell from a title alone. ever you ask, then return on their to their docking many years come may be Stanley Heim to at (510) 725-7593, or wise to diversify soon into You must readown the entire contract for bindingstaor Call Jon him atthat jshinslaw@gmail.com or harpwords. Inand somethe cases you may also e-maillines seem less vulnerable to technological revolutions. That, some say, isdisclaiming what Google avant garde have to consider what actions taken pursuant to erandheim@gmail.com. tions -- perhaps commercial property and operations, really have in mind. an LOI may suggest that you thus mean or don’t mean to be bound. excess coverages, and special, new and niche risks. Over time, the business of auto insurance production is likely to In that light, DMV’s proposed must frustrate As a matter regulations of professional preference and style, I dislike the title LOI andout prefer avoid it.If For change dramatically, and maybe the market shrink drastiand disappoint those who want drivers oftocars. the my money, or more properly for my esteemed proposed regulations are adopted, will have toterms stay cally, in the coming AV revolution. clients’ money, adrivers writing of commercial binding contract or preliminary ne- – put for the near future,isifeither onlya as a safeguard, a backup gotiation, and it should be called only what it Call Jon Stanley Heim at (510) 725-7593, or e-mail him at and a pocket to pick if something goes awry. Of course, if really is. Nothing in between and nothing with jshinslaw@gmail.com or harperandheim@gmail.com drivers remain on the hook, they’lltitle continue to need and an encouraging is useful. Indeed anything hybrid can bevehicle confusingliability to all andinsurance. disappointthe state will continue to require ing to one side. But my cause here was lost long Maybe, however, at a lower premium and correspondingly
7 | Big Times Magazine
MACHINES WON’T REPLACE INSURANCE AGENTS IN 2016, BUT THEY WILL DO THIS By Steve Anderson
I am a science-fiction fan. As a kid, I watched the original Star Trek series live on TV from the first episode in 1966. I’ve watched every Star Trek movie and almost every episode of every TV show variation of the Star Trek theme. I guess I have been interested in the future and what it might make possible for a long time. I continue to explore all types of technology, both tried-and-true as well as the new stuff. Is it a fad? What implications might it have in the future? Should I pay attention to it? My focus is the insurance industry, so I also try to understand what impact emerging technology might have on how the industry helps people perceive risk and manage losses. In November, I attended the ACORD 2015 as a judge for the ACORD Innovation Challenge. I had the opportunity to listen to Jared Cohen’s keynote presentation. Cohen is the Director of Google Ideas and the co-author (along with Google executive chairman and former CEO Eric Schmidt) of “The New Digital Age: Reshaping the Future of People, Nations and Business.”
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The questions I asked included: What type of boat did you buy? Does it have a motor? If yes, what is the horsepower? How much did you pay? Based on the answers provided, I was able to use this tool to capture my insurance expertise (I have a Masters in Insurance Law) and display a customized page that showed the coverage available — and what was not available — under several different types of homeowners policy forms, including both physical damage and liability coverage.
Cohen spent a majority of his time talking about how Google is using machine learning in many areas, including image processing (Google Photos) and Google Driverless Cars. If he spent that much time talking about machine learning, then it just might be something I should spend more time exploring.
I was able to answer the question asked and also show where additional insurance coverage was needed.
Using their platform, I was able to create an online conversation that created a guided conversation that answered the question, “I bought a new boat. Does my homeowners policy cover it?” Building the response to this question took about an hour for me to complete.
More complicated conversations (like an annual account review process) would take longer to develop. The additional time required is due to the difficulty (at least initially) of capturing the expertise required and understanding the logical flow of
Big Times Magazine | Jan/Feb 2016
Once you learn how the tool works, anyone should be able to create simple conversations like this in less than 30 minutes.
the conversation.
I do not believe this technology will replace the need for insurance agents. Today’s consumers demand value. They want to engage with people who provide products and services. And they want it when they want it. Anytime, day or night.
However, once the guided conversation is created, it can be used many times by both internal employees who don’t have the experience as well as clients who have a question.
For insurance agents who are simply “order takers,” machine learning will likely be a threat. It will be much harder for them to justify why anyone should do busithat otherwise could have been avoided. There ness with them. are agents some companies who have fell on hard Those insurance who embrace newjust technolotimesways and are well with managed. Left alone and Machines ABOUT THE AUTHOR gy and find better toreally engage the consumer that can learn just might provide an edge inallowed to work through the problems, they will will always find opportunity. For those agencies that surance agents need to compete effectively Stephen Santoro is a former senior executive officer in a 24/7 be fine and will become great firms again. This arworld. can see the opportunity, machine learning tools will from TWO Fortune 200 Insurance Holding Companies. ticle is NOT targeted at them. Both firms were/are traded on the NYSE. His background provide another way to engage and interact with the focused on reinsurance in both USA and tax haven vendigital customer. You decide folks! ues. Stephen has worked in the insurance business and Like Mark Twain, I think the death of the insurance agent has been greatly exaggerated.
Thank you Jon Spaugy and the Board of BIG I do not profess to be antoexpert in Artificial Intelligent for allowing mygrowing viewpoints. I’ll be back next time! or Machine Learning. The evidence tells me that this technology will be available sooner than we think. In 2016, I will be spending more time learning about machine learning technology to better understanding the implication — and the benefits — to the insurance industry.
related businesses since 1981. Stephen also has owned controlling interests in 3 managing general agencies in CA and GA. Contact him at (310) 305-0459 or ssantoro@ stephensantoro.com.
