by Jon Spaugy, BIG’s Chief Executive Officer
Another convention in the books Now that another convention has come and gone, I’d like to reflect on how things have changed (and stayed the same) over the six years since BIG was founded, six conventions and three miniventions. Wow! Where does the time go?
things for me is our convention – and association -- continues to far surpass what I thought it could be. Naturally, we are always looking to improve on our success, and in time I think we will be one of the biggest trade shows in the country.
I can say this without fear of being contradicted; we had more carriers and fewer mergers in 2010 than we do now. Like a lot of other industries, companies are consolidating and the little guy is being squeezed out. That is, unless he/she is smart and proactive. Attending the BIG convention shows a great deal of both.
In the end, it’s all about our members. We can blow our own horn all we want, but if we are not producing, then it’s means nothing. Convention wisdom has always dictated that referrals are the bread and butter of any business, insurance or otherwise, and that goes double for BIG. A barometer of whether we are being effective is how fast we grow. Growth, by and large, which depends on current members recommending us to their friends and colleagues. I can tell you that we broke another attendance record with this past convention and plan on continuing that trend in the future. As I said before, our exhibitor count remains steady. But when you factor in cutbacks, it is impressive.
From a convention planning standpoint, getting 100 carriers to our convention was much easier. Because we were still on the ground floor, so to speak, it wasn’t hard to impress. Now, with budgets being cut, especially in the promotions area, the fact that we are still bringing in a variety of companies to our convention is testament to the reputation BIG has built within the industry. This year, we welcomed over 800 insurance professionals and hosted 101 exhibitors at our trade show. These numbers continue on our trajectory of steady growth since our beginning. It is gratifying that so many people decided to take a weekend – a precious commodity in our hectic lives -- to come out to Riverside and see what BIG has to offer.
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Of course, now we do have a track record and a standing to uphold, the expectations are higher and we are more vigilant in our planning and execution. One of the most gratifying
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I hope everyone had a productive experience at the 2015 BIG Convention and brought back lots of strategies, contacts, and know-how back to their agencies. We are glad to provide the opportunity and look forward to seeing even more forward-thinking insurance professionals in 2016! EXECUTIVE EDITOR JON SPAUGY MANAGING EDITOR DON LUKENBILL ART DIRECTOR SAL AYALA The views of contributors to BIG TIMES Magazine are theirs alone and do not necessarily reflect those of the leadership or members of Big Independent Group.
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by Don Lukenbill
From the Day of Education on Friday to the Legal/Technology Update on Sunday, the 2015 BIG Convention managed to pack in another stellar schedule of activities in three days. For that long weekend, the BIG Convention was truly “the Main Event” Excellent CE courses and other seminars, a motivating keynote address by Mike Stromsoe, over 100 top industry exhibitors offering appointments, services, and other business opportunities, a hospitality suite and belly dancing performance courtesy of Global Hawk (watching Jon Spaugy try to dance was worth the price of admission alone), the BIGGIE Awards, Progressive giving away a total of $5,000, regulatory and insurance analyst extraordinaire Jon Hein, and self-described “tech geek” Laird Rixford from ITC all contributed to a memorable event.
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Motivational Speaker Mike Stromsoe captivated the audience with his UPP Program, that is, the Unstoppable Profit Producer Program. “Get it? Got it!” was heard throughout as he outlined the Three M’s of Marketing: Marketplace, Message, and Media. “If you want to reach 100 percent of the Marketplace, you need to use 100 percent of the Ways,” was the refrain Stromsoe used to illustrate successful marketing techniques. “People do business with people they know, love (not like), and trust,” said Stromsoe, who is also an insurance agency owner. He pointed out that there are three ways to create customer loyalty: Customer Satisfaction, Convenience, and Recognition, and the law of reciprocity is always in effect. “People don’t care what you say about yourself, they care about what other people are saying about you.” To learn more about Stromsoe’s UPP Program, visit www.UnstoppableProfitProducer.com.
The Trade Show kept on an even keel, with plenty of new partnerships started, old friends getting reacquainted, and tools for agency growth. “We wanted to connect with trusted advisors and explain the benefits of providing immigration services to their communities, and BIG has a tremendous reputation with independent agents and brokers,” said Greg McKewen from Latin American Immigration Association.
Magazine.) The award ceremony producers were kind enough to hold off until the Clippers beat San Antonio in a game seven nail-biter. Especially touching was the standing ovation for now-retired insurance legend Kjell Austad. Unfortunately, the Pacquio/Mayweather fight shown after the awards presentation was neither a nail-biter nor touching. But thanks to BIG for providing the pay-per-view free of charge to all attendees.
On the producer side, Aida Grigoryan from Century One Insurance in Studio City said “I came looking for new products and companies, as well as to connect with our reps. Especially for new agents, the BIG Convention is a great opportunity to do just that.”
Jon Heim kicked off the Legal/Technology Update Breakfast with some eye-opening perspectives on what’s happening in legal and regulatory circles. He offered an excellent primer on what constitutes a contract versus a tort, particularly when it comes to personal liability. “Will your corporation back you up in the case of a liability suit?” was a great question asked by Jon. Learn the difference between contract and tort and save yourself some potential grief later.
