Keep it safe and sane

July 3, 2008

At certain times of the year, or in response to certain trends–high gas prices, for example–it’s not unusual to see numerous news outlets tackle essentially the same reaction story. One of the more interesting examples I’ve seen recently are stories assessing the weak economy’s impact on fireworks sales this summer.

While a few of those stories I’ve read indicated fireworks sales slowing in some areas, the majority seemed to be reporting a robust trade in the firecrackers, bottle rockets and various other forms of personal pyrotechnics many consider an essential part of the Fourth of July celebration.

State fireworks sales laws vary widely, with only five states–Delaware, Massachusetts, New Jersey, New York and Rhode Island–banning the sale of consumer fireworks altogether. Still, in states that ban or restrict fireworks sales, it’s often simply a matter of driving across a nearby state line to stock the Independence Day backyard arsenal.

Though I suspect personal fireworks displays will be ubiquitous most everywhere in the U.S. this weekend, I was surprised to learn just how large the fireworks business is in this country.

According to the American Pyrotechnics Assn., the use of backyard fireworks has more than doubled since 2000, with Americans setting off a staggering 238 million pounds of fireworks in their backyards, neighborhood parks, basements or wherever in 2007! Total fireworks industry revenue reached $930 million last year, according to the APA, with $620 million of that coming from consumer fireworks sales.

The association credits the increase in fireworks spending to “an upsurge of patriotism,” along with “an overall improvement in the quality and variety of fireworks available today.”

Whatever this holiday weekend might have in store for you, keep it safe and sane.

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Before–and after–the fall

June 20, 2008

Maybe you’ve heard and read all you can stand about the subprime mortgage crisis, but if you haven’t, there’s some really excellent thinking about the causes of the problem and where we go from here in a new Knowledge@Wharton special report.

The report includes an overview on the financial crisis and how it developed, a look at the Fed’s response and an examination of whether new rules could prevent a similar crisis in the future. On the latter score, the report cautions that while regulatory changes might be able to prevent another credit crisis, crafting the changes that would be able to do so requires a clear understanding of exactly what went wrong, an understanding that is only beginning to be realized.

In an opinion piece written by former Wharton School Dean Russell Palmer included in the package, Mr. Palmer suggests that while in the aftermath of the crisis much of the conversation focuses on its causes and needed reforms, in his opinion the issue is one of leadership.

“I believe the situation offers on opportunity to learn crucial lessons about leadership, and if these are heeded, the U.S. will end up with a financial system that is stronger than ever,” the former dean writes.

Calling greed the underlying cause of the subprime crisis–as with other financial bubbles over the centuries–Mr. Palmer identifies several leadership lessons he thinks can be learned from the current financial mess.

The first, he says, is that “integrity is the key to leadership.” Another is the importance of board members providing effective oversight. And, Mr. Palmer writes, leaders of the firms involved “must be at the forefront of addressing the crisis and taking personal responsibility.”

It’s a great report that also includes video interviews with Wharton faculty, a timeline of the events that were like dominos falling on the way to the ultimate crisis and links to other stories on the subject Knowledge@Wharton has published over the past 18 months. If you’re not subprimed out–and even if you are–it’s worth taking a look.

 

  


Immigrants vs. natives

May 23, 2008

Of the many meetings I had at this year’s ACORD conference last week in Las Vegas, one theme that came through in many of them was the impact a new generation of employees and consumers will have on the insurance industry from a technology perspective.

Mark W. Lewis, general manager, global insurance industry at IBM, described the issue as one of digital immigrants vs. digital natives. As a Baby Boomer who’s come to embrace information technology in my professional and personal lives, I fit into the immigrant category. Folks like my daughter and others just getting started on their adult lives and careers–who’ve grown up with personal computers and can text message like the wind–are the digital natives.

“In a few more years you’re going to have far more people who don’t even think about technology,” Mr. Lewis said. For the digital natives, IT is just a fact of life, not something that catches their attention.