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Q&A: Tyler Nicholson by Don Lukenbill
If you have an agency management system, chances are you have meet this issue’s Q&A spotlight insurance professional, Tyler Nicholson. If you have been to a BIG convention or meeting -- or practically any industry event -- you have meet Tyler. He is definitely a stalwart supporter of independent agents and brokers, as well as a great guy. Of course, a conversation with Tyler at a trade show booth or over a drink at a meeting doesn’t give you the whole picture. In fact, much of the conversation likely centered on you and your business. So we thought it would be interesting to look behind the curtain and find out a little about Tyler Nicholson and share with you. BIG Times Magazine: We always like to start out with a little biographical information. Tell us how and when you started on your career path and what keeps you interested. Tyler Nicholson: I started my career path in insurance in a similar fashion that most of the people reading this did. A good friend told me to get an insurance license and to come work for him at one of California’s large auto insurance brokerages. I went to Mike Russ Schools, which I am now an instructor at, and got my license. Then moved on to working at FSC Insurance Solutions. BTM: You work for Vertafore, which is a resource for, among other products, management systems for companies, GA’s/MGA’s, and agencies. How have these products changed since your days with FSC?
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TN: It’s changed a lot. Vertafore has the largest customer base in the industry, working with agencies, carriers and MGAs, so they’re able to help find efficiencies across the entire value chain. In the past an agency had to spend a lot of time and resources on new equipment to implement an agency management system, plus it would have to continuing keep it updated and maintained. Now most systems no longer need to be run internally on servers in the office or remotely. Even FSC Rater’s data can be stored in the cloud online with their quotes in the cloud feature. I see of lot of agencies running their entire office off of Surface Pro tablets and laptops now. The insurance industry is currently going through a very large digital disruption. Having the internet available just about everywhere has changed the needs of agencies looking for these solutions to serve their clients. The insureds want their policy information accessible at anytime from anywhere on any device. Over 2.2 billion has been invested in insurance startups in the last 5 years and over 40% of that has been in the past 12 months. Vertafore has the tools to help agencies concur this disruption and even the playing field.
Big Times Magazine | Jan/Feb 2016
BTM: What kinds of changes/improvements do you see on the horizon? TN: I see a lot of changes about to occur in regards to how insurance is offered in the marketplace and who will be offering insurance products. The agencies that accept this now and adapt quickly will be the ones that thrive during this disruption by offering new ways to serve their customers. BTM: When an agency is considering a management system, what should they be looking for in the program? What about customer service? TN: This industry is starting to change so fast that you should look for a vendor that can sustain, and help drive, that pace. An agency needs to make sure who they choose as their technology partner exceeds their current needs. They also need to make sure their partner has broad adaptable technology solutions so they can prepare for whatever is on the horizon. Features are great, however the system that an agency is using as the backbone of their business needs to offer true automation and be scalable for future needs. Customer service is extremely important for any technology vendor, not just in the insurance industry. When an agency moves forward with a new partnership to provide any type of software solution, they should familiarize themselves right away with all training, learning and customer service avenues available so that their entire staff can get up to speed quickly and stay on top of enhancements and upgrades. BTM: Besides a management system, what other technology should an agency be using? TN: With companies like Coverhound, Healthcare.com and even Google recently entering our marketplace, Front Office solutions are essential for an agency that plans to grow during the changes we are facing. Rating, E-Signature, CRM and many others are available and geared specifically to independent agencies. Reporting and Analytic tools will help an agency benchmark and gain view into their marketplace BTM: Sometimes I hear reps for technology products talk about how, let’s say, “non-millennials” sometimes shy away from tried and true methods. Do you think this is common?
TN: I can’t say if it is common, I certainly don’t see that as an obstacle. However, it sounds like those reps may be going about it incorrectly. An agency needs to see the true value of a partnership when looking into a technology solution. It should never be offered or considered as just another product and treated as just another expense. When partnering with any business or even an individual, it should be considered as investment into the future of their agency.
TN: Bringing new ideas and products to agencies is essential. Trade groups need to make sure they have independent agencies best interest at heart. When agencies feel it is a place for them to have a forum and a unified voice on important issues, it will create a lure for them to participate. The more participation, the more and better ideas will come out of meetings and conventions. Once there’s large agency participation, that’s when the carriers participate the most.
BTM: You are well-know with BIG members, as well as other associations. What makes you gravitate toward trade organizations?
BTM: If you could go back 10 years and talk to Tyler Nicholson, what would you tell him?
TN: Trade organization for are a way to learn about and foresee changes. They are also a way to meet new people all the time. Trade organizations definitely helped me a lot when I was new to this industry and I have them to thank for a fair amount of my success. I have made the strongest and longest lasting relationships in the insurance industry during trade shows and local trade meetings. I miss the days of local meetings all over the state on a weekly basis. BTM: Obviously member meetings and newsletters are a great way to stay in touch, especially considering how insular an agency can be. Annual conventions have also been hallmarks of member-company-association connections. Some, like BIG’s annual events, have grown while others have faltered. Do you believe these longtime communication standards are still useful?
TN: I’d tell myself to ask as many questions as possible and to learn as much as I can about things that are not related to my specific job. So many things are connected that you would never think of at first glance and if you are also on the lookout and constantly learning you’ll find these connections more often. I’d also tell myself to take more time off on a regular basis. It took me many years to take more than a few days off at a time other than extended weekends. That is my biggest regret from 10 years ago and I still struggle with it today. BTM: Now fast forward to 2025. What do you want to hear about future Tyler Nicholson?