On Saturday Night, the BIGGIE Awards banquet was definitely a special event as the association honored the industry’s best and brightest. (A full list of winners can be found in the Biggie Award article in this issue of BIG Times
On the legislative front, Jon talked about the reaction to the recent DMV rule that requires producers to obtain written consent from an insured every time an MVR is pulled. Additionally, if the MVR is distributed to others (an insurance company perhaps?) and it is misused somehow, the producer is responsible. Fortunately, cooler heads seem to have prevailed in the legislature and AB 933 (Frazier) which provides that consent is presumed when the insured gives a producer their driver’s license number. Jon also mentioned the consumerist approach the Insurance Commissioner has taken, particularly in his consumer complaint program. The program was ostensibly set up to compile information about complaints about companies, but also does the same for producers. If a complaint is found to be “justified,” that information will be placed on the department’s website even though such a ruling has no legal meaning. Jon strongly encouraged any producer receiving a complaint notification from the department to consult with an attorney as such complaints could lead to a CDI investigation which opens up insureds’ files to additional department scrutiny. “Tommorowland,” as in probable future issues, were also discussed. In particular, Jon discussed clusters and what is the potential liability if information disseminated is a “trade secret” or certain personal information, can it be provided without an insured’s consent? He urges the “sanitization” of information and getting any information request in writing. The age-old debate of broker versus agent was touched upon, especially in light of Mercury Insurance’s recent legal troubles. Laird Rixford from ITC closed the program and the 2015 BIG Convention. He talked about advances in technology and how an agent from 1982 who uses hand rating would consider the networked, online raters of today “sorcery.”
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“To improve sales and marketing, technology needs to enable collaboration and communication,” Laird pointed out. He is a strong advocate (to put it mildly) of utilizing automated marketing to prospect for and maintain relationships with customers. With programs available today, information about customers is easily uploaded and relevant emails, texts, etc. are sent without the need for you to do “boring stuff you don’t want to do.” Technology improves agency performance, but the drawbacks of an open, collaborative environment are that it creates vulnerabilities and exposures. He advises that software is kept up to date with the latest fixes and that anyone with access to sensitive and/or personal information be hyper-vigilant when giving out that information. He also warned that company servers need to be locked in a secure area with very limited access. Better yet, use the cloud, after thoroughly vetting whichever company you use about their own security measures. Most importantly, Laird advises that you introduce technology in baby steps so as not to overwhelm your staff. As users adopt the technology, introduce more. Also involve employees in technology decisions so that can feel some ownership of it. Laird warned the audience that data breaches can be incredibly costly, and 61 percent of companies of 50 or less don’t last beyond six months after a data breach. “Make sure your security and liability coverage is excellent,” said Laird. “You can use technology to great things with your agency, but don’t rush into technology just for technology’s sake.” With that, we closed the door on another successful convention. We hope to see everyone in 2016!
that it flourishes for years to come, by contributing time, effort, and energy. Like anything in life, it takes work, but it’s that work that allows our community to thrive, and your participation this weekend, is proof that you believe in this community, and that brings a smile to my face.
Adam Meyerson did another stellar job as Master of Ceremonies at the 2015 BIG Convention. As our General Session began and we welcomed Keynote Speaker Mike Stromsoe, Meyerson began with an eloquent, heartfelt speech about what an association stands for and it means to be part of a group. For those of you unable to attend this year’s convention or the general session, we thought you might like to read the words yourself: “According to the Webster’s dictionary, the word “community” is defined as “a group of individuals associated by common interests or heritage.” In our case, our common heritage is our industry. Some of us have been in this industry for quite some time, and while others, who have just joined our illustrious clan, I bid you welcome. “Our community is a tightly knit blanket comprised of threads of all different colors, shapes, & sizes, and it’s those threads that have made this community so unbelievably unique. It is a very scary world we live in. With earthquakes overseas & riots in our own backyard, the only way for any community to survive, is for it to stick together, and fight for its survival. Sometimes, one person yelling at the top of their lungs is no louder than a single water droplet falling in middle of a giant lake, but multiply that droplet by a thousand, ten thousand, or one-million, and things start to change drastically & dramatically. “Being part of community is not just as simple as planting your flag and doing your own thing the same way everyone else does, it takes more than that. Being a part of a community is participating in its betterment, by taking an active interest in seeing
“This is because it excites me that you want to see this community of insurance professionals live long and prosper. YOU, make all of this possible! We are a community of individuals striving towards a common purpose and goal, and it isn’t money. Well, it’s partially money, but not entirely, I hope. There is money to be made yes, but if this industry does not evolve, come together, & focus its efforts as a unit, it will not prosper the way we all want it to, and I want it to. It’s about our decisions. “Whether you’re an agent, marketing rep, sales rep, vendor, carrier, or totally new to the industry, think about how many people are affected by the decisions you make? How that decision may change their lives, for better or for worse. The point is, we are all connected, just like a family. “Now, the word “family” is defined as “a group of people who may or may not be of blood relation, but who share common attitudes, interests, and goals.” When I look around this room today, I see a lot of faces. Some, or many, that I have seen before… and others, which I have not. Regardless of whether you’ve been in this industry for 20 “minutes or 20 years, you all should understand one thing, whether you know it or not, this is your extended family. And we, like any family, have arguments, make-ups, breakups, share meals, stories, we take vacations, we also celebrate in each other’s victories, and we comfort each other in times of struggle, failure, and loss. In one way or another, all of us here are linked to each other in some way. The point is that, like any family, we are there for each other. All of us are here, for all of you! That is my definition of family, and that is what the BIG is all about. “So look around you…these are your brothers and sisters in this industry, these are your colleagues, this is your industry. Let make it better…together! “From all of us at the BIG, thank you very much for supporting this incredible association. Thanks to your participation, we are looking forward to seeing it thrive for years to come!”
