Category: Articles

When I was a mere child of almost 5 and living the country life in rural Ontario I learned that a minor indiscretion compounded by an oversight in delivering the whole story to a superior (Mom) could earn painful discipline. My indiscretion (in those days my vocabulary would have labeled it a mistake) was to play a very realistic game of “cowboys and Indians”. Today it is more likely aliens and earthlings given the difficulty in playing any politically incorrect game. But I digress from the games of the early fifties.

I, always one to like to play the oppressed, was the “Indian” and my neighborhood friend played the cowboy who unfortunately was my captive. I stepped over the line of make believe when I tied my friend to a tree and started the smallest of fires under my captive. It always worked out in the stories I was told so how was I to comprehend this was likely to be painful in reality. Another neighbor saw my activity and at the first sign of smoke decided the game had gone too far. Fire out. Scolding from kindly neighbor. Friend running home for the comfort of his mother’s apron (virtually all mothers worked only in the home in this postwar era). Me left to contemplate reaction of parents to my indiscretion.

My sanctity of my bedroom at home was the place to be for some quite reflection on the events. Passing Mom in the hall and responding to her “What’s happening?” inquiry I nonchalantly said I needed some rest and nap after playing with my friend. Mom knew immediately something was not quite right. Ross never took unforced naps! Within minutes of my respite Mom had found out from the grapevine in the neighborhood (the same one that was reengineered into the insurance business) of my deviant behavior. Two sins were committed in my parents’ mind. First the trick with the matches and second the failure to be forthright in my description of the mornings’ events.

Business brings many a similar lesson. Compounding a first mistake with a failure to communicate the complete story, well before the inquisition, is not unheard of in our insurance business. In fact I have seen that being very proactive with one’s own “spin” on a story can actually make the perpetrator of an error or oversight look like the hero and thus put immense distance between themselves and the problem. Some would refer to this as a failure to take responsibility for their actions but it seems most of those most adroit at this skill reap large personal gains, who am I to say it is wrong?

In the early 70’s there was a very interesting case on a purported oil and land baron in Oklahoma. The gentleman was applying for a very big policy (in today’s inflated times it would equate to an application for $100,000,000). On the first go round the general decision was to decline the case because of overinsurance. To make a long story medium in length the persistence of the lead company underwriter convinced the principle reinsurer to accept a part of the case as a favor to what was a very good automatic account. Using the leverage of this one acceptance the large case finally found all the needed facilities and it was issued. The issuance was wrong as there was no real justification for the amount and the underwriters failed to completely seek all necessary evidence.

As the claim unraveled we learned the insured was all but bankrupt, dubious debts to various and sundry entities (both legit and suspect) and medical evidence that was if my memory serves me right was done on someone(s) other than the insured. As an industry we jumped in with the theory of suicide to try and lay the groundwork for not having to pay a claim on a big case that occurred in the 11th month after issue. The suicide theory died, as it became clear to senior insurance personnel that two (2) bullets in the head from the back were not common in suicide by self inflicted gunshots! I was young at the time and yes one of the underwriters who saw the case, which meant I was bewildered at our industries floundering to get off the hook. We made a big mistake and were compounding it by hastily hiding our own oversights. Every senior officer in our business should read “The Mullendore Murder Mystery” to see how we are an industry of trust but also an industry that loves to skirt our responsibility at times of trouble. I say skirt because we generally pay up much to our glory but at times we do it only after ill conceived excuses.

All the famous or infamous cases like Mullendore, Johnson, Smith and Demeter involved insurable interest and overinsurance. All made it through our checks and balances because we are not perfect as an industry. Each though cost often more in litigation than the face amount! We won but we lost! In each there was immediate denial that perhaps our process for risk selection had failed which lead to some skillful spin doctoring as time progressed.

Not only did the individual case scurry through our process but hundreds and thousands have made it abusively through at times. Decades ago but within my time we had the story of a wonder company, a hero of the unsung, a model of sales prowess and a marketing genius. “Equity Funding” was the darling of the North American industry. It out sold projections. It could do no wrong. Reinsurers, those cagey paragons of virtue knew good when they saw it (see it in some current situations but that is a story to hot to print prior to age 55).

Reinsurers through very lucrative coinsurance allowance that bordered on the insane (tell me again how you can give me $1 and I can give you back $2.50 and I am the one who will get rich?) . My youthful recollection was that every reinsurer of note was lined up to feed the selling machine and be part of the gold rush (an historical BreX). Again to make a long story short (read the book) when the farce was exposed every gullible reinsurer pleaded every conceivable excuse in the books except the correct reason. Reinsurance greed like all of man’s greed made decision making foggy at best. Equity Funding was out of character for its time but the story was one of reinsurers’ greed and the media wanted to believe. Tens of millions of dollars were lost and one would like to think a lesson well learned.

The Equity Funding story gets repeated almost yearly as a new crop of industry marketing leaders blindly close their eyes to the latest pitchman who is selling far more than normal and becomes an overnight top producer/broker/agency. The two bit player may not use the phone books as profusely as Equity Funding but the scheme to defraud us is the same. Find a gullible company with one or two greedy decision-makers well placed and the commission system heaped and overflowing, will reward you for a short period.

Again the rule is if it has been done before it will be done again. Different players not steeped in personal exposure to the game will play the role of “sucker” in it and spin a story of how their situation was different. Why not admit you were duped like the earlier victims and quit the spin city rhetoric. Just like the fire and the subsequent deletion from my mornings activity became a double penalty, the hiding or minimization of our industry errors just makes us look stupid in addition to gullible. I am even told that there are numerous examples of producers doing wrong but in reference checks the producer was merely one who left the company.

When I recently heard some inside information about a recent episode of marketing skullduggery which was labeled I believe “Project bad Apple” I remarked that we were now working on fruits for code names since we have used up all the animal names. The scams the same just the victims are new. When Project Banana hits the industry it will have a slightly different bend to it but it will be the same old rotten fruit. Sometimes man is committed to making the same mistakes repeatedly just to keep the story fresh.

So much trust from consumer to board of directors I often wonder how there are any companies left to merge or be bought by banks. When we do get mistreated by the rare abuse of trust we will of course be able to spin a story and promotion that exonerates us as individuals while pointing the proverbial finger at others who are not as quick with the story telling. My first response back when Mullendore was killed and I was asked if as a bright young risk selector I accepted the case on behalf of that long gone reinsurer M&G was what you could expect. I many a time said I declined the case on Mullendore refusing to take one penny for M&G Canada. Wow my peers in North America were very impressed. Unfortunately even if they didn’t ask I would volunteer the whole story. That was for fear of Mom! The fact was the head office of M&G in London had already committed the full retention and thus I, sitting in Canada, could not accept any part of Mullendore. The abridged version of my action is the one that today lacks the forthrightness of the full story.

Every time I listen to a “spin doctor” weave a tale it reminds me of my minor tale that lacked credibility and how only a mother could see through it. My time as fire starter was short lived. Red seat from “the strap” left the right impression but today we believe in sparing the rod and thus at times ruining the industry.

I joined Manulife Reinsurance Division in January 1990 and stayed until May of 1994. The mandate I carried was for traditional retrocession business. Manulife had been number one but was slipping and my team’s job was to regain the number one position in retrocession world in both reputation and production. Again I had the advantage of a world class team of people who went the extra mile to polish the image and be the most efficient and prolific “retro” on the planet. I never did fit the politics of Manulife and even had psychologist who were doing their routine reviews of all senior executives (I was number 26 out of 26 world wide!) tell me I would lose all my strengths and become a typical Manulifer if I stayed. I wanted to remain me and maintain my advantages as I saw them which for the previous twenty years had been so sought after by other companies and people.

Steve Carlson the editor and publisher of Marketing Options was a great editor and like all the articles I wrote for his magazine his touch and mastery of the written word helped me refine my writing score while letting me be me! Thanks Steve for this and much other editorial wisdom you bestowed upon this rookie writer.

Manulife remains a prominent retrocessionaire in a market that is more fiercely competitive than ever and where margins are close to insane. The team spirit has maintained its prominent role as a core competency among the troops of Manulife Re. They never did stick to the short form ManuRe thank goodness.

Ross

2004-04-07

Marketing Options

June 1990

The amount the client needs is $5,000,000. The amount you sold is $5,000,000. Why would anyone not want to sell more at these great rates?

As a well-educated and experienced agent, you have worked for months to arrive at the point of final presentation of the product that best suites the applicant’s needs. The numerous details to complete the application form have been garnered through a barrage of questions that make the Home Office underwriter’s job easier. Now comes the moment of editing the sale and making sure that all the t’s have been crossed and I’s dotted. Panic sets in as that tiny asterisk catches your eye and you scan to the long tail (* RATES ARE AVAILABLE FOR AMOUNTS UP TO $2,000,000 ONLY) that attaches to the other asterisks on the back page of the rate card of four screens later on your laptop.

After you have extradited yourself from immediate embarrassment with your prospect, you hear from your co-operative insurer that the retrocessionaires want higher premiums to participate in this plan. Just when you thought you had captured the essence of reinsurance or at least had become accustomed to its presence, along come the terms ‘retrocessionaire’ and ‘retrocession’.

The reinsurers are just great in their support of this innovative and aggressively priced plan, your co-operative insurer explains, but those stingy retrocessionaires will not cooperate and insists on fatter rates. They are the specialists, you are told, that must be approached by the reinsurer for retrocessions (or more coverage) when the sale exceeds $2,000,000 and your reinsurer’s capacity.

Your immediate reaction is probably “does this never end?” or “just where does the buck finally stop?” Having heard and witnessed the frustration of agents with reinsurers, I can finally comprehend how this situation would have the agent perplexed once again.

How does this situation arise? Today’s life insurance market is extremely competitive and a balance of aggressive pricing and innovative plan design often puts the pricing actuary and marketing executive in a position of market leaders. Those two people (sometimes rolled into one) must try and convince one or more reinsurers to support their pricing of the plan. If they are lucky, five reinsurers will provide support in the form of a price that allows the company to reinsure its excess business without losing money or interfering with the agent’s remuneration.

In the free enterprise system of reinsurance, the lowest bidder for the ceding company’s (in this case, the life company’s) excess business wins.

Now what we have is the originating life company designing a competitive product to sell more for less to the public. Keeping it simple, the price is such that most other life insurers are unable to match the price. One reason is that the winning reinsurer who for its retention, offers the lowest price of say five, worldly, knowledgeable, aggressive reinsurers, it is not likely to offer another life insurer the same rates for a copycat plan-not if that reinsurer ever wants to do business with the originating company again. The winning reinsurer’s price has been keenly stripped of every vestige of extra pricing margins, that is: morality, investment, administration and profit. Because the ceding company and reinsurer have combined retention of only $2,000,000, yet a market that often buys more, the search for a retrocessionaire(s) commences.