TN: I do. Agencies need to know what they want to get out of a convention or meeting. Showing up without plans will not get the most out of these events, but it is better than not showing up at all. There are so many things that go on during a convention that are not on the agendas.
TN: Obviously I would want to hear that he is very successful in whatever field and role he currently is in at that time. Also on a professional level I’d be like to hear from the people that have worked for him over the years, that he is a strong leader and coach that also is caring, puts his people first and leads by example. On a more personal level and most importantly, I’d like hear that he puts his family before everything else and is taking his own the advice from 10 years ago, to take time off a regular basis.
BTM: What can associations like BIG do to stay relevant to the success of agencies and companies?
BTM: If you could sum up your personal philosophy for success in a few sentences, what would they be? TN: There’s never any substitute for hard work. It is a major part of the equation for success. There will also be someone smarter, more experienced and educated than you. The one thing you always have control over is not letting ANYONE out work you. It is one piece of this recipe and there’s much more needed to get to the finish line. Without hard work, great ideas, experience, and knowledge will go to waste. One of my favorite quotes is “Work like there is someone working 24 hours a day to take it all away from you.” - Mark Cuban. BTM: Any final comments? TN: I hope all readers feel free to contact me anytime. I am looking forward to what’s ahead. I enjoy and embrace changes and they are definitely coming. Hold on and enjoy the ride!
Rudy Castro, SEVP, Cypress Premium Funding
11 | Big Times Magazine
AS PRIVATE PENSIONS ARE BEING ELIMINATED, THE UNITED STATES OF AMERICA NEEDS NEW SAVINGS MECHANISMS
By Stephen S. Santoro
ALL BIG MEMBERS WHO ARE SUCCESSFUL INSURANCE AGENTS AND BROKERS NEED TO CONSIDER THIS. YOU NEED TO HELP CREATE NEW SAVINGS MECHANISMS FOR YOUR CLIENTS AND INSUREDS. Private pension plans are healthier today than they were a few years ago. But as they get healthier, the more likely they will disappear. The rising stock markets since the 1980’s have restored many plans to proper funding (the exceptions being airlines, steel companies and US domiciled auto manufacturers) many employers feel they no longer need to sponsor them. All of you as insurance agents and brokers need to be aware of this. And as a service to your insureds and clients you should consider their financial well-being and futures. These entitlements may not be available when many of you retire at the current rates of consumption. McKinsey & Company (the consulting firm) predicts no growth in private pension plans in the next 5 years. Additional contributions from employers and the requisite investment returns on “defined-benefit-plan assets” will just offset the drain created by benefit payments, plan terminations and the slowdown of benefits earned by workers in “frozen plans.” (Freezing a pension plan means that no new hired workers are allowed to participate but employers continue to fund additional benefits as the existing workforce earns them. Terminating a plan means that no workers can earn new benefits, and all previously earned benefits are either paid off in cash or transferred to an annuity operated by an insurance company.) McKinsey projects that frozen or terminated private pension plans are likely to double or triple in the next 5 years, from 25% of the $2.3 trillion in “defined-benefit-plan assets” to as much as 75%. Strong unions may continue some plans but the past experience of airlines, steel companies and US domiciled auto manufacturers suggest otherwise.
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Under funding that created all the media and press fervor of private pensions in the past is over. Stron-
Big Times Magazine | Jan/Feb 2016
ger laws and requirements, plus better accounting are the reasons. Tighter pension regulation and better accounting do benefit the plan participants; they are an issue for the plan sponsors. The Pension Protection Act of 2006 and related new accounting standards will further accelerate this decline of the use of “defined-benefit-plans.” All plans must be fully funded by 2008. Those which are not must make that shortfall up by 2015. In the interim companies MUST show their pension surpluses or deficits on their balance sheets, not in footnotes and FASB (Financial Accounting Standards Board) is planning to add another requirement: Companies must recognize their pension gains and LOSSES as market prices change, rather than smoothing them over a number of years. Prosperity cannot save defined-benefit-pension plans, what will support 74 million baby boomers (now between the ages of 45-64)? What about the 84 million Generation X-ers (24-45) and Generation Y (younger than 24) in their retirements? (You folks, the insurance agents and brokers need to answer that question!) The USA savings rate has fallen from more than 10% in 1984 to MINUS (yes, you read that correctly) 1% in 2009. There is much debate about the methodology and measurement correctness, as savings may be stronger than many believe, however, THERE IS NO DOUBT THE USA NEEDS TO SAVE MORE AND CONSUME LESS. 401(k)’s, KEOGH’s, SEP’s and IRA’s maybe the right vehicle to “move” from pensions, but they still are not doing the job. Only 50% of the workers today participate in such plans and MOST fail to save the maximum amounts. Most baby boomers do NOT have the money to carry them through their retirements. Even many of the top-income boomer households have INADEQUATE savings: The average household in the below median half owns less than $130,000.00 in retirement savings, NOT COUNTING THE HOME. The Aspen Institute asked a group of insurance, reinsurance and financial services executives to consider the problem. Their conclusion: The government