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Q&A: Carlos de la Cruz
by Don Lukenbill
AFX/IBEX Premium Financing
Premium financing has been a part of the insurance business from practically day one. These days, one of the best at it is AFX/IBEX Premium Financing, and leading their marketing efforts is Carlos De La Cruz. For those of you who attended the recent BIG Convention, you probably spoke with Carlos. Of course, as a stalwart on the insurance scene, Carlos has had the opportunity to meet many insurance professionals and offer his advice on which tools are out there for building and maintaining a successful agency. In his decades-long insurance career, Carlos has seen changes in the industry and enjoys a successful career as a top executive at one of the countries leading premium finance companies. We wanted to find out about some of the exciting things happening in his neck of the insurance woods and get his perspective on where he has been, where he wants to go, and how we can all benefit from his experiences. BIG Times Magazine: Obviously you are well known in the independent agent/broker community. But for the few people who have only heard the legend, tell us what you do. Carlos De La Cruz: I have 30+ years of experience in the premium finance industry and have developed many long lasting relationships and friendships throughout my career. My target clients are independent insurance agencies throughout Southern California and my mission is to provide them with value added financing solutions to better service their business and insured’s. I have much pride and pleasure in maintaining, educating and developing mutual growth for AFS/IBEX and our respective customers alike. Having a deep rooted passion for what I do has allowed me to build relationships with a wide variety of companies and individuals within the insurance industry, including General Agencies, Insurance Companies and Industry Associations. I’ve always enjoyed taking part in industry events and networking with my fellow colleagues to better serve our community.
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BTM: So what path did you take to achieve your dream of marketing for AFX/IBEX? CDLC: Out of college my first two jobs was as a claims adjuster with Allstate Insurance and a Marketing Rep with Travelers Insurance Company. My entry into premium financing was with Coast Program and then with Cananwill, where I helped establish their personal lines premium finance division in California. After Cananwill I worked for a
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couple other premium finance companies before finally landing at AFS/IBEX, A division of MetaBank®, and have enjoyed a successful career here for 16 years. BTM: Take us through the premium financing process. CDLC: Premium Finance is an alternative financing solution to secure commercial insurance without paying the entire annual premium up front. This financing alternative allows the insured to invest capital towards business growth and/or additional insurance coverage to mitigate potential risk, in addition to taking advantage of competitive market interest rates. The insured can request a premium financing option from their respect insurance agent. The agent normally has a premium finance company of choice which has granted them access to generate a premium finance agreement on-line or by phone within a matter of minutes. The premium finance company will issue a disbursement of the financed premium to the insurance markets, upon receipt of the qualified and signed finance agreement, and the insured is responsible to satisfy the remaining balance on said loan generally within 9-10 installments. BTM: How does a premium financing partner like AFS/IBEX help an agency’s business? CDLC: Premium financing can be a necessary tool in order to close the sale when discussing payment options. Premium financing also can help attract
customers to your agency who could otherwise not afford a policy that requires prepayment of the premium. Premium financing also offers a way to provide a consolidated payment for your insured when they may have multiple insurance policies with various policies. The agency may elect to be paid a referral fee for origination of the finance agreement, in qualifying states, and receive their commission once the policy is bound, versus monthly or quarterly with direct bill.
ture? CDLC: Now that AFS/IBEX is a division of MetaBank® we have more tools and services to compete on a national platform. We will continue our focus on providing the best products and services in our industry, in addition to more flexible underwriting and competitive market rates. We want to be large enough to handle all the agents’ premium finance needs yet small enough to provide personalized service to our clients.
BTM: With most insurance companies offering payment plans, how does premium financing compete?
BTM: Very simply, is premium financing a solid option for agents/brokers? Why? CDLC: Yes, it is a necessary tool in the selling process. It is also very simple to do. For example, the agent can extend a $100,000 line of credit in a few minutes, a lot faster than you could get that amount of credit approved at a bank. Second, the rate is usually less than the banks borrowing rate. Third, it improves the customers’ cash flow.