“The most important part about that is you truly think differently,” he said. “The fact is the business world is being changed and it will continue to be changed by people like that.”

That everyday familiarity with technology will manifest itself in many of the decisions made by the next generation of business executives, Mr. Lewis said.

“One of the advantages that the digital natives will have is the more the business executive knows about technology, the better decisions he’ll make about what is possible,” he said.

The subject was at the heart of a meeting with Bill Hartnett, U.S. insurance industry solutions director at Microsoft Corp., as well. He and others from Microsoft were noting the impact the next generation’s expectations and experiences will have on the insurance industry, and promoting solutions to help address them.

A survey the company conducted earlier this year of adult “Millennials”–those 18 to 27 years old–show the issue cuts both in terms of the industry’s meeting its talent needs and in serving the next generation of insurance buyers.

The survey showed 91% of those questioned saying access to newer, innovative technologies would make them more likely to consider potential job opportunities.

Survey respondents also indicated they see the industry’s adoption of various technology-based customer service tools is an important issue, with 89% saying they think it’s important insurance companies provide Web-based customer support, 86% saying it’s important that insurance companies offer customers personal Web portals on which they can view their accounts and 76% saying it’s important they offer live online chats with agents.

They also are believers in blogs, according to the Microsoft survey, with 69% saying it’s important to them that insurance companies offer company blogs on which customers can post their questions or concerns. 

 

 


Tiny technology, sizable issues

May 1, 2008

From my perspective as a journalist, one of the really cool things about attending RIMS is the opportunity to have conversations with a lot of folks engaged in some really interesting issues in risk management and commercial insurance.

One such conversation I enjoyed this week was with Connie Germano, senior vp excess casualty at ACE USA in New York. The subject was nanotechnology, and her perspective on what constitute some of the key issues surrounding nanotechnology was an interesting one.

Given the work that’s going on to tap nanotechnology for everything from consumer products to medicine and the questions that remain unanswered about the potential risks associated with these molecular machines, many have questioned the possible risk exposures associated with nanotechnology, and, with those risks, the possible impact on the insurance business.

It’s not uncommon to hear someone saying nanotechnology could be “the next asbestos.”

But that sort of attitude is in fact one of the key issues that needs to be addressed if we’re to reap the benefits of nanotechnology, Ms. Germano said. While several major insurance and reinsurance companies have begun researching issues associated with nanotechnology, there are as yet no nano-specific coverages on the market, she said.

And, for some underwriters, the findings of that research might lead to “the fear stage” about nanotechnology, she said. “And they might try to exclude it as a result, which is exactly what we’re trying to avoid.”

Noting that of the $12 billion spent on nanotechnology research in the U.S. in 2005 $10 billion was spent on using nanotechnology and only $2 billion on the risks, Ms. Germano suggests that it’s critical that more research be done to identify the risks associated with nanotechnology, and then steps taken to develop appropriate standards for everything from the handling to the disposal of nano materials.

From an insurance and risk management perspective, the key to reaping the full business and societal benefits of nanotechnology is understanding any risks and managing them effectively, Ms. Germano said, adding that she doesn’t want to see the insurance industry respond to possible nanotechnology risks with “a knee-jerk reaction and just exclude it.”

“From an insurance perspective, my responsibility is to understand what’s going on in my clients’ world,” she said. “And as an insurer, my responsibility is to make sure they understand it and are addressing it to the best of their ability.”

 


We’re number one!

April 24, 2008

Car thieves in Modesto, Calif. can proudly wave their big foam fingers once again, as the Modesto area has reclaimed the number one ranking in the National Insurance Crime Bureau’s annual list of areas with the highest per capita rate of vehicle thefts in the U.S.

Modesto’s 5,358 auto thefts in 2007 propelled it to the top of the list, according to the NICB, a spot the region last held in 2005 before slipping to fifth in the 2006 ranking.