and the people of USA should harder to bolster savings, creating savings vehicles that are simple, attractive, supported in part by government with tax deferrals and direct subsidies, managed by the insurance, reinsurance and financial-services professions and are targeted to each important expenditure in a lifetime, such as education, home purchase and retirement. These folks further suggest that Social Security and the insurance, reinsurance and financial-services profession create and sell low cost annuity contracts to people as the retire, to minimize the risk of outliving their savings. They go on to say those current low-income workers who don’t have savings plans at their work, be granted a subsidy to save for retirement. This subsidy would improve on the existing savers’ tax credit, giving a federal match of savings up to 3% of income for people earning less than $40,000.00@ year. The current sub-prime and Alt A mortgage fiasco suggest a housing crisis where too many people own houses they neither could afford or should have purchased in the first place, these executives decided the issue is not too much house but TOO MUCH BORROWING. Their plan would replace zerodown-payment loans with subsidized down-payments savings-a 50% government match of the first $5,000.00 of savings. For Generation Z (current babies), these executives propose child savings accounts: Newborns get a $500.00 tax-sheltered sav-
ings or investment account from the government. Relatives can add $2,000.00@year and low-income families would get a match of a $1,000.00 deposit. These executives focused on low and moderate income Americans, who have the least ability to save and the greatest potential return from doing it. This is welfare, but it is capitalist welfare! Fundamental requirements of “free people” are savings and investment. Savings reduce financial risk and make it possible to take a chance on a new job or take a year off work to acquire a new skill. Returns on investment demonstrate the power of capital appreciation and build wealth among those who need it most. Americans who are perceived to be “more well off” need to put more money aside (save) and the executives plan properly provides better tax shelters for savings in ALL income and wealth brackets. Individual Americans, including their USA government, need to save more and borrow less. All of you as insurance agents and brokers need to be aware of this. And as a service to your insureds and clients you should consider their financial well-being and futures. You decide folks! Thank you to Jon Spaugy and the Board of BIG for allowing my viewpoints. I’ll be back next time! ABOUT THE AUTHOR Stephen Samuel Santoro is a former senior executive officer from 2 Fortune 200 Insurance Holding Companies. Both firms were/are traded on the NYSE. Stephen’s background focused on reinsurance in both USA and tax haven venues. He has worked in the insurance business and related businesses since 1981. Stephen also has owned controlling interests in 3 managing general agencies in CA and GA. Since 10.1988, he has operated a consulting firm focusing on personal lines p/c with insurers, reinsurers and managing general agencies as clients. Contact Stephen by phone at 310.305.0459 or email at ssantoro@stephensantoro.com.
13 | Big Times Magazine
4 FACES OF LEADERSHIP AND THE IMPORTANCE OF THE VISION THING: Behavioral Strategist Explains How Any Leader Can Responsibly Boost Their Visionary Side
By Rob-Jan de Jong Whether it’s a presidential candidate, a corporate executive or an NFL coach, people admire a leader with vision. They like someone with a clear idea of where he or she is headed, and who knows how to motivate others to accomplish the goal. But as much as people might like to say someone is a “born visionary,” in truth, vision is something we develop, not something we arrive in the world with, says Rob-Jan de Jong, a behavioral strategist and author of “Anticipate: The Art of Leading By Looking Ahead” (www.robjandejong.com). “One thing that visionaries have in common is that they have an ability to notice things early,” de Jong says. “They recognize some sort of significant change is happening and they make use of the opportunities it presents.” Just identifying that a major change is afoot isn’t enough, though, he says. The visionary needs to connect the dots into a coherent picture that takes into account future developments. “That’s easier said than done, but it’s an ability leaders can develop if they are willing to work on it,” de Jong says. Growing a leader’s visionary side therefore boils down to sharpening both the ability to notice things early and the ability to create coherence. In combination, the abilities suggest four archetypes of leaders. • The Follower. This is someone who is neither good at noticing things early, nor skilled at cre-
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ating and communicating a coherent story from insights about what the future might bring. The follower may be an excellent manager, but don’t expect this person to inspire others or drive innovation. “Being a follower isn’t necessarily a bad thing,” de Jong says. “These people are often careful about their decisions and good at critical thinking, and in the short term that can work well. But their preoccupation with today keeps them from anticipating what comes next.” • The Trend Hopper. On the upside, a trend hopper has a well-developed ability to see things early and is willing to embrace changing realities. These are people who are quick to adopt new technology and among the first to fantasize about how things can be different – even radically different– real soon, de Jong says. On the downside, trend hoppers aren’t adept at turning their early insights into a coherent story that justifies an active strategic pursuit. After seeing them chase several flavor-of-the-month ideas, other people start to tune them out. • The Historian. These leaders are adept at connecting the dots and spinning a story that makes sense. They cite patterns, facts and figures and make everything that’s happened so far look coherent and intentional. “When you listen to them, it all makes sense,” de Jong says. “But they have their eyes trained on the factually true past, not the imaginative uncertain future.” Certainly, it’s valuable to have some historical perspective, he says, but you can’t let history cripple your ability to engage the future. Historians also
often are cynics, ready to explain why things are they way they are and why your unconventional idea won’t work. • The Visionary. This is the one to strive to be. A visionary isn’t quick to hop on every fad, but also isn’t a naysayer about how things might be done differently. Instead, says de Jong, the visionary takes a mindful, future-oriented perspective, balancing the need for a compelling future with the awareness of the dangers of becoming dogmatic and overly optimistic. Visionaries are able to explain an imagined future in a way that fills people with energy and engages their imagination. “A powerful vision isn’t just nice to have,” de Jong says. “It’s the most important tool in the transformational leader’s toolbox. A leader’s personal imagination, inspiration and dedication are what will ignite the excitement in the people they lead.”