Starting with the premise that the price is very thin, one can assume the retrocessionaire’s price must be even thinner because the retrocessionaire’s price is stripped of the most of the reinsurer’s margins. There are three general results that can occur.

First, retrocession capacity is significant amounts is found to remove tiny * off the rate card. The price needs no adjustment. Unlimited capacity is a sign that three or more pricing actuaries have agreed on price, commission and product design, which is mean feat!

Second, no facilities are found at the price and the tiny *is necessitated. To boldly accept a $1.00 premium (which is that portion of the life company’s premium to the reinsurer that the reinsurer may be able to subsequently allocated for retrocession’s) and pay out $1.50 for risk coverage (which may be the best price any retrocessionaire is able to offer) does not normally appeal to a reinsurance company.

Third, a cooperative structuring of premiums and commission is discovered that allows all parties to achieve their goals. The reinsures pays the retrocessionaire the thin risk premium and collects same from the insurance company. The reinsurer acts as a conduit for the excess risk but receives no payment for the service, treating it as a fact of keeping the ceding company’s business. The ceding company and agents, in their joint effort, agree and accept a reduced commission respectively.

Within the extremely competitive large case market the balancing of price, commissions and total capacity becomes very important to all parties. If the agent expects the lowest priced product, it may be at the expense of limiting the total capacity in the market. (A more moderately priced product, for example, would have a much higher total capacity with more retrocessionaires able to provide coverage for the higher premiums available.) In the majority of sales the total face amount available for the lowest priced product is often enough but in the odd case the tiny * can ruin your day if it catches your eye at the last moment.

Finally, what do you call a company that accepts excess business from a retrocessionaire? Only printable answers, please.

Interpretation of those impressions by the author.

Continuing in a decades old tradition of the Canadian Institute Underwriting providing a great educational forum for underwriters from coast to coast every January they held another very successful seminar in 2007. The content was excellent. The speakers were at the top of their game. The organizers made sure every detail was in place for success. The attendees were there in force eager to learn and share their thoughts. I was fortunate enough to be asked to present on the subject of advisors/brokers relationships with underwriters. Over the last 38 months I have surveyed many advisors and MGAs on what is their perception of the industry and more particularly the underwriter and the whole new business function or process. The most recent follow up survey shows that the opinion of most if not all Canadian life insurers is that there service has deteriorated even further. The underwriter takes it on the chin even though they may not have started the perception.

But enough on that since it is the result of the survey conducted of the attendees which interests me the most right now. There were 75 attendees and they represented a true cross section of Canadian life insurers’ underwriters and indeed a representation from coast to coast. I was happy when 72 o the attendees completed the seminar’s questionnaire. Like advisors and brokers filling insurance applications not all questions were answered for various reasons. Overall the fewest answers were 64 for any one question. This would be I hoped at the time a truly valuable reflection of what underwriters were thinking on a wintry day in January just after the crunch of year end.

The first question asked each how many years they have had an underwriting authority level (the ability to accept or reject business on their sole signature, the power of the pen). I was surprised to find the range of years was from under one to over thirty three. The majority of attendees (46 of 72 respondents) had more than 5 years of underwriting authority. At the other end of the spectrum, twelve respondents had up to one year of authority and they were the ones without that glimmer in their eye from declining too much business (yet). A large benefit comes at this seminar when the neophytes challenge the establishment on the why’s and why not’s of underwriting. Open minded senior (in authority time frame) underwriters can learn to change if the neophytes push hard enough. Neophytes can pick up both good and bad habits from the more established risk taker.

Interaction with those who distribute the life insurers’’ product to me is key to successful relations between those who sell and those who stand in judgement (actually most sit at their desk). When I was a young know nothing risk taker my bosses sent me along with others like me to a course on communication and “selling” or probing. I learned to ask questions, respond sufficiently and deal with angry clients. I also as an aside learned working in reinsurance and dealing with insurers’’ presidents, actuaries and underwriters was far easier than dealing with those who sell our products. From the attendees responses it appears 45 of 70 have taken a communication or sales course. I am not convinced this high number is an accurate reflection of how many actually took a course other than a “good manners on the phone course”. I hope it is true that companies are finally seeing the merit in having risk takers learning more than what is the latest treatment for a weak left ventricle.

It was not surprising to learn only 37 of 72 respondents had any “one on one” interaction in the past two years with advisors! In fact only 11 of 72 had six or more “one on one” session with advisors over a two year period. I guess that explains why the chasm between advisor and underwriter has grown so wide. If you do not interact you do not grow in understanding and delivery. Is this isolation because underwriters just do not have the time or is it because companies want to isolate the decision maker from the advisor?

The question that I positioned as number four in the survey was the one I was most anxious to have an answer to since it was at the very foundation of our industry which is based on trust and in turn comes from forthright participants be they advisor, underwriter or reinsurer. I asked the respondents “what percentage of advisors are 100% forthright?” Starting with the young and uninitiated (one or less years of underwriting authority) we had 4 of 10 underwriters say advisors were 100% forthright 0 to 40% of the time. Not a good start for those who should still be building their own impression and opinion from experience not hearsay. But we all know how powerful gossip and hearsay along with urban myth can be. At the other end of the maturity spectrum, those with five years of underwriting battles under their belt were a little more split in opinions. 10 of 43 respondents thought advisors were 100% forthright only 20% or less of the time. 3 of 43 thought 21 to 49% of the time. Getting better were the 19 of 43 who felt it was between 50 and 80% of the time. Scoring an “A” were the 10 who believed advisors were 100% forthright 81 to 95% of the time. One lone underwriter with three years of authority answered that advisors are 1005 forthright 100% of the time. It was an anonymous survey so no I cannot pass on her/his name.

Am I an idealist when I would like to think that the target of absolute trust through full and complete disclosure should be at least 80% or better? Perhaps if our industry had more interaction and “one on ones” between the two solitudes we could improve the impression since that is all it is an impression.

The next question should have been divided in two to get a real impression of what underwriters think but as it stands it still worked. “What % of advisors do a good job of getting medical and financial information?” There were 18 of 64 respondents who thought advisors did a good job less than 50% of the time. One lone very experienced underwriter felt it was more like closer to 100% of the time. The remaining 45 of the respondents felt the advisor did a good job between 50 and 90% of the time. One added in bold letters that advisors do a better job getting medical information than financial information. Must not deal with financial advisors! This spit of respondents reflects the fact that some companies maintain that 20 to 40% of applications come in to the head office incomplete. What is missing is something from the mundane and trivial to the must have and a showstopper if left out. All would unanimously say this is a “marketing” or “distribution” department problem not an underwriting problem but it is the bad old underwriter who is blamed for asking for the complete answers. Yes we need to know if they had cancer or not and when and where. Da!

How do you judge an underwriter or for that matter an underwriting department? There are two components to the job. One is the quality of the decision. Is the case a standard risk based on best judgment or is there a need for actions like declining or rating the risk? Getting that right is not easy sometimes as there is a lot of grey around the risk selection process (the variables in health are amazingly huge). Make a rare error or exception and it is built into the price but make either too large an exception or too many exceptions and errors and the company will suffer financially (the financial burden of the errors though is often so far off it is hard to rally enough support for quality now because good quality costs money to accomplish). The respondents were almost, but not quite, unanimous in their believe that speed of issue is not the best measure of the underwriters but rather it is quality of their work. Only 4 of 69 respondents thought speed was the best measure. It is also notable that it was 4 underwriters in the 5 plus years of experienced decision making that opted for speed (age does make you faster and perhaps you forget that subconsciously you are worried about quality).

There has been a debate over the last few years as products and the fanciful sales concepts spread (how to make insurance not look like insurance is an art form). Those who sell our industry’s products swear the underwriter has no idea what the product is all about and thus have no right to underwrite it. The survey results show that 45 of 68 respondents believe the underwriter knows the product better than the advisor. There is a funny comment added to one of these answers which was “but that is not saying much!” That is a reflection of the fact the products or the concept is so complex no one understands what it can do or suppose to do. Glad the consumer is smarter than all of us as they must know the product since they buy it.

Over the last five years the reinsurer has been much maligned for causing too much angst amongst underwriters and in turn the distribution networks. We are blamed for everything from poor time service and declination of policies to global warming (the hot air thing). Okay here was the opportunity to ask in a confidential setting “Do reinsurers help with insurers’ quality and time service?” Of the 65 respondents to this question 60.5 said yes! The half a respondent comes from the fact that he/she thought that reinsurers help with quality but not time service. Was that their answer because it was a reinsurer asking the question? Was that their answer because they truly believe it? I like the latter.

Was the exercise worth doing? Absolutely since it in some ways confirmed my own opinions of where the underwriters were in their thinking these days and in other ways worried me that not much has changed in perception of the trust issue. We still have a lot of work to do on the “forthright” part and if we can get that number up to well over 80% across the board I am sure the quality of information will improve making the whole process faster — everybody then wins.

Written by

Ross A. Morton

2007-02-01

I was recently asked to do a critique of our industry’s leaders for publication. Even after I said an emphatic no the notion was put forward that I could do it anonymously. I really did not want to do anything anonymously since I take my writing seriously. Well, at least I like what I write and I have never shied away from taking any critique given. It was like taking cod liver oil. Made one cringe all over but it was good for the long cold winters. Trying to write a critique of our leaders would be suicide assisted by stupidity — I would have to go back to dairy farming at which I was utterly ill prepared!

The request, once turned asunder, made me ponder the word leadership. My nurturing parents never gave me a course in leadership and more recently most courses in leadership failed to change my ingrained style of dealing with human emotions and thus leading. Of all our industry leaders, be they good, bad or nondescript, which of these leaders were the product of genetic manipulation and environment versus some business school. If I had but the time and money it would be a fascinating exploration to get into the childhood development of these men and women who control the life insurance fortunes (perhaps fortunes is not a good choice of words given the controversy over demutualization’s benefits) in Canada.

Not aspiring to the label “industry leader”, but merely recounting my own experiences as an ancient in the business, I tried to recollect what events shaped my persona beyond the nurturing of parents and siblings. Since the subject at the front of my memory is leadership, all events must build that cornerstone of my career. I recognize the danger of digging up the past — lawsuit from someone wanting a cut of my meager pay since they put me where I am today, demands from irate friends who feel they were my mentor or frustration from my spouse who wonders who would even care.