CDLC: Premium financing can at times be more flexible compared to carrier payment plans. For the agent company payment plans are not always the best option. The agent receives his commission on a monthly basis which adversely affects income. When premium financing the agent gets paid up front and commissions are received promptly. In addition, when dealing with General Agencies (Wholesalers), premium financing is essential since most do not offer payment plans. BTM: What are some scenarios where agents/brokers miss premium finance opportunities? CDLC: By asking more probing questions the agent may find out their insured would have been better off premium financing his policy rather than paying it all upfront. He could have used some of that upfront cash to invest in his company or for much needed equipment or pay suppliers. BTM: : Your website says “AFS/IBEX is committed to taking care of our agents/brokers and customers needs by investing in the latest computer technology.” What does that mean? CDLC: We are always looking at improving our automation to make the premium finance process easier for the insurance agents who uses AFS/IBEX. We are constantly updating or adding features on our website from the way they process the finance agreement, to the way they receive our various notices and reports. For the customer, we are always looking for easier ways to notify them on when and how to make their payments to us and how to communicate with us. BTM: Without revealing any company secrets, what can we expect from AFS/IBEX in the near fu-
BTM: Let’s get back to Carlos. If you could time travel back ten years, what would you tell yourself in 2005? CDLC: Embrace technology and constant change as much as possible. It is inevitable. Progress cannot be achieved without change. Opportunities present themselves more frequently to those who embrace change and adapt to their environment as it continues to evolve. BTM: Now fast forward ten years. What do you want Carlos 2025 to tell you? CDLC: Putting in that extra effort in anything you do WILL pay off at some point. BTM: What is your personal philosophy for success? CDLC: Be organized, focused and work diligently. Enjoy life and family. BTM: Any final comments? CDLC: I appreciate the opportunity for the interview. I wish continued success for BIG. BIG is special to me because two good friends were instrumental in its creation. I have known Jon Spaugy for many years and even knew his dad Ken who was an insurance agent. Sharron Varga and I have known each other since 1983. We joke that we started in the Insurance Industry when we were 15 years old!
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ast becoming one of the most coveted awards in the insurance industry, the annual BIGGIE Awards were presented at our 2015 annual convention. There were a total of 500 surveys returned with nominations and over 7,000 insurance professionals contributed in the voting.
“I was gratified to see a very high level of participation this year, with some really tight races. We had a wide and diverse field of nominees, and all were unquestionably deserving of recognition,” noted BIG CEO Jon Spaugy. “The BIGGIE Award definitely creates a buzz and there is a real competition to win one. There were numerous companies and producers that went out of there way to publicize the award, as well as our convention, and that says a lot about the continued growth of BIG and the respect we share with the insurance community.” The awards are split into ten categories, rewarding excellence in the independent agency channel, marketing fields, technology, and community advocacy. There are also three other award categories – Hall of Fame, Legend, and MVP – which are selected by the BIG Board of Directors. Couched in between a nail-biter game seven between the Clippers and the Spurs (Go Clips!) and the Mayweather/Pacquio “Fight of the Century,” the award ceremony was ably handled by our resident Master of Ceremonies, Adam Meyerson. We are pleased to present the winners here. 2015 BIGGIE AWARD WINNERS Standard Carrier Representative of the Year Standard Agency of the Year Standard Carrier of the year Preferred Carrier Representative of the Year Preferred Agency of the Year Preferred Carrier of the Year Community Advocate of the Year Technology Company of the Year MGA of the Year Vendor of the Year Hall of Fame Award Legend Award MVP
Missy Alizadeh, Kemper Specialty Insurance Hotwire Insurance Kemper Specialty Paula Wiess, Mercury Insurance Auto Insurance Specialist Mapfre Insurance Safeco Insurance Progressive Insurance Arrowhead General Insurance Agency EZ Lynx Kjell Austad, Retired Jasbir Singh Thandi, Global Hawk Insurance Salvador Ayala, BIG/BIG Latino and Uniko
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International Financial Reporting Standards (IFRS) Accounting Should be Adopted by both The National Association of Insurance Commissioners (NAIC) and by The Securities & Exchange Commissioners by Stephen S. Santoro
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alking about accounting may put you to sleep. But don’t drop off yet. An accounting decision coming up soon will have major implications for the world’s capital markets. That means your stock, bond, money market, trust fund, trust accounts, bank relationships, hedge fund, 401K, Keogh, IRA, SEP and mutual fund accounts, my fellow insurance agents. The SEC has proposed allowing non-U.S. companies (that includes insurance companies and reinsurance companies) to file US financial reports using IFRS in lieu of U.S. GAAP. The SEC was seeking comment, through and including November 13, 2014, on whether to allow U.S. companies (again, that includes insurance companies and reinsurance companies) to make the change as well. There is a larger question to answer as well: Should the SEC and the NAIC shed their allegiance to GAAP (and SAP) and support IFRS? I believe that is a good idea. While the world speaks different languages when it comes to financial reporting, by adopting IFRS that is eliminated forever. We are global and world economy. Both the SEC and the NAIC must now recognize that and make the appropriate adjustment, WITHOUT compromising safety, security and prudence. GAAP is confusing, inefficient, outmoded and needs to be updated. Think of the chaos at the 2008 Beijing Summer Olympics if the teams who participate all play by different rules. That is precisely the situation much of the insurance, reinsurance, business and investment world is living with today. Disparities in financial reporting caused by differing accounting standards may have been tolerable when cross-border investment was a fraction of what it is today. In today’s global market, these differences exact too high a price. By creating a single “global” accounting standard both the SEC and NAIC bring greater efficiency to the insurance and reinsurance markets. These firms must pay internal and external legal and accounting experts to help sort out accounting differences across multiple states, countries and jurisdictions. The shift would be great for investors too: A single set of standards would bring a new, more transparent comparability and reliability for investors who invest in far away places. In addition greater safety comes too. The current CDO (collateralized debt obligation), CLO (collateralized loan obligation) and MBS (mortgage backed security) issues, caused by sub-prime, alt-a and now some prime mortgages may have been avoided or stopped at inception. There are also huge benefits for emerging markets and the poorest of countries in the world. A globally embraced set of accounting standards can provide a readily available foundation for capital market activity and greater access. This promotes investment, strengthens the economies and improves peoples income levels, living standards and their lives in general. From my perspective it is clear the fluidity of the world’s capital is outstripping the reach of national, state and local regulatory approaches. The pace of action in the markets demands a bold action step. The willingness of the U.S. SEC and most other nations to embrace IFRS and give up GAAP is a great first step. It also provides a springboard for international collaboration and input, vs. the current “stand