ABOUT THE AUTHOR Rob-Jan de Jong, author of “Anticipate: The Art of Leading By Looking Ahead” (www.robjandejong. com), is an international speaker, writer and consultant on strategy and leadership themes. He serves as an expert lecturer at various leading business schools such as the Wharton Business School (USA), Thunderbird School of Global Management (USA), Nyenrode Business University (The Netherlands), and Sabanci Business University (Turkey). As a behavioral strategist, he speaks, teaches and consults on executive subjects such as visionary leadership, influence, strategic decision-making, and innovation..
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Alfred Lord Tennyson wrote “In the spring a young man s fancy lightly turns to thoughts of love. “ Of course, spring is still a month or so away, and every married man and those with girlfriends know that their fancies had better turn to love on February 14th. Emperor Claudius II (3rd century Rome) decided single men made better soldiers, so he outlawed marriage for young men. Valentine was a priest during that time and continued to perform marriages for young lovers in secret. When Valentine’s actions were discovered, Claudius ordered that he be put to death. Fast forward to around 500 AD and the Roman “marriage lottery.” Each year, marriage-minded women would put their names in an urn. Eligible bachelors would draw from these names and be paired with whichever woman he selected. They would wear these names on their sleeves for one week. To wear your heart on your sleeve now means that it is easy for other people to know how you are feeling. Pope Gelasius declared this lottery day -- February 14 – to be St. Valentine’s Day. So in that spirit, we give you a few Valentine’s Day fun facts: About 1 billion Valentine’s Day cards are exchanged in US each year. That’s the largest seasonal card-sending occasion of the year, next to Christmas. Women purchase 85% of all valentines. About 3% of pet owners will give Valentine’s Day gifts to their pets. Valentine’s Day and Mother’s Day are the biggest holidays for giving flowers. Worldwide, over 50 million roses are given for Valentine’s Day each year. 73% of people who buy flowers for Valentine’s Day are men, while only 27 percent are women. The Italian city of Verona, where Shakespeare’s lovers Romeo and Juliet lived, receives about 1,000 letters addressed to Juliet every Valentine’s Day. Richard Cadbury invented the first Valentines Day candy box in the late 1800s. Alexander Graham Bell applied for his patent on the telephone, an “Improvement in Telegraphy,” on Valentine’s Day, 1876. The oldest surviving love poem till date is written in a clay tablet from the times of the Sumerians, inventors of writing, around 3500 B.C Amongst the earliest Valentine’s Day gifts were candies. The most common were chocolates in heart shaped boxes. In some countries, a young woman may receive a gift of clothing from a prospective suitor. If the gift is kept, then it means she has accepted his proposal of marriage In Medieval times, girls ate unusual foods on St Valentine’s Day to make them dream of their future husband.
Source: St. Valentine’s Day.org (www.stvalentinesday.org) and History Channel (www.History.com)
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CALIFORNIA LEGISLATORS OPT TO REDEFINE SMALL GROUP COVERAGE
By: Bryan Bate, Vice President of Burnham Benefits Insurance Services
It is not such a happy new year for thousands of midsize business owners in California, who watched as their last sliver of financial hope faded away on December 31. Up until the first of the year, legislators from all states had a window of opportunity to repeal a provision of the President’s Affordable Care Act (ACA), that was initially designed to require all U.S. companies, with 50-100 employees, to be placed in the small group employer category; prior to this regulatory change, only those businesses with 50 or fewer employees had been obligated to adopt small group plans. While this provision became optional for all states on October 7, 2015 – with the signing of the Protecting Affordable Coverage for Employees (PACE) Act – California will stay the initial course and redefine the boundaries of small group employers.
ing evidence that females are generally healthier than males, small group plans will not take this information into consideration when rating both sexes.
As of January 1st, all organizations in California with 50-100 employees – except those who have grandfathered large group plans – will now be considered small group employers, and face higher premiums on group insurance plans. This major structural shift, set to affect 2.4 percent of businesses (33,000 employers) and 14 percent of the workforce (2.3 million employees), will take affect upon renewing or purchasing insurance in 2016. Small group premiums will be based on the experience of the entire risk pool of all those fully insured and non-grandfathered groups covered by the insurer in the state. Moreover, premiums cannot fluctuate based on an individual group’s claims experience.
Family Size This is now strong a determining factor in adjusting premiums under the 2016 provisions. Up to three children under 21 years of age may be charged a premium within a family, but any additional children can receive coverage at no additional charge.
Additional Impact on California Employers Along with an overall increase in plan premiums, those employers who fall under the new small group definition will not be allowed certain large group considerations, such as health status, industry risk factors, and claims experience – variations that have traditionally been available to businesses with 50-100 employees. Other examples include:
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The Gender Factor Despite research from Harvard Medical School, show-
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Age Rating As of 2016, the new age ratio is 3 to 1. For example, the rate for a 63-year-old cannot be more than three times the rate for a 26-year-old. Meanwhile, previous age factor variations often reflected up to a 5-to-1 ratio or higher. Geographic Considerations Regions within the state that are currently prescribed may be changed significantly. Changes are also possible with premiums for tobacco use, which may be increased up to but not exceed 50 percent.