Following Modesto on the list was Las Vegas-Paradise, Nev., slipping to second in 2007 after holding the top spot in 2006. Rounding out the top 10 were San Diego/Carlsbad/San Marcos, Calif.; Stockton, Calif.; San Francisco/Oakland/Fremont, Calif.; Laredo, Texas; Albuquerque, N.M.; Phoenix/Mesa/Scottsdale, Ariz.; Yakima, Wash.; and Tucson, Ariz.

Among the big movers in this year’s ranking were the San Diego/Carlsbad/San Marcos region, leaping to the third spot in 2007’s ranking from number 11 in 2006; San Francisco/Oakland/Fremont, moving up to number five in 2007 from 12 in 2006; and Laredo, making a big jump to six in 2007 from 22 the year before.

Some positive news, according to the NICB, according to preliminary FBI data, 2007 stands to be the fourth straight year of a decline in vehicle thefts nationwide, down 7.4% from 2006, according to those preliminary statistics.

On a completely different note, I’ll be attending the annual conference of the Risk & Insurance Management Society Inc. next week in San Diego (I’ll be leaving my car at home), and I do plan to post to the blog from the conference.

 


Sick call

April 10, 2008

We care so much about our co-workers, we even want to share our illnesses with them. At least that seems to be one way of reading the results of a recent poll conducted by Shelton, Conn.-based work/life benefits company LifeCare Inc.

The online poll of employees at LifeCare’s 1,500 client organizations asked “When you go to work sick, what is the main reason?” It found 29% of those responding saying they went to work sick because they didn’t want to let down colleagues who depend on them.

Another 26% said they went to work sick because the politics or culture of their office made it too risky to take time off, while 15% said they were too busy to stay home. Many respondents indicated they’re trying to save their time off, 12% saying they were saving the days for childcare/eldercare emergencies and 8% saying they were saving the days for vacation time. That latter group makes the most sense to me–who wants to waste time off being sick?

Of those polled, 7% said they don’t work when they’re sick. Ah, the sensible 7%, willing to take a chance on letting down co-workers for a day or two rather than exposing them to their illness.

This year’s top reason for going to work sick was a change from the results when LifeCare asked the same question in 2006 and 2007, when “too risky to take time off” was the top response. Interestingly, LifeCare notes that the percentage saying they don’t work when they’re sick has stayed fairly consistent each year in that 6% to 7% range.

 


Play ball!

March 31, 2008

I’ve used this space occasionally in the past to acknowledge my allegiance to Chicago’s North Side baseball team, and while the weather is making it less than certain whether the Cubs will take the field at Wrigley today, it’s that time of year again.

I’ve got a ticket to this afternoon’s game, but I’m sitting at the office, looking periodically at the rain pouring down outside and checking the weather radar, and it doesn’t look promising.

As the Cubs begin this season, there is for Cubs fans, of course, the usual risk of heartbreak. This year the team marks the centennial of the last season that didn’t end in heartbreaking fashion with the 100th anniversary of the Cubs 1908 World Series win, their last.

Last year, of course, the Cubs did make the playoffs, only to be swept in the first round by the Arizona Diamondbacks. This year, some are actually picking the North Siders to win the National League pennant, which anyone who believes that Cubs history has been shaped by bad luck and curses must believe can’t bode well. I tend to believe the Cubs’ history has more to do with lack of talent or bad health or both, but we’ll see.

There are actually some other interesting risks potentially emerging around Wrigley Field as this season begins. Since purchasing the team’s owner, Tribune Co., last year, Sam Zell has made it clear he intends to sell the team and the ballpark to raise cash.

Part of that plan will no doubt include selling Wrigley Field naming rights, which has led some to suggest that anyone buying those rights best be particularly sensitive to how they apply them, lest they risk the ire of the diehard Cubs faithful. That seems a unique, if limited, sort of brand risk.

Personally, I expect someone to buy the naming rights, and they may well slap their name on the grand old marquee at Clark and Addison. But I’ll still call it Wrigley Field.