While at a Boy Scout composite (everyone was from a different troop in Ontario and thus total strangers) camp I learned that leaders are sometimes blind and the blind are sometimes leaders. Within an hour of arrival at the camp I was picked as patrol leader probably because I had more badges than anyone else (I used to love passing tests and getting a tangible reward!) and I had matches to start a fire. Suffice to say this put an onerous responsibility on me to lead 7 other Scouts through the trials and tribulations of a two-week wilderness experience.

My first few days were full of me being full of me. Orders barked. Demands commanded. The little tyrant at his worst, striving to have the best patrol in Haliburton. The adults running the camp (not much older than my 15 years) gave me lots of rope and liberty to make life hell for 7 other 15 year olds! I was learning nothing about true leadership. Looking back it is probably at this juncture that many of the more ruthless leaders of our industry (wherever they may be; wink, nudge, wink) and other industries never recovered from that overbearing power surge.

I believe my lucky day came when, while on an island and living off the land (well sort of), I suffered an allergic reaction to the smoke of a particular pine tree (true second hand smoke). My eyes were swollen shut and without vision I felt doomed as a leader. I heretofore had used a style that meant pointing the index finger at work undone, giving the evil eye to slaggards and watching every move for fear of my patrol screwing up an assignment. Leading would be an impossible task given I lacked sight. The most important sense I possessed as a leader had been rendered temporarily out of order. I envisioned a relinquishing of power and with it my summer would be a failure.

I had a heart to heart with my adult leader who did not strip me of my responsibility of leader but instead coached me and made every effort to help me. He knew the right approach and was a true mentor on how to be a leader. He said you must trust your team to do the right thing after delegation of the action. Think through the team players and use the individual strengths therein to move forward. Listen to everything and “feel” the emotions to judge whether my direction was correct and was being carried out. Above all else you have to a team player.

Over the next 48 hours my sight returned gradually and so did my confidence at being a leader. I now understood the importance of listening to my “staff” and then delegating work in a meaningful fashion that best utilized their unique talents. My mentor probably went on to be a leader in his own right given he comprehended the role so well and was able to communicate the lesson so well. On the other hand he may be a consultant to any of today’s political or industry leaders needing the unthreatening counsel of a wise and worldly man or woman.

I did not go on to have the winningest patrol but I was part of a team that gave first place a run for their money right to the last inspection. If I could only have stopped “Bugsy” from having a nocturnal piddle behind the tent I am sure I could have won all the ribbons.

I smile when I recollect the lesson learned that summer. I should say lessons since I also learned how leeches can cover one’s body in mere minutes if you don’t take the right precautions. One of our other leaders took pleasure in putting us through a “mud portage” knowing it was full of leeches that would have made even Humphrey Bogart cringe more than in the African Queen! This is akin to the leader’s yearly change in company strategy or tactics

Every time I hear a speech or read an article where our leaders are questioned, quoted or highlighted I wonder where they got their early lessons. Did the pattern of their style emerge in youth or adulthood, home or school, club or gang?

When I ponder the leadership lessons I have assimilated over the years it is the “how not to do it” ones that immediately jump to mind. Is that because I have worked for inferior leaders? Is that because I assume every leader will be a mentor of excellence? Failing those two, then perhaps my expectations were set too high by a young in age but old in sage scout leader some 36 years ago. The following lessons are glaring and I will use the leap of faith that you can decipher the good examples from the bad.

After acquiring the necessary skill to do one job proficiently I asked to do more, regardless of what to fill my day early in my career. My boss responded by telling me to read the paper or pocket novel to “kill the time” since no one should look like they have nothing to do! On going two levels higher with my demand for more work, I was told to stay with the current regime and no one would worry about the extra time spent on superfluous reading materials.

Asking that my boss “go to the wall” for the department and make sure the recipient of certain information at a very senior level understood its importance was met with a blatant show of selfishness. The boss responded that he/she (trying to protect the anonymity) “would not go to the wall for anybody in the department nor the company if it meant in any way he/she may risk his/her job! “I would never go to the wall for you, any of you!” was not too inspiring.

“His usefulness has finished so why worry about him.” “Why should I give him a piece of the action if he is not smart enough to demand it?” The speaker was one and the same. The former sentence was uttered about what I thought was a valuable contributor to the speaker’s success but immediately of no more use. The later was said after a major contract was won and monetary rewards were enormous and the “him” played a most significant role in winning the day.

At a time of critical financial need after a family tragedy the boss steps in, in absolute confidence, to share the burden between the three of us and uses his own personal money to make sure the human tragedy was not exacerbated by monetary issues. Quietly a real personal gesture from a supreme boss for a staff member he/she had always seemed to loath or chastise.

The inability to give a 10-minute dialogue on the industry they worked in to senior officers and in front of all direct reports spoke volumes on the individuals true understanding of what was going on in the world.

1. “Well, this two day meeting about team building and building understanding is over and it is now best we all get back to the real work world where the work has piled up.” A company CEO/President who inspired his/her team with that wrap up speech at a company off site session.

2. “How’s the wife?” “What are you doin’ for holidays this year?” “We have had a good year at xczvbx, right?” The foregoing is a synopsis of my job evaluation and year-end review. The monetary increases always surpassed my expectations but I never really heard words to help me improve?

3. “I have been told your speech was given in a very monotone fashion and you refused to stand for the speech. This type of behavior is unacceptable.” The foregoing was delivered by a very important person in my career but was delivered after receiving a one sided telex (prehistoric and long ago replaced by courier and then e-mail) from a politically proficient peer at the same company. No question asked as to why. Nor even a question as to why I was on crutches. I had given the speech with a broken ankle in a bucket of ice while seated. Moral — as Yoda or David would say “Martyr I was not, eh.” “Stupid if I try, not.”

4. “The Board does not need to hear bad news and therefore we stripped your report of any references to adverse mortality, reserve shortfalls or concentration of risk. Instead we edited it to read that all issues were under control.”

5. An executive vice president once said to me “My job is to help you with your transition and I am available to you at all hours should you need support, an answer or approval. If you do not make a success of this opportunity then we have both failed but I have failed greater because I let you down.” I didn’t ask him if he was ever a Boy Scout Leader in Haliburton!

Take heart all you rookies. There are true leaders in our industry and some of them will cast you a life preserver but some will beat you to the lifeboat. My history in this insurance industry is far from unique and, although each of the above brief anecdotes will be a full chapter someday, I am sure if I solicited for more management examples the bad would outnumber the good. Perhaps that is what Grandma meant when she said I would certainly learn from my mistakes and the mistakes of others in the “big city”.

Curving back to the opening, I cannot write about specific leaders for various reasons:

I would never want at this stage of my life to hurt someone with his or her own leadership/management baggage.

I would have a difficult time on a part time basis truly studying each of our dozens of leaders to insure each was given a fair assessment.

I would like to work for a few more years in the business.

My leadership/management advice is more valuable sold in Asia Pacific and Australia where, since I am this foreigner of large stature (physical bulk), it is in demand. “The grass is always greener.” Never rang truer.

I like my current relationships thank you.

I would have a hard time picking who was number one on the list given all the choices. If I put the Boy Scout leader at top it would be cheating since I do not know if he is or ever did work in our industry.

Sorry to disappoint, but no ranking today but perhaps tomorrow. In the words of Baden-Powell as published in the “Headquarters Gazette, May, 1913”:

“In the Scout Movement the Scoutmasters and Commissioners have won their position in the public estimation by their whole-hearted work in a national cause; every day they are gaining more sympathy and goodwill from parents and pastors, teachers and Statesmen, and thus it is that the boys, in their turn, accord to them a greater confidence and greater readiness to serve and be led.”

I do not think there is malice of forethought amongst advisors but rather just clumsiness when dealing with the words, written or spoken, of someone from the product manufacturing side of life insurance. In the past I have written about the “Two Hymn Books” and how insurers themselves quite frequently use one set of verbiage for the advisor and then a second set for the risk assessor (underwriter). That strategy of poor communications has created dozens of issues between marketing and risk selection to the point one would assume it is a prescribed management style.

The most recent issue, although one cannot be so firm since issues crop up faster than grass grows in spring, is the one emanating from foreign travel. A few years ago the world was changed forever as the realities of terrorism and bombs of all types seem to engulf more than just a few countries. Panic set in and the questions from the highest executive suites of insurer and reinsurer poured forth wondering what travel is safe? Where do we worry if people are traveling there? Who wants to take these risks? Is there antiselection? The list of questions and apprehension grew and landed on the shoulders of underwriters to insure the price was right — risk equalled reward.

Did we of the “inside workers’ fraternity” communicate our angst to those of the “outside workers’ fraternity”? Did we forewarn the advisor who we are so dependent on for distribution that changes are in the air and there will be some tough times ahead for anyone travelling abroad? Did we take to the advisor all the rationale for the stand risk selectors were going to apply to cases where the mere mention of a plane headed to Beirut or Jakarta caused extreme consternation? The simple answer is we underwriters in the reinsurers did little proactive work on the subject with the many insurers and in turn the insurers did little proactive work with their distribution networks.

That is water under the bridge since we cannot go back and only claims people like to think that hindsight underwriting and action can be done in a foresight manner. Going forward I hope we have learned that we have to be proactive as a group of professional underwriters but that is sometimes impossible given the expediency with which advisors and their head office marketing support people operate. If I could influence what did happen I know I would today say quickly tell the world that reinsurers and insurers will be tightening up on anyone traveling abroad until we can ascertain what is the real threat and thus what is a real fair action to take on the various permutations of travel.

Underwriters over the years have become jaundiced in their view of some material risk factors and travel is definitely one of them. Ten days before a flight leaves for a deemed troublesome country and the advisor says they need a million dollars of coverage and fast. All part of normal estate planning and the upcoming flight bears not an iota on the application for 10 year term insurance. Let us please get serious. The underwriter is probably right in postponing until the person is back from Afghanistan before proceeding with assessing the real risks if indeed the person still wants a ten year product. In the interim go buy travel accident insurance. The underwriter is dubious of the real motivation and thus his or her training is to take the prudent (not necessarily conservative) approach. Is that wrong? I would bet that 99% it is the absolute right call. Since none of us in the insurance world things we are perfect I will settle for right 99% of the time.