Small Group Requirements, Benefits and Cost-Sharing While many midsize business owners with 50-100 employees are adjusting their budgets for premium costs, they are now also required to provide coverage for essential health benefits—10 categories of wellness and preventive health services that provide, for example, dental and pediatric benefits that are not necessarily included in large group plans. These plans must also meet four metallic benefit levels of coverage. These tiers—Bronze, Silver, Gold and Platinum—are intended to help employees compare plans and choose the one that reflects the most beneficial coverage and cost-sharing structure. Additional benefit and cost-sharing requirements are predicted to increase the breadth and scope of coverage, reducing plan flexibility while increasing premiums. As a result, changes may influence employers with 51-100 employees to self-insure as a way to avoid these requirements, potentially adding to growing
numbers of lower-cost groups choosing to assume the financial risk of providing health care benefits to their employees. This is typically done by earmarking money from corporate and employee contributions and setting it aside in a special fund that is used to pay claims as they are incurred rather than paying fixed premiums to an insurance provider. As this kind of chain reaction starts to occur, premium averages will likely increase, not only among the fully insured employers with 51-100 employees, but also for employers with 1-50 employees, as these groups will be combined for the purpose of premium rating. Accepting Change Although California was given the chance to repeal the ACA’s small group insurance provision, prior to the first of the year, state legislators have decided to hold their position and move forward with this tremendous shift in insurance structures for business with 50-100 employees. As a result, millions are now scrambling to figure out what it all means and how they will be affected. For many employers, there is still time to analyze what plans are appropriate for their individual companies, and whether or not to self-insure. Before taking the plunge into the brave new insurance world of 2016, employers may want to consult with insurance carriers and financial experts on what may work best for them. After all, change has come, whether we like it or not.
About Burnham Benefits Insurance Services: Burnham Benefits Insurance Services, Inc. is a privately held, full-service employee benefits consulting and brokerage firm headquartered in Irvine, Calif. The firm is among the largest in the state to specialize solely in strategic employee benefits consulting and brokerage services. With a comprehensive offering of client-first health and wellness programs, Burnham effectively manages more than $1.5 billion in premiums for more than 400 clients.
Burnham Benefits’ footprint currently spans offices in Orange County, San Francisco Bay Area, Los Angeles, San Luis Obispo, Santa Barbara, Sacramento and San Diego, Calif., as well as a satellite office in the Washington D.C. metro area. Burnham Benefits holds national recognition as Business Insurance’s #1 Best Places to Work in Insurance 2013 and 2014 and has been ranked a Best Place to Work by the Orange County Business Journal for five years running. For more information, visit www.burnhambenefits.com.
About the Author: Bryan Bate, vice president of Burnham Benefits Insurance Services, Inc., has 17 years of experience in the employee benefits industry. With multiple individual and leadership sales and account management awards, Bryan is responsible for new business development, enhancing existing client relationships, and fostering marketplace relationships. Working strategically and collaboratively with clients, Bryan helps organizations navigate the employee benefits market—from negotiations and financial modeling to wellness strategies and communication—enabling them to achieve both their short- and long-term
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NINE TYPES OF CLIENTS YOU SHOULD CUT LOOSE IN 2016 By Michael Houlihan and Bonnie Harvey, coauthors of The Entrepreneurial Culture: 23 Ways to Engage and Empower Your People. No that 2016 is here, you’re probably looking forward to taking advantage of new opportunities that will help your business grow and blossom. What you aren’t looking forward to is another year full of Client A cursing you out every time you have a meeting. Or Client B always asking for more, more, more and then complaining once they get the bill. Or Client C being so slow to respond that every project takes twice as long as is necessary. These are the clients who starve your business of the energy it needs to grow and prosper. It might be time to do some winter pruning and cut off those bad branches. Bonnie’s mother used to tell us that seasonal pruning makes the trees grow stronger and produce more fruit. The same is true of pruning troublesome clients. When you disconnect your business from these toxic energies, your employees will be happier, you’ll be happier, and everyone will be able to focus their time and energy on more productive, more rewarding tasks. But before grabbing your pruning shears, it’s important to have a plan. First, you need to truthfully evaluate the situation. Do you have more troublesome clients than happy campers? In other words, are you the real problem?