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alone” SEC/NAIC approach. Further, it benefits other areas of capital market regulation. It will be difficult initially for the states, the NAIC and the SEC to relinquish direct control and embrace international collaboration. Such a transition will have steep hurdles and many, many “nay-sayers”. Many U.S. companies and regulators are not ready to make this change. They have legitimate concerns about the degree to which judgments abut IFRS will be respects by regulators and courts. However, in many countries the shift to IFRS is currently under way. And while English may be the dominant language for business, IFRS is becoming the dominant language for financial reporting. 100 countries either require or permit IFRS as the current accounting standard or they base their local standards on it. Canada started in 2011. Brazil, China, India, Israel, Korea and Mexico have also set time certain dates to switch. Robert Herz, chairman of the FASB (Financial Accounting Standards Board) suggests establishing a target date for the U.S. SEC, NAIC state regulators and companies (again, including insurance companies and reinsurance companies) to switch to IFRS, which includes his version of IFRS improvements. I think the U.S. should go one step further, rejecting a “wait and see approach” and declare the U.S. will switch on a time-certain date, which mandates ALL U.S. listed public companies switch. This move allows U.S. companies to begin preparing now and provides the mechanism to DEFEAT and ABOLISH any court, legal, regulatory or congressional intervention that would slow the change. Further this action motivates colleges, universities and institutions of higher learning to train tomorrow’s accountants, financiers, CIO’s (Chief Information Officers or Chief Investment Officers), CAO’s (chief accounting officers), CLO’s (chief legal officers), CFO’s (chief financial officers) and CEO’s (Chief Executive Officers) in IFRS. It also promotes other jurisdictions and countries to follow suit IMMEDIATELY and not waste precious and valuable time embracing IFRS, not trying to modify to mollify local customs, traditions and protocols. This forms the genesis of countries to work together toward creating a “universal” IFRS, not a fragmented IFRS. SEC Chairman Christopher Cox (and one of my favorite SEC Chairman ever) made this comment recently: “Having a set of globally accepted accounting principles and standards is critical to the rapidly accelerating global integration of the world’s capital markets.” I agree with him 1000%. This also means insurance companies and reinsurance companies too! 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 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. Stephen attended the University of UT from 1975/1980. Stephen 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. Follow Stephen on social media: Twitter: http://twitter.com/stephenssantoro; Instagram: Stephen Samuel Santoro; Face Book: Stephen Samuel Santoro (5000 Friends); and Stephen Samuel Santoro II (4300 friends); and LinkedIn: www.linkedin.com/stephensamuelsantoro
15 The Biggie Awards | Big Times Magazine
Does your culture reward the lazy brain? Five ways to override this natural human tendency - And save your company in the process By Edward D. Hess
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n today’s globally competitive environment, successful organizations must constantly learn, adapt, and innovate—but that’s easier said than done when the human brain prefers operating in low gear. Here is how to snuff out “lazy thinking” so that your people can begin generating and implementing new ideas. Humans are lazy thinkers. Although the brain comprises only about 2.5 percent of our body weight, it generally uses 20 percent of the body’s energy. That’s why the human learning machine prefers to operate in a low gear—on autopilot—as much as possible: It’s a conservation thing. As Nobel laureate and behavioral economist Daniel Kahneman puts it, “Laziness is built deep into our nature.” So (your slothful brain is probably thinking) what’s wrong with that? Well, the big problem is that business has taken the “laziness model”—aka operational excellence—as far as it can go. In my book “Learn or Die: Using Science to Build a Leading-Edge Learning Organization” I say “the lazy brain is why the operational excellence model—in which companies fight for dominance by being faster, better, and cheaper—rose to dominance in the first place. We take what we already know, replicate it, improve it, and repeat. It is much easier than thinking innovatively.” Unfortunately, many of the jobs this model creates can now be done by machines. Today, the only real competitive advantage is an ability to learn and innovate. That’s it. And if your business is set up on the old model, it just doesn’t lend itself to learning and innovating.
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Fact is, the old operational excellence model provides too many reasons NOT to learn—too many reasons to remain lazy, complacent, robotic. Steeped in the “command and control” paradigm of operational excellence, leaders (and employees) see learning as a high-risk activity. Combine a deeply entrenched attitude that risk-taking is a no-no with the brain’s inherent laziness and you
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get a company that can’t innovate its way out of the proverbial wet paper bag. The implication is clear: If you want to survive the coming Digital Age of Machines (aka the 21st century) you MUST give your culture a serious shake-up. You MUST engage and reward people so strongly that they’re willing to override their natural tendency toward laziness and continuously generate and share new ideas. In other words, you have to create an idea meritocracy. Doing so requires creating a hybrid business model, one that prioritizes the need for innovation while keeping in play the best aspects of operational excellence—for example, its focus on relentless, constant improvement. Succeeding at this hybrid culture requires a commitment to learning. Lazy brains won’t survive. Read on to learn how you and your employees can energize your lazy brains and revitalize your culture in the process:
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Empower fast, cheap, customer-centric experimentation. Intuit is a very successful and highly profitable company. (Quicken, TurboTax, and QuickBooks are a few of its products.) About eight years ago, after becoming concerned that it was losing its edge, Intuit proactively created a new culture and installed new processes, all designed to create an idea meritocracy. One of its primary goals was to galvanize product development by discovering often-unstated customer needs and creating solutions for them.