Can I as a risk taker trying to have my company make money afford to turn a blind eye to the extra risk and accept the case even though foreign travel to some parts of the world are seen as risky (see below under government advisory). Are these warnings foolish and frivolous? No they are precautionary based on best information. The underwriter has no better source on the safety for a Canadian in say Indonesia than the Canadian government’s own Web site information bulletins. I have personal experience with Indonesia, a country I have strong attachments to from the 1990’s numerous trips there, and thus can relate to warnings by the Canadian government. I was to leave Singapore, where the biggest risk was shopping to the maximum Visa authorization, when I was warned by a Singaporean friend that going to Indonesia right then was not wise. He said trouble is brewing and the risk is immense. Not to be deterred I called my company and they said no all is alright go for it. Now I am caught between two sets of opinion. As a deciding factor I went to the government of Canada site and found out that indeed Canadians should get out of Indonesia and one would be stupid to go in at that time. Okay common sense says 2 out of 3 wins so go back to shopping in Singapore.

Duty and friendship mean a lot to this Ontario lad from rural roots so I called a business associate in the company I was to work with for four days. His advise was “All is well so come on over to Indonesia”. Then he really threw me when I asked if he would be picking me up at the airport as he usually has done in the past. His answer was “No, sorry it is too dangerous to be out after dark.” The risk was real. The government was right to warn me. My friend was right to warn me. In the end I went but did not eat or stay in any American icon establishment and kept away from windows, doors and milling vehicles! I am still here. Dos that mean that all travel is save regardless of warnings? No. Three weeks later the front of the hotel I was staying is was blown off by a bomb!

The various government advisory Web sites are great ways for an underwriter to assess the current risk of a particular country and if you visit all three (Canada, Australia and USA) you get a composite picture that is either comforting or frightening. For now I will continue to use it as one of the locations of good information and weigh its significance along with all other information I can accumulate. The worst that has happened to me in Indonesia is a real bad case of Shigellosis — great weight loss but terrible illness but that is another story about “testing”.

The underwriter has to decide if there is enough of a margin in the premiums singularly and collectively to accept a broader definition of “standard risk”. When I started in this business the margins existed for insurer and reinsurer alike. As pressure from advisors to lower the price for the many and actuaries eager to show they could sharpen a pencil better than the next actuary the price for mortality plummeted some 85% between 1974 and 2003. Only your computer hardware has seen similar reductions. Here in 2005 we have no margins. Putting it another way neither insurer or reinsurer have enough margins over a thousand cases to be extra generous on any case especially in areas where we lack statistical comfort. In the distant past there was the extra dollars of comfort that allowed underwriting latitude in decision making. It is long gone folks. We traded the broader definition and tolerance for standard for the sharper price for the healthiest and blandest of proposed insureds.

Today the battle rages around the world. Distribution wants freer rules on foreign travel and facts, lots of facts, to support the decisions of insurers and reinsurers. The underwriter wants to show some latitude but has only the press, government agencies and common sense to go on. The fighting in the trenches will only end when all parties sit a the same table and devise rules that make sense to the advisors and are seen as prudent to the risk selectors and risk takers.

Tell me again why hiding under a blanket in the boot of a taxi is not normal travel from airport to hotel. All that happened was my clothes got dirty and the reinsurer had a large cleaning bill. I still think I have been and remain a standard risk, at least for travel history and future.

Ross A. Morton

Richmond Hill, Canada

2005-06-3

I never dreamed that I would ever be writing a letter to a Town let alone a thank you letter. I give a lot of speeches and write a lot of articles for delivery all around this world of ours. Coming back to my roots is what keeps all the marbles in my head from becoming too frantic and thus colliding in delirious fashion. However it is the sad reality of death that has recently made me take a hard look at Harriston and what really does it mean to me.

My grandmother use to joke that I was a farm boy born to be in the city. I believed that to be true for my entire adult life. I was born officially in Palmerston Hospital during the cold and blizzardy month of January 1947. For my short stay in Harriston before my father and accompanying family moved to Toronto, I lived in two homes, neither of which has left a strong image in my gray cells (maybe that is the root of my gray hair). Reinforced by years of story telling by my elders is the story of my starting a fire under a peer when I was four — he being the cowboy and I being the Indian. That and the horrible episode with poison ivy in the backyard are all that linger as I reach middle age.

I remember though that Harriston was always home. We were regulars at the grandparents’ farm (Bert and Evaline French) although I never did get very far with milking and after a swat at my ear I was delegated to the separator. I could turn a handle at the right speed but never mastered the delicate and rhythmic squeeze of the teat. In my case practice did not make perfect it made for angry cows! The mere mention of Harriston brings back the smell and sounds of the barn. The fall harvesting, that brought out such strong bonds between neighbours as they raced to beat the rain, will always lead my thoughts to the Town of my Canadian heritage.

Many a winter evening was spent in the confines of the world’s best baby sitter — the old main street theatre. My younger brother and I would be parked in there regardless of what was playing on the screen while parents played cards or visited with relatives. As a youngster parents and their games were boring and the imagery on the screen was much better. This of course had its down side as younger brother and I came face to face with the movie Psycho. Even though it was a very adult theme and very scary we were admitted since Dad new the show owner and of course any idea of parental guidance rules had yet to be invented. To this day my brother still takes a shower without the shower curtain and I am sure our underwear is still as brown as the night we wore it to Psycho.

My older brother was always the envied one since he, being of considerable advanced age, had the local friends he made before we moved to Toronto. That meant he could play with peers and have a totally carefree Harriston visit. Five years makes a lot of difference in siblings. He was always the mature older brother who possessed all the strengths of any hero brother.

Uncles, aunts and kissing’ cousins seem to abound in the town and there was always someone celebrating something. I took the relatives just like the Town for granted during my adolescence. I drifted into the global village and international travel during my career development. Always a different country and different pressures of work. There were times I would fit in a weekend trip to visit Gramma and Grampa in their dollhouse in town. I always left fully nurtured both in spirit and stomach. I have the curse of having enjoyed the three best cooks in the world — my Gramma, my mom and my wife. You just had to look at the three Morton boys to realize that food was good and plentiful in our formative years — just look at our girth.

The tradition of weekend or day visits to Harriston continued as my parents returned to retire in Harriston. As I matured (a little) I came to appreciate my parentage and my roots. Not just the tangible items that were passed from generation to generation but also the intangible. I believe that my demeanor that has been successful in my career was molded by my parents and cultured by the Town. More than once I took pride when someone in the world would come up to me a say that I must be a small town person since my scruples and style were that of the rural background. Some would call it honesty and integrity. I would call it operating with a trust in people and a desire to see no one hurt and no one plundered. I was taught by parents and nurtured by the environment of rural heritage that I must treat all as I would want to be treated.

I owe my parents a lot. My Dad is gone but definitely not forgotten. My Mom is still thriving in the Town of Harriston and remains as the focus of not only the Morton clan but the larger clans of the Holtoms and Frenchs. Mom is a solid individual who quietly gives her all to family and friends. She shies away from centre stage and prefers anonymity to acknowledgement. Each of her three sons inherited and acquired her magnanimous style tempered by my father’s determination and “pig headedness”. We three sons were indeed blessed and each enjoyed a successful adulthood.

Holtom Family Reunion’s were joyous occasions where for half a day we could catch up on relatives near and far. Games and good food filled the day. There was something special that all enjoyed except for the teen who struggles with all nerdy things until the thunderbolt of maturity hits. To have a reunion or not was always the burning question. Events of the last few years have reinforced my desire to see the reunion thing continue at least every two years. To have it in Harriston confirms our roots and shows them off to the newer generations.

Now, why I am I writing this now? Where is this brief piece of literature going?

In the past three years the ideal world of the Mortons has been full of life’s downside. There has been years in the past when an uncle or grand relative died (the shock of Eldon French’s early demise and the sad passing of Great uncle Jack Holtom are etched in my brain). Many years earlier I lost a beautiful cousin at the mere start of her adulthood but time has a way of lessening the pain. Most recently the events seemed to come in rapid succession.

My Dad died almost three years ago at a grand age of almost 81. I was in Indonesia and struggled to get home when he was in his last hours. I had to accept the fact that I could not change the world to get home faster. The family carried the tragic end while I cried a lonely cry in airport and plane. I still miss my Dad and his quite presence across from me in life.

My Uncle Randal French told me the end was near and asked me to be strong and help Helen. It was difficult to even help myself since I had never before been asked to accept responsibility for carrying out the wishes of a dying person. The order is reversed but that matters not since they were so close to each other there seemed no time to grieve for one alone.

Then my Gramma decided enough was enough and let her God take her to a better place. She was indeed the matriarch of the family and carried the wisdom of the ages wherever she went. She was indeed a great and honourable lady who was loved by all. No greater human has walked this earth.

Just when tragedy seems to be past us and we settle into expectations of retirement and grandchildren our world was shattered with the very untimely death of my big brother Terry. It happened so suddenly that I am still of the feeling that it has to be a dream. One minute he is the host at the Holtom family reunion and the next minute he is in a terminal coma. We may never know why and that leaves anger. Big brothers are always supposed to be there. Sons are always supposed to be there for their Mom. Two of three Morton boys must carry on with the help of the next generation of boys and girls.

In each of these tragedies I spent considerable time in Harriston preparing the funerals, giving and receiving comfort and just walking the streets. In every instance my admiration for the Town grew. Walking down the street people would stop me and say your Jim’s boy or your Randy’s nephew or Mrs. French’s grandson or how is Isabel. The condolences would flow in a sincere and consoling fashion. I hate to admit it but most of these people I do not recall their names nor their relationship but thank you all for welcoming me and my family home in the most difficult of times. Food arrives without fanfare to feed the family. Offers of assistance are frequently received in person and by telephone. Harriston rallies to console its family.

It is hard to write how one feels but I do feel renewed by Harriston. You always make me feel warm and cozy even when death has stung my brain. My relatives in town, especially Marion, Art, Helen and Betty Jean have always been fantastic. There is of course all the others, related and not, who come to the funeral home to pay their respects, which is of tremendous support to my mother and the rest of us Morton’s. I feel safe in Town. I feel my mother in her apartment is safe and secure with all the needed friends nearby.

I truly thank you Harriston for being there for my family and I as we faced some very sad times. Thank you for buoying my sole as I walk the streets seeking answers to questions that no one can answer. For those of you who reside there do not take Harriston for granted. It is a great place that really cares. It is a great sanctuary amidst the enormity of today’s issues both near and far. For those like myself, who reside in far off places these days, never forget your roots. Take the time to let the soul of Harriston refresh your soul in times of trouble and in times of jubilation. Sincere thanks from a boy who will never forget and tells the world proudly of his roots.

Looking back on this article I realize that not much has changed yet everything has changed. Canada has gone from fierce reinsurance competitors numbering 6 to maybe three and a half (but a very solid half I must say). Facultative support has become the exception rather than the rule. The insurer retains less as a percentage yet is carrying a large burden in the area of risk selection. More audits and finer margins are the rule. The underwriting leader has to be on top of their game more than ever.