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Is the client behaving badly because you’re providing bad service or are they chronically abusive and disrespectful even when you provide great service? Second, you have to prune with finesse. It should be done in a way that prevents bad feelings on both sides. Make it about you. Explain that it’s not about them, but about the direction the company is heading at this time. Depending on what the case may be, tell them that you’re reorganizing, making changes due to personnel issues, focusing on a set number of clients, and so on. You don’t want to permanently burn any bridges. So what kinds of clients should you consider putting on the chopping block? The Abusers. These clients never have a kind word for you or your employees. In fact, interactions with them are usually peppered with demeaning language and expletives. It’s one thing when they treat you like crap, but an abusive client being nasty to your staff is something you simply can’t tolerate. Nothing can sink employee engagement and happiness faster than rude and abusive clients. A popular phrase with Abusers is always “or else.” They yell at you or your employees that you better do such and such or else! Know that you’ll never be able to please them. There will always be an ‘or else’ looming. Know that at the end of the day, you’re in control and you get to decide whether you’re going to put up with them or not. The Pot Stirrers. These clients aren’t team players but they do infiltrate your team. Unfortunately, once they’re working with you, they do nothing but stir up trouble. They say bad things about you to your employees and vice versa. Clients might do this because they feel like it gives them an upper hand. If they can play everyone against each other, they think they may be able to work out a better
deal or keep everyone scared enough that they’ll do everything they ask. Pot Stirrers are poison to a company. It’s important that you nip this kind of behavior in the bud as soon as you realize it is happening. The Unhappy Campers. Time and again, you deliver great work, but your unhappy campers always find something to complain about. They’re never fully satisfied, and their lack of gratitude has taken the wind out of you and your employees’ sails more than once. Unhappy Campers may not be the worst clients on your list, but they can be exhausting. When you and your staff have put time and energy into a project and you’re pleased with the results, your clients’ appreciation means a lot. And it doesn’t have to be a big show of gratitude. A simple “thank you!” is all it takes. But Unhappy Campers can’t be bothered. If they’re not happy, you’re not happy, and it’s best to cut them loose while you still have energy to give to other clients. The Cheapskates. Any business owner knows that deciding on how to price your products
or services is never an easy decision to make. Chances are before presenting a client with a price list, you’ve already put a lot of time and thought into it, running the numbers to settle on a price that works for your business and potential customers. But Cheapskates don’t care about any of that. They’re the clients who always ask for a discount or want to keep paying based on an outdated price list. Of course, it’s okay to give clients a discount here and there. But Cheapskates have no problem bleeding you dry. And the worst Cheapskates are also chronic late or non-payers. They never pay invoices on time, causing you to have to spend time tracking them down in order to get paid. Your energy is better spent elsewhere. The Know-It-Alls. These are the clients who make you wonder why they even hired you in the first place. They never want to take your advice, fight you at every turn, and then change all the work you send their way. Even worse, when they do it their way and don’t get the results they wanted, they find a reason to blame you or call you and need you to fix it under a ridiculous deadline.
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When a client prevents you from doing what you do best, that’s a big problem. It makes the work you do for them less satisfying, and worse, you run the risk of having your business’s name attached to subpar work. The Sponges. Your Sponge clients seem to think they’re your only clients and use your time accordingly. They call constantly, send email after email, and request needless meetings or flake on important meetings and deadlines because they view their own schedules as much more important than yours. You put much more into your interactions with Sponges than you get back. They eat up valuable time with unimportant tasks and worries that keep you from servicing other, more profitable clients. The Headache Inducers. These are the clients who hold up a hoop and expect you to jump through it. Then, they hold up an even smaller hoop and expect you to jump through it. And on and on. They specialize in making unreasonable demands and last-minute requests that put unreasonable stress on your company. If anyone is going to give you a migraine, it’s this type of client. You might be able to rein them in by setting boundaries, but if they repeatedly breach those boundaries, it might be time to pass them on to your competition. You don’t need the headache! The Cowboys. Every interaction with these clients feels like a Wild West showdown at high noon, but instead of carrying a six shooter, their biggest threat is firing you. They constantly remind you how easily you could be replaced. Unfortunately, the best way to handle Cowboys is to be the first one to pull the trigger. You might suggest that they’d be happier working with another company and help them take steps to make that transition. There’s no joy in always being under the gun, and you’re never going to do your best work
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when you’re being threatened with termination. The Two-Faced. With these clients, you never know what’s up or down. They won’t hesitate to lie to get what they want—or conveniently forget previously agreed-upon goals or deadlines. They’re always changing the rules and moving the goalposts. You can never reach a satisfactory point with them because they’re always changing their expectations. You never know where you stand with these kinds of clients. And that can cause a lot of unnecessary frustration and confusion. It becomes difficult for you to make the right decisions for them. You end up constantly second-guessing yourself or wondering when they’re going to turn everything on its head. Don’t waste your time. There are plenty of honest clients out there. Whether you think of freeing your business of troublesome clients as pruning away the bad or opening up a port to welcome new opportunities, the results are the same. Your business will be healthier. You and your employees will be able to blossom and pursue those activities that can truly improve your business. ABOUT THE AUTHORS Michael Houlihan and Bonnie Harvey are coauthors of The Entrepreneurial Culture: 23 Ways to Engage and Empower Your People (Footnotes Press, 2014, ISBN: 978-0990-79370-0, $9.95, www.TheBarefootSpirit. com), the companion to the New York Times best-selling business book The Barefoot Spirit: How Hardship, Hustle, and Heart Built America’s #1 Wine Brand. Michael and Bonnie coauthor weekly no-nonsense business blogs at www.TheBarefootSpirit.com and www. TheBrandAuthority.net. For more information, contact Info@TheBarefootSpirit.com.