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Turn mistakes into “surprises.” Another major change was needed at Intuit to fully engage the workforce in this new culture of innovation and learning—specifically, a new mental model about mistakes. Fact is, lots of ideas just don’t work out. They may not be supported by data when they are tested, or a process improvement idea that looked wonderful in theory may not work as expected in
practice. In an idea meritocracy, mistakes like these are not punished so long as financial risk parameters are respected. Instead, they are viewed as learning opportunities. There is no mistake so long as you learn. Intuit even calls mistakes or experimental failures ‘surprises.’ First of all, while mistakes are not good, there’s no negative connotation with surprises. Surprises don’t elicit the same amount of fear and anxiety that mistakes do. And when we aren’t afraid, we’re more likely to take risks that have the potential to lead to big wins. Second, in many cases, those ‘surprises’ ultimately point employees down a different path that could have great promise.
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Teach employees to work around their weaknesses. Bridgewater Associates, the largest and one of the most successful hedge funds in the world, implements its idea meritocracy through a culture and processes designed to help people overcome the common human obstacles to learning: their cognitive blindness, dissonance and biases, and their ego-driven emotional defensiveness. Bridgewater does that through radical transparency, constant stress-testing of one’s thinking by others, the daily rigorous use of best learning processes, complete candor, permission to speak freely, and an egalitarian idea meritocracy where everyone has the duty to challenge ideas regardless of rank or position in the hierarchy.
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Let employees “pull the cord.” Sometimes employees see big problems and mistakes but feel powerless to make a change. They figure bringing mistakes to the attention of higher-ups is above their pay grade and not a part of their job description, or they fear ending up being the proverbial messenger who gets shot. Of course, these feelings of powerlessness are terrible for morale and just encourage people (and their brains!) to keep going on autopilot.
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The solution is to make it very clear to employees that they are able not just to point out problems, but to take bold action to correct them. At Toyota, an idea meritocracy was created by giving every employee in the factory the ability to “pull the cord” at any time to stop production. In other words, all employees were empowered to take ownership of preventing defects and mistakes. In many cases, fixing a mistake required a team to discover the root cause of the problem and to devise a process that would prevent that mistake from happening again. Empowering line employees to take responsibility for continuously improving processes using root cause analysis helped Toyota keep employees engaged and was Toyota’s quality differentiator for years. Unfortunately, Toyota diluted that system in its drive for global expansion and global sales leadership.
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Make it a duty to dissent (even when you have to shoot down a HiPPO). Google’s culture is built on driving innovation and experimentation—in other words, trying new things. To support this culture, pay level is irrelevant in decision making, and so is experience or tenure—unless the experience provides data used to frame good arguments. In fact, Eric Schmidt, Google’s chairman, stated in the book How Google Works that Google employees are told not to listen to “HiPPOs,” or the “Highest Paid Person’s Opinion.” Idea meritocracies are able to continuously improve or innovate faster and better than the competition. Seek to engage all employees in constant improvement or innovation through everyday learning. No matter what product or service you sell, in order to compete in a technologically advancing, highly globalized competitive environment, you must be in the business of learning. You must build a culture where lazy thinking is snuffed out and big thinking is encouraged and rewarded.
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About the Author: Edward D. Hess is a professor of business administration and Batten Executive-in-Residence at the University of Virginia’s Darden School of Business and the author of 11 books, including Learn or Die: Using Science to Build a Leading-Edge Learning Organization, by Columbia Business School Publishing (September 2014).
Study Finds Health Coverage Grows Under Affordable Care Act
Insurance coverage has increased across all types of insurance since the major provisions of the federal Affordable Care Act took effect, with a total of 16.9 million people becoming newly enrolled through February 2015, according to a new RAND Corporation study. Researchers estimate that from September 2013 to February 2015, 22.8 million Americans became newly insured and 5.9 million lost coverage, for a net of 16.9 million newly insured Americans. Among those newly gaining coverage, 9.6 million people enrolled in employer-sponsored health plans, followed by Medicaid (6.5 million), the individual marketplaces (4.1 million), nonmarketplace individual plans (1.2 million) and other insurance sources (1.5 million). The study also estimates that 125.2 million Americans -- about 80 percent of the nonelderly population that had insurance in September 2013 -- experienced no change in the source of insurance during the period, according to findings published online by the journal Health Affairs.