The environment changes rapidly. Reinsurers today show less in terms of consistency of practice and more than ever do not “discuss” their changes with the competition in advance or even after implementation. Is the onus on the insurer’s underwriter to make sure they understand all the nuances of every reinsurer it does business with? Historically one hoped the word would get around prior to anything happening but today there is the need for proactivity for all to stay current and make sure the minutest of details is known to all. Not easy for certain practices are taken for granted and not all insurers or reinsurers want to operate the same way on every case.

I actually think that five years from today the uniformity might be such the cry is for more variance of practice to enable flexibility. But maybe that is just speculation given tomorrow’s leaders may not be today’s leaders.

If Steve Carlson was still publishing Marketing Options he would have me writing the sequel.

Ross

2004-04-13

Marketing Options

April 1991

93.6% of all cases applied for are issued standard by the life industry. That was a statement that the industry said voluminous statistics provided unwavering over scores of years. It’s probably thru because of the pioneering efforts of the first companies into the field of substandard underwriting made it so, based on scarce information. In those years, all experimental underwriting was relegated almost exclusively to reinsurers soliciting the tough case and applying their sobering expertise to pricing almost any risk. Their familiar daring statement, often heard, was “We can accept with pleasure the risk at only + 37 extra mortality points”. (Similar risk taking can only be witnesses now in the archival film reruns of daredevils going over Niagara Falls in barrels.)

Facultative shopping of a case to numerous reinsurers for the best price, fewest additional requirements (“No, Mr. Reinsurer, a liver biopsy doe not fit into Mr. Applicant’s busy timetable!”), and financial security was hot up until the mid – 80s. It was a spirited exhibition of which reinsurers could survive the longest while trying to portray a sense of professionalism to the eagerly awaiting ceding life company. Such a ceding company would regularly send copies of a facultative file to up to 14 reinsurers. You can bet that one would make a bad call, offer coverage, and three winners emerged – the applicant now insured, the agent now paid, and the ceding company now rid of the risk of poor early mortality. All of this left the reinsurer blind- sided again, albeit with the reinsurer partially to blame.

Finally, reason prevailed. Reinsurers witnessed new claims stacking up on this business that began to shake the foundation of shopped facultative business. One by one, over the last five years the reinsurers assessed, revoked and retooled their own underwriting departments to reflect reality. Reality was that the earlier statistics were flawed and misused. Reality was that the days of ‘fat’ mortality assumptions in the premium rates was gone. Reality was that agents, head office underwriters and actuaries had forgotten to assess the depth of individual antiselection – if one person out of 100 accepted a rating of 300%, how correct was the assessment of that one individual? You could have bet that person was one of the worst of the 100 offers made!

Who loses when the reinsurer no longer provides the aggressive + 37 extra mortality points or even standard issue? Of course, it’s the applicants who will now pay the substantially higher 300%. Meanwhile, the average insured (who belongs in a standard premium category after rigid underwriting) is today’s big winner because with the more rigid definition of standard risk have come lower premiums.

In 1989 and 1990, it became evident that the head office underwriters needed to improve their mastery of the art of underwriting just as the wise agents pursued the mastery of serving their clients. The mastery of facultative underwriting combines the skill sets of agent, head office underwriter and their compatriots from the world of medicine, finance, actuarial science and reinsurance.

It was realized that ceding companies can take either a proactive role in determining the price to the proposed insured or a passive role of reacting to the quotes of the reinsurers. To their credit, more and more ceding companies are now taking a pro-active role. Their underwriters are deciding what substandard risk classifications should be offered and they are going to only a few reinsurers (those whom they know have the appropriate expertise for the substandard affliction in question) for confirmation of that assessment.

This is a radical shift for home office underwriters and, in fact, it can and is being done by only the most competent in the profession. However, the benefits to agents are becoming evident. These agents are realizing many difficult cases are now being dealt with by their own company and dealt with in a more consistent manner than shotgunning reinsurers. For the reinsurer, this new approach to shopped facultative cases eliminates blind-siding, at least until the next major upheaval in underwriting – such as AIDS and non-smoker rates presented in the past or genetic testing may offer in the future.

We tried so hard to make things better for our new employees that we made them worse. For my reports’ reports, I’d like better. I’d really like for them to know about hand-cranked calculators, white shirts and ties, make shift calculations on paper and leaving some margins for future staff. I really would.

I hope you learn humility by being humiliated, and that you appreciate honesty by being cheated. I hope you learn to clean up your own desk and finish everything on time and proactively supply the answer not the question. And I really hope nobody gives you a brand new computer whenever you whine about megahertz slowing your productivity.

It will be good if at least one time you can see products make money and make tough decisions to cancel a dead end treaty. I hope you get embarrassed fighting for something you believe in.

I hope you have to share a room when traveling on business with your younger staff. And it’s all right if you have to draw a line down the middle of the room, but when he/she wants to hear your heart felt feelings on his career and your outlook on insurance free of corporate babble I hope you let him/her.

When you want to make a closing pitch to a customer and your inexperienced staff wants to tag along, I hope you’ll let him/her once in a while. Share the glory and the defeats.

I hope you have to take a train or bus to an insurer in a winter blizzard and that you work in a company that appreciates the dedication. On rainy days when you have to catch a ride, I hope you don’t ask your driver to drop you two blocks away so you won’t be seen riding with someone as eerie as an actuary or underwriter.

If you want an example of ethics, I hope your boss teaches you by example how to be ethical instead of buying a course for you to take. I hope you learn to dig in the dusty history for guidance and read books on a myriad of subjects. I hope being forthright takes precedence over subterfuge. When you rely so heavily on computers, I hope you also learn to add and subtract in your head and understand the present value of money.

I hope your peers tease you when you have your first notoriety of success, and when you talk back to your boss that you learn that frank debate can build a stronger company.

I hope, at whatever age you are, you forget the packaging and let who you are inside see whom she/he is inside. Remember that some of the most precious idiosyncrasies we hold so dear are brick walls our peers cannot get through. Make your own decisions and hide not behind the safety of the committee.

May you make mistakes both big and small but have the courage to admit them and move on, never duplicating the error again. I don’t care if you try a beer once, but not at the desk. And if a peer offers you dope or a joint to break the mundane cycle at work, I hope you realize he is neither your friend nor a friend of the company.

I sure hope you make time to sit on a porch with your senior cohorts from work and go fishing with your boss. May you feel sorrow at a failing insurer or reinsurer and joy during the growth of our industry. I hope your boss punishes you when you show arrogance and disdain for a customer and that he/she publicly praises you at your successes and diligence for service.

These things I truly hope fall in your path – tough times and disappointment, hard work and personal and company success. To me, it is the measure of life and the significance of our work, be it ever so humble at times.

When I wrote this in very early 1973 I was three years out of university where I studied Canadian history and abstract mathematics after deciding actuarial science and law were too boring for my warped mind. My greatest “boss” ever, Bob Spittel, and the president at the time of Mercantile and General Reinsurance Canada, Ian Michie, pushed, encouraged, corralled or cajoled me into writing a paper for presentation at the Pacific Insurance Conference (a very prestigious event in the early days). If they liked my paper, if those in Canada who felt it was worthy of representing Canada at the conference and if I would deliver my first real big audience of elders (20 plus years my senior in age and experience) presentation M&G would send my dear wife and I to Japan for the actual conference.

Bob’s prodding and brotherly advice made it all possible. Ian thought that if my wife joined me in such an exotic location she would get pregnant and I would truly be a family man (a deeply held belief for all his male staff). His concept of fertility was somewhat antiquated and this idea was right up there with facing the bed along a north south axis! Bless you Ian for caring.

Anyway the paper past musters by all who signed off on it so off I went to represent Canada. When there my wife and I were treated as royalty since the Japanese loved the article being that it was different and less boring than all the others. The Japanese insurance industry furnished Sue and I with a butler and chauffer for the conference and its ancillary events while poor President Ian rode with all other delegates in buses. Looking back the article is so tame compared to much of my writing. Was it perhaps the long beautiful legs of my wife in the shortest of mini skirts (it is 1973) that really was the attraction and not my words?

Anyway if anyone wants the Japanese version I have it also but I cannot attest to the quality of translation or that it may indeed be better than the English version.

Ross

2004-04-07

Pacific Insurance Conference – 1973

The Canadian Life insurance industry has relatively stabilized itself in the realm of new product development in the last couple of years. There are, however, various “old products” which have been revamped to exploit current market potential arising from government tax changes or economics inflation.

At the present time, over fifty life insurance companies operating in Canada are offering a form of variable contract in which the policyholder’s benefit is variable according to the performance of a special investment fund. Basically, there are five forms the variable contract takes: a decreasing term combined with and “increasing” investment fund: guaranteed level insurance plus accumulated fund values; minimum death benefit plus investment fund value; increasing minimum death benefit due to investment fund appreciation; and yearly adjusted death benefit either increased or decreased value. Sales results of all forms have been mediocre but one Canadian company has experienced sales far and above the Canadian Life Insurance Association’s most liberal predictions.

As a result of recent Canadian federal government tax legislation changes, life insurance companies are experiencing and all too needed influx of individual savings dollars back into the registered retirement savings plans. The market for these plans has grown considerably and there is every expectation that is trend will continue.

The tax legislation changes also provided an incentive for the sales of the income-averaging annuity. The annuity was not a new product but an old product adapted to entice the resultant sales from a market predicted to produce $12,000,000 of premium income per year.

Initial sales results of an inflation-linked family income plan have not be exactly encouraging, but rather discouraging. This plan, linked as it is to a cost-of-living index, could prove to be more marked in the future should inflation continue to devalue the dollar’s purchasing power.

The paper makes short mention of the deposit term type policy and its generally good sales results. The persistency problem is very negligible with this plan and companies are able to almost ignore the problems of the early lapse.

The almost totally revised federal Unemployment Insurance Act necessitated a revision of privately offered accident and sickness insurance coverage. With the exception of the self -employed, the federal unemployment scheme provided mandatory accident and sickness benefits to all employed Canadians. Three approaches (an integration provision, and elimination period and a split benefit) were instituted to offset duplication by private accident and sickness insurers. The new plans were really “old plans” with changed indemnification schedules.

The recent trends in new Canadian products have been toward cheaper term insurance, which could lead to super selective risk appraisal. The consumerist movement may shortly take a very critical appraisal of the life insurance industry, just as it has delved into the automobile insurance industry resulting in government intervention.