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2015 MARKED BY IMPROVED INSURANCE CONSUMER PROTECTION, NEW PRODUCT APPROVALS AND FRAUD BUSTS When he was sworn-in on January 5, 2015, Insurance Commissioner Dave Jones promised his second term, like his first, would be defined by action. Throughout the first year of his second term Commissioner Jones took action to protect consumers, hold insurers accountable, fight fraud, and make sure that insurance products are available to meet the expanding insurance needs in the marketplace. The culmination of the Department of Insurance’s efforts in 2015 resulted in more than $69 million recovered for Californians from consumer complaints and market conduct exams. More than $56 million in grants were awarded to district attorney’s to fight insurance fraud, there was nearly $25 million recovered through lawsuits in which the Department joined whistleblowers to combat health insurance fraud, and more than $200 million obtained by the Department to settle a long standing dispute over a failed insurance company. Commissioner Jones also approved first of their kind insurance products for the sharing economy and built new webbased consumer tools to benefit Californians. To help Californians reduce the risk of damage to their homes from an earthquake, $3 million was also obtained in general funding for the California Earthquake Brace + Bolt program. “As I promised when I was sworn in for a second term, we have worked aggressively to investigate and assist in the prosecution of those committing insurance crimes, taken strong actions to protect consumers, and approved new insurance products to meet new and evolving risks,” said Commissioner Jones. “I look forward to another
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year of fulfilling the department’s mission of ensuring a vibrant insurance market where insurers keep their promises and the health and economic security of individuals, families and businesses are protected.” In 2015 Commissioner Jones led the Department of Insurance in accomplishing the following: Fighting insurance fraud and curbing California’s underground economy. Fighting fraud continues to be a priority for Commissioner Jones. Insurance fraud is a multi-billion dollar drain on California’s economy. For fiscal year 2015/2016 Commissioner Jones awarded $34.95 million in grants to district attorneys to combat workers compensation fraud and more than $21.95 million in grant funding to fight auto and organized auto fraud. As of November 30, Department of Insurance detectives arrested 745 individuals for alleged insurance fraud this year. In an effort to curb California’s underground economy the department led a statewide multi-agency outreach effort visiting more than 75 businesses to educate business owners about their obligations to comply with insurance, licensing, workplace safety, labor laws and tax codes. This effort resulted in more than 15 citations, multiple stop work orders and nearly $300,000 in fines. Assisted consumers recovering from California’s devastating wildfires Two of the largest wildfires in California’s history occurred in 2015. Commissioner Jones visited the
burn zones and worked with state and local officials in Lake and Calaveras counties to help thousands of residents begin the recovery process. In an effort to speed recovery, Commissioner Jones obtained agreements from insurers representing 90 percent of the claims resulting from the Valley and Butte fires to claims handling reforms that provide for faster payments to consumers and flexibility with some of the deadlines and documentation typically required by insurers. Under the agreement, policyholders may receive advance payment for up to four months of additional living expenses, 25 percent of policy limits for personal property, and expedite the process for debris removal -- a first step in the rebuilding process. Commissioner Jones continues to monitor wildfire claims to ensure claims are paid timely so residents are able to rebuild quickly.
program is expanding to include more than 150 ZIP codes in vulnerable areas in Northern and Southern California. Issued emergency health insurance medical provider network adequacy regulations and created a healthcare price and quality ratings comparison tool so consumers can make better decisions about where to seek medical care
Expedited approval process and approved 6 new insurance products for TNC drivers As demand for ridesharing services continues to grow, Commissioner Jones swiftly acted to address insurance gaps associated with ridesharing and approved first of their kind endorsements to personal auto insurance policies that help close the insurance gap for consumers who drive for ridesharing companies such as Uber and Lyft.
Within minutes of being sworn in for his second term, Commissioner Jones issued emergency regulations strengthening requirements for health insurers to have sufficient doctors, hospitals and clinics in their medical provider networks to ensure consumers have timely access to health care. The regulations were approved on February 2, 2015. Additionally, Commissioner Jones lead a partnership with the University of California San Francisco and Consumer Reports to createCalifornia Healthcare Compare, a first of its kind online tool to help Californians get price and quality information before deciding where to seek needed medical care. Tens of millions in insurer investments help California’s underserved communities, bring jobs, housing, social programs and neighborhood revitalization
Expanded funding to protect vulnerable homes and property from earthquakes To help homeowners seismically retrofit their homes, Commissioner Jones helped secure $3 million in general funding for the California Earthquake Brace + Bolt program. This year, 1,000 homeowners across the state will receive up to $3,000 to seismically retrofit and protect their homes from earthquake damage. The Earthquake Brace + Bolt
The Department’s California Organized Investment Network (COIN) Community Development Financial Institution (CDFI)tax credit program attracted $71.05 million in insurance, bank, and private investments into California’s underserved communities this year. A priority for Commissioner Jones, the program spurs innovative public-private partnerships that help revitalize neighborhoods by creating jobs, affordable
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housing, community centers, schools, and health clinics. The tax credit program also supports small business loans, green investments, and water/wastewater investments. Insurer investments in COIN Bulletins increased from $6 million in 2014 to $40 million in 2015. For example, insurers are financing an affordable housing fund that invests in 100 to 200 unit housing facilities to improve the low to moderate communities and create value for investors. On average $5,000-15,000 is spent renovating each rental unit. Improvements include fixtures, finishes and tenant amenities, common areas, drive-up appeal, and functionality Housing based services include adult education classes, after school and summer programs for youth, computer training, nutrition education, and job readiness and career development workshops Green improvements include solar electricity for common areas, LED lighting, and low irrigation landscaping Commissioner’s Insurance Diversity Initiative
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increases insurance industry spending with California diverse businesses by $587 million The Commissioner’s Insurance Diversity Initiative resulted in insurers procuring $1.52 billion in goods and services from insurance companies last year-a $587 million increase since 2012-according to the 2015 Insurer Supplier Diversity Survey. The Commissioner’s Insurance Diversity Initiative expands economic opportunities for the state’s minority, women, disabled veteran, and LGBT-owned businesses by encouraging insurers to open their procurement process to California’s diverse businesses, which in turn helps boost California’s economy. To advise the Commissioner on how to meet Initiative goals, which also includes increasing diversity among insurer governing boards, the Commissioner appointed a new Insurance Diversity Task Force made up of industry representatives, diverse business owners, and community advocates. Source: California Department of Insurance (www.insurance.ca.gov).
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