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“The Affordable Care Act has greatly expanded health insurance coverage, but it has caused little change in the way most previously-covered Americans are getting health insurance coverage,” said Katherine Carman, the study’s
Big Times Magazine | May/June 2015
lead author and an economist at RAND, a nonprofit research organization. “The law has expanded coverage to more Americans using all parts of the health insurance system.” The RAND study estimates 11.2 million Americans are insured through new state and federal marketplaces created under the Affordable Care Act, including 4.1 million who are newly covered and 7.1 million people who transitioned to marketplace plans from another source of coverage. In addition, among the 12.6 million Americans newly enrolled in Medicaid, 6.5 million were previously uninsured and 6.1 million were previously insured. The RAND study is the first to examine insurance transitions since the end of the second open enrollment period under the Affordable Care Act. It analyzes information from the RAND Health Reform Opinion Study, a survey that has followed a representative sample of about 1,600 Americans aged 18 to 64 from September 2013 through February 2015. Participants are questioned periodically about whether they have health insurance, their source of insurance and other related questions. None of the other surveys with equally cur-
rent data on changes in coverage caused by the Affordable Care Act provide longitudinal information about coverage transitions, and none of the other longitudinal surveys are as current.
- Coverage through individual nonmarketplace policies declined by 1.9 million and coverage from other sources (Medicare, military insurance and state programs) declined by 10 million over the study period.
RAND researchers say the findings that the biggest gain in coverage was from employer-sponsored insurance runs counter to predictions that many employers may quit offering insurance in response to the Affordable Care Act and suggests that regardless of whether that occurs, employer-sponsored coverage will remain the nation’s major source of health insurance coverage.
- An estimated 24.6 million Americans moved from one source of insurance to another source of coverage during the study period.
Other study findings include: - Most of the gain in the number of Americans with insurance occurred between September 2013 and May 2014, reflecting the first open enrollment period.
Support for the project was provided by RAND internal funding. Other authors of the report are Christine Eibner and Susan Paddock. RAND Health is the nation’s largest independent health policy research program, with a broad research portfolio that focuses on health care costs, quality and public health preparedness, among other topics. From RAND Corporation (www.rand.org).
Sidebar with
Harper &
Heim
Lawyers
Editor’s Note: BIG Independent Group counsel and BIG Times contributor Jon Stanley Heim and his law partner, Marilyn A. Harper, continue their monthly short columns on legal issues in the insurance production business. This month they address consumer complaints to the California Department of Insurance.
e at Harper & Heim, Lawyers frequently get reW quests from insurance producers for legal help on responding to a consumer complaint to the California Department of Insurance. The requesting producers are wise, for almost all such complaints can be resolved reasonably and quickly, but complaints left unanswered or blithely dismissed can bring bigger trouble down the road. California’s insurance consumer complaint laws were originally intended to gather statistics on consumer satisfaction with insurance companies, as well as to resolve routine transactional disputes. Over the years these laws have been used to investigate and correct supposedly unlawful activities of insurance producers. The great majority of the “compliance analysts” CDI employs to investigate consumer complaints are earnest and well-intentioned. Nonetheless, they have not had extensive legal training, and they are oriented to the insurance consumer rather than the insurance industry. So in handling consumer complaints, care and caution are warranted.
A consumer complaint is initiated by a complaint form usually completed and always signed by the consumer. It can be done on line. If the complaint seems at all viable, CDI sends a letter to the producer, briefly summarizing and usually enclosing the complaint. CDI asks the producer to write a response to the consumer and to send a copy of the response to CDI. The response must include the producer’s entire file. That file may alert CDI to legal or business issues beyond those raised by the consumer. This is one reason why it’s wise to contact counsel before responding to any consumer complaint. No ethical lawyer will conceal relevant, non-privileged evidence that is lawfully and properly requested. However if the producer or his or her experienced attorney sees a latent problem in a file, it can be addressed and corrected in or before the response, making the problem both moot for the complaint at hand and unlikely to recur. The producer has 21 days to deliver the written response. It is important to meet that deadline. If you don’t CDI can and often will find the consumer complaint to be “justified”, on that basis alone and without any consideration of the merits of the complaint. Also important are veracity and thoroughness. Remember, you are dealing with regulators. They expect and deserve your respect. If you are inaccurate and it appears your inaccuracy is intentional, you will offend people who are weighing your conduct and have power over your insurance production license and career. They likely will not trust you again. And you must address all the issues raised in CDI’s letter. Questions left unanswered will prolong the complaint process for months or even years. If you have made a mistake or done something wrong, you probably should correct it. Make things right. If you tell CDI that you have changed a challenged business practice to prevent future slips, make sure that your specified fix is in place and stays in place. Recurrences of allegedly resolved problems raise red banners at