WHAT NEW CANADIAN INSURANCE PROCUDTS

Introduction

1. In the fall of 1972, the Excelsior Life Insurance Company published the results of its survey of Agents concerning their attitudes of the insurance industry. A mere 1% of those surveyed replied that “lack of products” was a major cause of their agency not doing more life insurance business. Other than the occasional agent requesting a mutation of an existing policy form, it would appear that the Canadian insurance industry has stabilized itself in the area of new product development.

2. By defining new product, one must not include the confusing method of renaming old products so the name coincides with an advertiser’s extravagant plans to “con” the public into spending money on insurance. New products in the past have included family policies, guaranteed insurability benefits, fifth dividend options, variable annuities, variable life and deposit. There have been no such innovations in Canadian products during the past two years, other than the introduction, by companies, of policies which have been available to the public through competition insurance companies previously.

3. This paper, therefore, will not delve into the introduction of so-called “new products” but will concentrate on the old products which are generating the greatest amount of publicity in the insurance industry today in Canada. The first two policy types which come to mind are the variable contracts and the registered retirement savings plans; however, one must also include the mention of deposit tremor modified term, economy linked family income plan and the income averaging annuity contracts.

4. The latter part of this paper will delve into the implications of the revised Unemployment Insurance Act on the Canadian accident and sickness insurance products. The products involved in this area are not “new products” but are old products with new indemnification schedules and rules.

VARIABLE CONTRACT

5. Approximately fifty life insurance companies operating in Canada are now offering the variable contract to the public. The majority of these contracts are sold on the promise that they will fight inflation; i.e., the variable contract combines previously known insurance features and certain required guarantees with the publicly appealing opportunity for an inflation offset and growth factor. Generally, the policyholder’s benefits vary according to the performance of a special investment fund, usually consisting of common stocks, but there are those funds that include bonds and mortgages. Prior to variable contracts, the ordinary life participating policy, with its value depending mainly on the life insurance company performance regarding expenses, mortality and investment returns, was the closest plan available to combat the inflationary trend of the Canadian economy.

6. In connection with life insurance, there are five mutations of the variable contract available in Canada. First, there is the form which combines a decreasing term life insurance contract with and investment fund that is predicated to increase in value to exactly counter balance the decrease in life coverage. At maturity, which is frequently age 65, the guaranteed amount of insurance has been reduced to zero and the amount accumulated in the special investment fund becomes payable.

7. A second similar form of contract provides a guaranteed level amount of insurance, payable on death, in addition to the amount accumulated in the special investment fund. As some specified age, again typically age 65, the policy is changed to one providing a guaranteed level amount of insurance for the balance of the policyholder’s lifetime. This new amount of insurance is determined by multiplying the amount in the special investment fund at the age by a factor guaranteed when the contract was originally issued.

8. Under a third and somewhat different form of contract, a minimum death benefit is guaranteed from the inception of the contract. Included in this death benefits is the amount accumulated in the special investment fund; thus, if the latter amount exceeds the amount of the guarantee, the amount in the fund will be paid; whereas, if he amount in the fund is less than the guarantee, the guaranteed amount will be disbursed to the beneficiary.

9. A variation of this third type of contract provides that the guaranteed minimum death benefit will be increased by and appreciation in the special investment fund over the premiums paid into the fund. Both the latter tow types of contracts more often than not provide for a maturity at a specified age, frequently age 65, and for the payment of the amount in the fund or a guaranteed amount if greater at that time.

10. By searching further, one finds another form of contract in this broad category of variable contracts, which provides an initial amount of insurance which is adjusted annually through the application of any growth or decline in the special investment fund over the past year to provide additional or possibly reduced amounts of insurance. This latter form of contract generally provides that some part of the insurance is fully guaranteed and that only the balance will reflect the performance of the special investment fund.

11. Almost all variable contracts have three basic features: benefits on maturity or death may not fall below a pre-determined floor; cash surrender values are provided through out the term of the contract; the amount of cash surrender values is not guaranteed and reflects the fund’s performance; and a policyholder can convert at any time to a fully guaranteed life insurance policy. Purchasing power of the conventional insurance surrender or maturity dollar has eroded to a point where this form of long-term guarantee investment was regarded with skepticism by much of the buying public. Therefore, the public in the past couple of years has been conditioned to expect more from its hard-earned savings dollar. The variable contract has found a ready-made market as well as a generally willing sales force. However, the life insurance companies offering variable contracts have met with variable sales results.

12. On rather large Canadian company, following the agents’ request for an equity linked policy to meet competition, introduced such a policy in the 1972 calendar year. One would have expected to an overwhelming number of applications to be processed by this well known and respected company, especially since various members of the Canadian Life Insurance Association predicted the variable contract would account for over fifty per cent of sales volume in the early seventies. However, the company mentioned has only experienced a sales result of two per cent of its total number of policies sold. The one encouraging item is that the average size ($15,000) of the equity linked plan is greater than its overall average size policy ($12,000).

13. The variable life contract has not exclusively met with such an unenthusiastic response as a sales result. One Canadian company has increased its volume by more than double its 1970 volume and became the fastest growing life insurance company in Canada. The bulk of their sales – ninety per cent – has been in the form of an equity linked policy utilizing a common stock based fund. A fifty per cent increase in sales force has been experienced and the company is truly based on the variable contract. Their plans for the future include selling life insurance and annuity policies whose values are tied to and fluctuate with a fund of real estate investments. Presently, there are problems existing with government authorities concerning the liquidity problem of such a fund, but these may soon be resolved. Real estate is the one commodity that we cannot artificially manufacture and as its scarcity increases its value increases. A property-linked fund should prove to be popular, since most Canadians are constantly aware of the rapidly increasing value of real estate and realize it is the safest investment, barring a general depression.

14. Other sales results from Canadian companies show results which are almost invariably below the Canadian Life Insurance Association members’ predictions, and the agency demand for the variable contract has currently stagnated. Companies who are actively soliciting sales of the variable contracts are obtaining reasonable sales results. On the other hand, the companies that merely added the contract to placate agency demands are not truly encouraging abundant ales results. This possibly reflects back to my opening remark that only one per cent of the agents surveyed felt that the lack of new products was a reason for fewer life sales.

REGISTERED RETIREMENT SAVINGS PLANS

15. Life insurance as a form of savings has stagnated during the period 1962 to 1972. A decade ago, almost one-half of a Canadian’s personal savings went into life insurance policies; whereas, today the figure is approximately one-fifth of his savings. In fact, government issued Canadian Savings Bonds have overtaken life insurance savings. Thanks to recent tax legislation changes, which allow the Canadian taxpayer to deduct up to $4,000 if self-employed (or $2,500 if not self-employed) from his taxable income if the money is used for retirement savings, there has been an influx of savings dollars back into life insurance. The taxpayer is always looking for ways and means to pay fewer dollars to the Taxation Department. Insurance companies, as well as trust companies and the like, are now advertising the availability of their own registered retirement savings plans. These plans are tax shelters which allow the purchaser to invest gross interest and gross capital gains before taxation. The buyer may even borrow money to buy the plan, with the added bonus that the interest on the borrowed funds is also tax deductible.

16. In 1972 the dollar value of the registered retirement savings plan deductions was $320,000,000, which represents an increase of forty-two per cent over the 1971 dollar in those taking advantage of the deductions – representing 248,719 Canadians. As an example of the tax savings, a self-employed taxpayer earning $20,000 per year could save $1,698 in taxes by diverting $4,000 of his income into a registered retirement savings plan.

17. It must be stressed that this is not a new product, but it is a new incentive to the buying public to purchase old life insurance products (provided the product matures by the owner’s seventy-first birthday) such as endowments, annuities, and some of the variable life contracts. The outlook for an ever-increasing volume of business is this area is very good, provided the Canadian government does not reduce this tax deduction.

18. The registered retirement savings plans, offered by Canadian insurance companies, produce a soaring premium income, excellent low lapse ratio and do not allow the applicant-owner to borrow any portion of the funds value. The direct result is an abnormally high cash flow into the life insurance industry. Thus, the larger insurance companies are evolving into the real estate development industry in order to obtain adequate returns on their large capital resources. By financially supporting a total residential, industrial or commercial venture from the land acquisition through to the leasing to tenants, larger insurance companies experience yields on their investment of 8% or higher, while taking advantage of the cash flow. The financing of existing real estate, producing less than a 7% yield, is therefore left to the European financial centers.

19. A second side effect of the registered retirement savings plans is their stabilizing effect on the Toronto Stock Exchange. The laws stipulate 90% of these registered funds be invested in Canadian securities. This, therefore, constantly provides a reliable flow of capital into the Toronto Stock Exchange moderating the periods of “bear” markets which are more evident on the New York Stock Exchange.

20. Recently, the Canadian insurance industry has seen the introduction of plans, not really new plans, which are provided to meet the current trend in the industry. One plan is meant to take advantage of the changes in income tax legislation which provides for further tax shelter. The second plan has been introduced to combat inflation. The third plan is meant to combat the persistency problem with life insurance contracts and especially term contracts.

INCOME AVERAGING ANNUITIES

21. With the introduction of the revised Income Tax in Canada in January 1972, the insurance industry found a ready-made incentive to the buying public to buy income averaging annuities. The applicant must buy the income averaging annuity within the taxation year or within sixty days of the year-end. The buyer can then deduct from his taxable income the lesser of the actual amount paid for his income averaging annuity and the amount of his income which qualifies under the Income Tax Act minus the sum equal to one year of payments. This Act is quite appropriate in areas where an individual may receive a large sum of money as income in any one taxation year which he may not anticipate receiving in future years.

22. There are various areas where the income averaging annuity would be very appropriate, and they include:

(1) Any payment out of the superannuation or pension fund can be transferred into an income averaging annuity unless there is some provision in the fund or legislation that does not permit it

(2) Payment upon retirement in recognition of long service, can be tax sheltered in an income averaging annuity.

(3) Single payment from an employee’s profit sharing plan, in satisfaction of his rights under the plan, can be transferred to an income averaging annuity.

(4) The new Income Tax Annuity provides for a number of new interesting opportunities for transferring funds such as deferred profit sharing plans which can be withdrawn to an income averaging annuity.

(5) If an employee’s pension is amended and a lump sum becomes payable to him even though he continues to be a member, he can transfer the payment to an income averaging annuity.

(6) The payment from an employer or former employer in respect of loss of employment (i.e., severance pay), if paid in the year of retirement or the following year, can also be tax sheltered.

(7) A return of premiums received from a registered retirement savings plan on the death of an annuitant can be transferred to an income averaging annuity.

(8) Net taxable gains are also transferable into an income averaging annuity. Also, incomes from production of a literary, dramatic, musical or artistic work or income from activities as an athlete, musician or public entertainer can also be “averaged” to cut taxes.

23. The annuity in question must be purchased from a “person” licensed or authorized to carry on an annuity business in Canada, which means a life insurance company. The income averaging annuity can be an annuity certain for a fixed period of up to fifteen years – it can also be a life annuity with up to fifteen years guaranteed. However, in neither case may the guarantee period go beyond age 85, nor may the benefits start later than ten months after the purchase of the annuity. The income must be level for as long as the annuity is payable.

24. Even though the individuals affected by such annuity plans are in the minority in Canada, there is indeed a market for this type of plan and it has been predicted that there will be sales of approximately ten to twelve million dollars in premium in the next couple of years from this plan. One company to date has experienced about two million dollars of sales in its first year, which is, in their opinion, a very good sales result.

INFLATION AND FAMILY PLANS

25. Inflation problems were mentioned earlier in connection with the variable contracts, and how variable contracts were aimed at fighting inflation. One Canadian company has recently introduced and inflation linked family income plan which allows for the benefit payable to be linked to the cost of living. The death benefits payable increase yearly according to the rise in the cost of living, with the provision that the increase is no more than twenty per cent in one year and a guaranteed minimum increase of four per cent in any one year. The plan is convertible at any time for the amount of the increased value, which depends again on the economic inflation factor. To date, the sales results of this plan have not been as good as expected and no real trend can be foreseen at the present time, even though the plan should appeal to those people worried about the purchasing power of their savings dollar in the future.

DEPOSIT TERM

26. Although the problem of persistency in Canada has shown a decrease in the past couple of years – decreasing from a fifteen point one per cent lapse rate in mid 1971 to a thirteen per cent lapse rate by the end of 1972 – it is still a major insurance problem. One product, aimed at eliminating the financial strain of lapses, has just recently been marketed by a couple of insurers in Canada. This is the deposit term type of policy.

27. The company that has experienced the best sales result with this plan sells a modified term plan on the basis of a ten year renewable term, with a deposit that varies by age (example, at age 20 the deposit is $5.50 per mil and age 60 the deposit is $16.96 per mil). With the deposit term, this company has experienced a very low lapse rate of two per cent and its sales are now forty per cent of its total business. Since no portion of the deposit is returnable at time of lapse, the company feels that it has more than covered its first year expenses and thus does not have to worry about early persistency problems. The commissions to agents are 100 per cent in the first year with nil commissions on renewal, and the commission is based on the regular term premium, not on the combined regular premium plus deposit.

28. We possibly will see in the future more companies selling this plan in order to combat a persistency problem on term business.

ACCIDENT AND SICKNESS INSURANCE

29. On June 23rd, 1971, the Canadian federal government passed, in parliament, a new Unemployment Insurance act which affected the insurance market by making insurers, issuing accident and sickness policies, adapt “old plans” to a “new market”. Again, we did not see a rash of new products, merely a rash of policy changes. Surprisingly enough, most insurers left the necessary changes to the last possible moment; most changes not being introduced until well into the 1972 year when the Unemployment Insurance Act was in full momentum and ready to start on July 1st, 1972.

30. Significant sections of the new Act as they affect insurers were:

(a) Universal coverage was enforced; thus employees not self employed were not included. It has brought into the scheme some one million more employees previously excluded due to their salaries (earning more that $7,800 per year.)

(b) The new act provides benefits after eight weeks of insurable employment in the past fifty-two weeks, making it closer to insurance company practices.

(c) Contributions are scaled to earnings while benefits are expressed as a percentage of earnings; benefits are more related to protecting a person’s standard of living and adjust automatically with that standard.

(d) Sickness and pregnancy were added as valid reasons to draw benefits under the Unemployment Insurance Scheme.

(e) The new Act takes the position of “second payer” only with regards to group policies and not to individual policies which are bought personally by he claimant.

31. The insurance industry countered that major changes would not be required to be introduced with the coming into effect of the Unemployment Insurance Act, and that coverage would retain the flexibility that has always been characteristic of individual policies providing income replacement benefits. One such insurer stated: “ Our underwriting practices considers the Unemployment Insurance Act benefits to be like any other existing coverage and we try to ensure that any benefits offered by our company do not allow for unnecessary or duplicate coverage.”

32. Generally, three approaches: an integration provision, and elimination period, and a split benefit were instituted to offset possible duplication and the problem of over-insurance. The integration provision approach controls the amount the insured will receive, or the insurer will pay, when the insured is concurrently entitled to receive Unemployment Insurance benefits. The provision would reduce the monthly benefit of the policy, not the government benefits. Unfortunately, the reliance on this provision alone results in poor sales results and/or policy owner dissatisfaction and heavy lapses. The insured prefers to know that he will receive the full benefits paid for and expected, regardless of what the agent told him at the time of the sale.

33. The elimination period approach, commonly a one hundred and twenty day elimination period, is a second method of combating the over insurance problem in the early stages of benefit. However, as one must qualify by twenty weeks’ contributions under the Unemployment Insurance Act for entitlement to its cash benefits, it is quite possible that a policy owner may not indeed qualify; thus, one could be left with a loss of earnings and no adequate replacement for the one hundred and twenty day elimination period. We also have the factor that Unemployment Sickness benefits can be deferred until payments under a registered group of sickness plan are exhausted, thus leaving the insured over-insured for a possible one hundred and twenty day period. Many companies have been endeavoring to sell this approach. Proposed insureds, realizing the delays encountered with dealing with a government agency and being unfamiliar with the available Unemployment Insurance Sickness benefits, have, however, been rather reluctant to purchase a plan that does not benefit them for one hundred and twenty days.

34. The third approach, split benefits, has been in use by some companies for some time. The Unemployment Insurance benefit is taxable income; this, insurers are issuing policies with modest benefits for the first seventeen weeks and then for the full qualifying amount thereafter continuing for the balance covered benefit period. Again, sales on this type of plan are hard to make, since the agent is faced with a communication problem. The buyer still prefers to know that if he is purchasing a benefit he is purchasing the full benefit and not twenty five per cent now and the balance after seventeen weeks.

35. Various combinations of these approaches (i.e., the integration approach in conjunction with the split benefit approach) are being used, but all it appears to be doing is confusing the consumer, and not encouraging good sales results.

36. A self-employed individual is purchasing more and more accident and sickness insurance on the conventional plans available. This market is relatively unaffected by the Unemployment Insurance Act, and thus not burdened with further confusing approaches concerning the how’s and when’s of paying benefits. Further inducement to the professional, self-employed market is the recent introduction of the return of premium on disability income policies. The policy generally provides for the return of the three-quarters of the paid in premiums with the insured paying about forty per cent extra in order to provide for this benefit. Those consumers, who had previously believed they were better off self-insuring themselves against loss of revenue, are now purchasing a plan that “always” gives them something back.

RECENT TRENDS

37. Since the Canadian life insurance industry has no new legitimate “new products”, one would find it hard to summarize the trends of “new products”. Instead, possibly the above comments on life and accident and sickness insurance shows that the recent trend has been more centered on the marketing of old products to produce greater sales results. There have also been various other forms of marketing to increase sales results, and they included sales through catalogue order forms, mass merchandising, amongst other “gimmick” type of solicitation. The products offered are not new but they do, however, fill the need for a market that has been virtually left to stagnate. Since the amount of insurance that this market is seeking generally produces a small commission, it does not attract the agent to a possible sale. Thus, by a direct mail or mass merchandising approach, this market is beginning to be solicited once again, but not by the professional sales force, rather through a mail order type business.

38. There is a definite trend, recently, to counter the increasing competition to sell “cheap” term by decreasing to the lowest, and possibly below, the rates charged to the consumer. These old plans with their new bargain basement rates cannot withstand the usual expected mortality losses that are based on the insured being given a standard premium when his individually assessed mortality falls somewhere between eighty per cent and one hundred and thirty per cent of normal. As a result, these new rates will warrant acceptance of only those lives that are assessed at one per cent mortality or better, excluding literally millions in the one hundred and one per cent to one hundred and thirty per cent category presently obtaining standard rates. This latter group must reapply on a different plan which has the conventional rate structure.

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39. If this trend for new product rates continues, it could lead to rates on certain products for those who show a more and more finite mortality; i.e., ninety-one to ninety-two percent, ninety-three to ninety-four per cent, ninety-four to ninety-five per cent, … one hundred and twenty eight to one hundred and twenty-nine per cent,… If this happens, the Canadian insurance industry will, by such a pricing structure, be offering rate classifications similar to automobile insurance rates. A super standard life risk will be paying a lower premium, just as the good driver with merit “discount” pays less for automobile coverage. The average standard life risk, if there is such an animal, will be paying the conventional rate, just as the average (one accident every couple of years) driver pays. The just substandard, or borderline standard life, will pay more in premiums, similar to the poor driver. The average driver’s rates are now going up at a phenomenal rate, coinciding with the poor driver’s experience and rates; only the good drivers are stabilizing. It seems bound to hold true for the life insurance rates if the trend continues for a “cheap” rate structure.

40. The public is now demanding that the individual provincial governments investigate the automobile insurance industry and it has resulted so far in three out of ten provinces now providing a basic automobile coverage and excluding all private enterprise for the driving public. It will not take the various consumers’ associations long to realize that the life insurance industry may require a very similar attack on its practices if the above-noted trend continues.

41. Competition is generally very susceptible in our society, but when the competition adversely affects the status quo of the purchasing public, it is unnecessary and unwarranted. Hopefully, the industry will not bow to agent demands for lower rates for much longer, but will find a better and more equitable method to supply the necessary competitive edge.

42. Mr. William MacFarlane, in his article entitled “Consumers – no longer a Non-word” in the National Underwriter of January 8, 1972, stated that “ The Life insurance industry today, unlike its counter parting the Property and Liability field, has been the happy victims of virtually complete neglect as far as a consumerism movement is concerned. The sleepy giant has been nudged on occasion, prodded on others, has rolled over and yawned, and then evidently brushed off its detractors and unspectacularly gone back to doing business in the same old way and at the same old stand.”

43. As stated at the very beginning of my talk, new products are not really what the life insurance industry needs. With the rise of consumerism and the consumerist and related groups, the life insurance industry can expect to undergo a scrutiny as never before encountered. Developing new products just to please a minority group is not what is required. The life insurance industry should take a look at the products it now sells and possibly offer even fewer policy types in the future. There should be a tendency in the future to drop all the various and overly confusing policy names as well as making the policies much simpler for the average insured.