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CDI. You have no assurance that CDI will not be looking. Often consumer complaints seem minor, tenuous or arguable. Naturally you may want to uphold your plausible position. Consider however that early, tolerable compromises – for example, refund of broker fees – may be more conclusive and efficient than taking time and paying a lawyer to make a low stakes point. Anyway, California’s broker fee regulations generally require refunds of fees if the producer is wrong. You can spend a lot of money and lose a lot of new business wading through a past transaction which, however it comes out, won’t yield an ongoing, satisfied client. Giving a little and moving on may not be vindicating, but is often prudent. Sometimes these consumer complaints trigger full scale CDI investigations of producers. If CDI advises you that a consumer complaint has been referred to CDI’s investigation or legal division, realize that you have an ongoing and substantial problem. At this point, you’d be foolish not to consult learned counsel. It may take weeks or it may take months, but something more is very likely to happen. Investigations can lead to license discipline proceedings. Such proceedings can result in monetary penalties, license suspension or revocation, or even prohibition from all insurance business, including as a passive business owner. Thus can investigations imperil your insurance career? If you have good counsel, you may be better off taking the initiative by planning a strategy before an investigation gains momentum, and perhaps even initiating contact with the assigned CDI investigator or staff attorney if you find out who they are. It is not reasonable to hope that complaints referred for investigation or legal action will just go away. Thankfully, the vast majority of complaints do not proceed to full investigations or legal actions. Most complaints are resolved with CDI findings, at or about the compliance officer level, that the complaints are either “justified” or not. There ap-
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pears to be no legal significance to a “justified” finding. Such a finding does not mean that you are liable to the complainant, that you will lose a civil action on the same subject, or that any legal deck is stacked against you. However the number of justified complaints against a producer will be included CDI’s web site information on the producer. If that number gets high, inquisitive consumers might be put off. Also, a high volume of consumer complaints can stimulate a CDI investigation even if each complaint seems minor and was not formally investigated when it arose. On occasion our law firm is asked to attack a “justified” finding. Only rarely does such an effort succeed. Again, CDI compliance analysts are not attorneys. Their decisions whether complaints are “justified” don’t doom producers and aren’t likely to be reviewed in court or by administrative tribunals. The analysts handle a large volume of complaints. Their precision is that of an old time mortar, not a modern sniper rifle. The analysts don’t seem to do a lot of peer review or soul searching. In most cases, you are better off leaving such an inconsequential injustice in your rear view mirrors and devoting yourself, perhaps both more jaded and more aware, to your next big insurance sale. You are busy at work in a high-pace business. Consumer complaints can be annoying and time consuming. But you can’t let them be forgotten. Address them early, fairly, timely and respectfully. Put these little flames out before they flare into big wildfires. Spend a relatively few dollars getting and following good advice, and down the road you may save much time, money and anxiety. You may also improve your business operations. If our law firm can help you, just call or e-mail BIG Independent Group or our firm. Both organizations are here to serve you and to make your business easier. Call Jon Stanley Heim at (510) 725-7593, or e-mail him at jshinslaw@gmail.com or harperandheim@gmail.com.
25 Legal Advice | Big Times Magazine
Infraestructure Alignment Is Fundamental to delivering Growth
By Terry Soto, Author and CEO, About Marketing Solutions, Inc.
S
ome of us use the terms infrastructure and organizational structure interchangeably. In this article, I will use the word infrastructure to refer to technology platforms and digital assets. There is a myriad of technology, information systems and digital assets on which your companies rely to operate your businesses. However, given the diverse customer base which shop your products you must ask if your infrastructure is optimally aligned to support your goals across all customers Hispanic and non-Hispanic regardless of language preferences. Consider the various ways in which your company relies on its infrastructure and determine if your company has created the necessary alignment to: Generate reporting – For companies who target Hispanics, it’s important to ask if your company’s Information Systems are aligned to deliver on the company’s information needs on all your customer including your Hispanic customers. Are you able to track sales, segmentation, demographic, geographic, product categories, usage and other behavior your Hispanic customers may exhibit so appropriate decisions can be made in a manner that is relevant to your Hispanic customers and relevant to your business model?
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Communicate with customers – Ask if your Information Systems are set up to effectively communicate important information bilingually so your Hispanic customers understand your letters, forms, brochures, user guides, warranties, rebate forms, and statements the way your company intended. Ask if your current methods effectively communicate with Hispanic recipients and whether they truly understand your messages, the intended level of urgency, the action that is required of them, by when, and where and how the action needs to be taken.
Drive cost away from your business by using technology to automate activities which would otherwise be handled by people – Ask if your company’s technology and digital assets support a quick and comfortable transition and adoption of automation so Hispanics grow less dependent on people and more dependent on your technology to shop your products, ask tech support questions, send emails, chat with customer service representatives and even make payments in automated ways. If Hispanic customers do not understand the purpose of that fabulous kiosk your company just installed in all your locations and can’t understand the screens, it might as well just be a fabulous piece of store décor as far as Spanish dependent Hispanics go and the phone will keep ringing for live support. Enhance the shopping experience for our customers and drive sales through the digital assets you have in your locations – If every piece of technology with which you want your consumers to interact to browse your products, and help customers fall in love with your experience so they ultimately buy is not understood by a proportion of your Hispanics customers, they simply won’t engage and your digital assets won’t work across those Hispanic customers who are excluded from utilizing and enjoying these digital experiences. Take a few moments to assess the many ways in which your company relies on infrastructure to 1) understand your customers so you can make better decisions, 2) communicate with them, 3) drive cost away from the business and 4) enhance the shopping experience and ask if you are having the same effect on your current and potential Hispanic customers. If not, ask yourself why you’d want your infrastructure investment to perform at anything less than 100% and why you would want to deliver anything but a seamless customer experience.
About the Author: Terry Soto is President and CEO of About Marketing Solutions, Inc., a Burbank, California – based strategy consulting firm specializing in helping her clients dramatically improve overall business performance by optimizing their strategies to succeed in the Hispanic market. She can be reached at terrysoto@aboutmarketingsolutions.com or 818-842-9688
27 Business Management | Big Times Magazine