In 1977 I was in my last year at M&G and looking for my next career opportunity while working as hard as ever at M&G. Like always in my life I left a person or a group of people but never the heart and soul of the company. Making the imminent departure was the fact that I thoroughly enjoyed working with a great group of people.

Dr. Brackenridge was already an icon of life insurance underwriting and a model medical director when we put a tour of the USA together to publicize his latest book. The book was a rewrite of a decades earlier version of the same title. Anyone who knew “Brack” immediately fell under his charisma and depth of knowledge and the great style of delivering sound expertise in a complicated field. We at the time wanted the Americans to meet the man for themselves, talk up the book and think better of the M&G. IT worked.

The tour was memorable and a milestone for the M&G. Many reinsurers break out of a “sameness” by doing the unusual but regrettably that is not the case today. Today perhaps we are mired in a rut of “sameness” which is just too comfortable for today’s leaders to beak from and charge forward. Perhaps a reinsurer just has to find there own “Brack” today and use him, her or it to lead that charge.

Anyway I reproduce here a story I was asked to write back then for publication in the M&G global magazine for staff. It did not get wide distribution and I struggled to find my original copy. It turned up this past week while researching for a book that I have been threatening to publish for years. Not the financial underwriting text but the one on our industry. Upon finding the old tattered copy and reading it I immediately found a smile on my face from ear to ear as the warm memories flooded my consciousness.

IT was a great “tour” and it will always remain a highlight of my reinsurance career. The people, both M&G staff and invited guests, all contributed to super times that indeed “do it for the M&G.”

Remember that it was written in a different time. The 1970’s were not the same as 2005. Political correctness was unheard of and travel was fun and novel still. If any of the words offend today I am sorry but I do not want to change it and loose the flavour. My current comments are in italics.

“BRACK’S BASH”

OR

“DOES THIS DOCTOR MAKE HOUSE CALLS AS WELL?”

(ALSO KNOWN AS THE M&G TRAVELLING CIRCUS OR THE M&G’s MAGICAL MYSTERY MOVEMENT)

Once upon a time (don’t worry it’s not about Goldilocks) there was a company called the M. & G. (Note that they had yet to brand themselves as M&G) This band of adventurous travelers (N.A. expression) liked to do the unusual and as often as not wondered why the unusual became a habit.

Who else, I ask you, could think of a plan that would involve the “Movement” of hundreds of words (in book form), across thousands of miles of open terrain on the North American Continent. The logistics of the event are beyond comprehension. Not since the Indians (N.A. expression or version) sold Manhattan Island to the Dutch has there been such a momentous occasion in history. The Canadian good guys (appropriately dressed in white) sat for hours trying to think of an imaginative, taxing ordeal that would put an author of such a book as “The Medical Selection of Life Risks” through in such a short period of time.

The “Movement” started in New York and then moved on to Washington, Dallas, Los Angeles, San Francisco – pause – Minneapolis, Des Moines (why here?), Chicago, Toronto (is there a better place?) and Montreal. The Montreal portion of the “movement” has been excluded due to my inability to converse rapidly in the French language – vive le Quebec libre. (Note looking back I have no idea why I added such an end to the sentence)

GWCB and I flew to New York in the wee small hours of Monday, May 16th to be greeted by Brack, EG and RW lazily enjoying lunch. It’s 10:00 a.m. and they are having an early lunch! No, it looks more like breakfast. GWCB and I were glad it was breakfast for, if it had been lunch, we would have missed the opening performance. New York, was an amazing city (probably still is). I was constantly worried that I would run out of money. I spent $90.00 in less than five hours on tips and cab fares. Why are we doing business in this town? Our actuaries would never have allowed for this type of expense margin in our rates.

It was difficult talking to Brack and EG on Monday since they still had not recovered from being inundated with a verbal barrage the day before. One of our clients had given them a very complete running description of city during a whirlwind tour of the city. Who says our clients will not talk to us? I was told the highlight of the tour was Harlem. It’s too bad the U.S. of A. could not obtain war relief to correct the damage caused by the internal wars in Harlem. Maybe the M. & G. and Jimmy C. could work out some catastrophe coverage. (Note how much has changed since the mid 1970’s and most of it for the better)

The Park Plaza was up to the standards expected by the members of the M.M.M. (see title). Elegant surroundings and superb service highlighted the day. Fortunately for the team, the books arrived with only five minutes to spare. A great volume of needless perspiration was spent in anticipation of trying to give away forty books when we didn’t have forty books to give away. All is well that ends well, and on such an original thought we left “The Big Apple” in a limousine which was forty feet long and thirty feet wide. To end the scene one must make a mental image of Brack taking copious feet of movies of the limo ride which are nothing more than road signs, steel girders and bridge abutments. These are of interest to engineers around the world, but heaven help Brack’s family and friends.

Ah….Washington and thank God for RRW who made all the arrangements. Did he really select the hotel and a dining establishment for dinner? Yes, he did! We had charcoal coloured lobster, a steak thin as bologna, wine served in glasses still tasting of a strong antiseptic detergent and a waitress who kept saying “it is not my fault, I’m only a part-time summer student trying to learn a trade.” Back in the hotel we found that our phones did not work. E.G. was without a lock on her door and proceeded to pile the television set, triple dresser, four chairs and her purse against her door to feel secure in her bed.

Fifteen guests were expected at our luncheon, yet the original room scheduled for the lunch would accommodate one thousand guests, a flying circus, a full orchestra and the complete M&G Cheltenham staff if we could have brought them over for the occasion. After a great deal of complaining and sulking in corners we were able to arrange a more appropriately-sized room. The hotel itself got its revenge on RRW by giving him a room which had no towels. When he emerged from the shower his story was that he was forced to roll around in bed to dry himself. At least he said he was rolling around in bed to dry himself, but knowing RRW the imagination could run wild with other possibilities. It would be unfair to mention the name of this hotel so I will just say it starts with the letter “M” and is named after a famous ship in American history.

In Dallas we were met by the ever jovial PHT who proceeded to give us an educational tour of the city of Dallas which is famous for only one thing and that is not reinsurance. (Note, was it the cheerleaders? Being this was a testerone charged trip?) One gets to appreciate the talented drivers that we have in the M. & G. when one of the M. & G. representatives can maneuver down a one-way street, going in the wrong direction, and fail to notice that he is in the wrong. This was an experience and I am sure that all our travelers have tried it at various times and have met with varying degrees of success. Thank God for group insurance.

The luncheon here went well with a large attendance of forty people, all of whom were thought to be invited friends of the M. & G. The books arrived on time and EG was able to welcome the first guests on her own, since the rest of the M. & G. contingent were off touring the city or shopping. At least the rest of us arrived for dessert and handshaking. Yes, it’s Wednesday, so it must be Dallas and we must prepare to move on to the next town. On the way to the airport, once again, was our fearless PHT driving us through the myriad of interstate highways. He made an unusual detour. This was on a country road and we made a “pit stop” at a local cemetery. PHT, being religious as he is, decided not to partake of the cemetery itself but merely walked off behind the bushes to the side of the cemetery and proceeded to let nature rule his body. This has been recorded on film by Dr. Brack and will be shown at the next convention of urologists.

We’re all tired, but we’re all looking forward to Los Angeles – hopefully we’ll be able to see it through the smog and not be distracted by the pornographic material we are sure to encounter. (Note, amazing what one thought in those days of a city and why?)

Ah…..problems started to happen – started to happen is wrong since we had nothing but problems since the start of this trip. GWCB made it to LA but unfortunately, his luggage did not. I had a feeling we should have tipped that red cap. The lack of books presented a problem. RAM and GWCB spent most of the morning digging through the warehouse of Emery Air Freight trying to find a package that contained fifty books. No books – no performance. The show must go on so we left Emery Air Freight with a solemn look on our face and madly tried to write an apology for our guests. Meanwhile back at the hotel EG had set up all the books and had an hour to spare to do some shopping. (Note, EG always found the books first!) It’s a wonder she still had money since she had shopped in every town and had filled her suitcase to the point where it was at least 100 pounds in weight. She must be a pet rock collector!

It’s time to move on but the eternal question crops up. Where’s Brack? Where are his briefcase, pipe, movie camera and extra film? This was the fourth day of keeping track of this individual and by this time our nerves were being frayed and our schedules were being pushed to the limit. It was a continual cry since the time the meeting ended. “I want to see LA”. A quick five minute tour of Beverley Hills was arranged in which time he saw at least one house and fifteen sign posts that pointed to various freeways in the Southern California area. On to the airport with no time to spare and we were quickly whisked on to the plane which would magically convey us to the city of San Francisco. Ah….what luck we met another actress (Note, an actress I liked up until her very rude and arrogant behavior on the plane) but that was a story censored out of this story by MH and SAC.

San Francisco went too smoothly to be believed and the hotel was exquisite.

Thus mentioning the name of the St. Francis should come as a very high recommendation to any one else wanting to venture into the town of San Francisco. The luncheon was a success and handshakes were given to all.

The weekend – a lonely weekend – in the town of San Francisco just Brack, EG and RAM. Saturday was spent touring the Monterey Peninsula and what else? – taking movies of road signs! This should be tremendous movie equal to any Fellini production with a cost only surmounted by that of JAWS. A lazy day Sunday arriving at the airport around noon and flying to that wonderful city of the north, Minneapolis. No, if it was Minneapolis it must have been Monday but I guess we had to get there on Sunday.

Flying into Minneapolis one wondered if there was going to be a runway or a large lake to land on. Lots of green, lots of blue, but few people. Once again everything at the luncheon went well with our nerves getting back to normal and our drinking capacity reducing somewhat since we had nothing to excuse the over-imbibing that had preceded this section of our “movement”. The dinner was cheap here – we had filet mignon for the price of macaroni in Toronto. No wonder we had such a turn out. How often does the client get a free meal of filet in these days of inflation and low salaries?

For seven days now we’ve been asked the question by Brack, “Why are we going to Des Moines? I don’t want to go to Des Moines; there can’t be anything in Des Moines, etc. etc.” But, as Brack learned in Des Moines, the town was founded on the banks of a river where all the wagons heading west to California broke down. Thus needless to say this town is made up of broken down wagons or people who were not able to mend their wagons on the way to the West. Maybe the town should have been named Broken Wagon but of course that name was used by a famous Indian once before but we won’t go into that.

On the wagon again – we swore off drinks before the sun crossed the yardarm. Yet once the yardarm was crossed (we moved the yardarm) our guests arrived. Handshakes galore – no kissing – and sore arms from lugging hundreds of books across this vast continent! A pleasant place Des Moines. WH was in his glory shaking more hands than anyone else and feeling proud that this could only happen in America. Let’s get out of Des Moines before we all stick straw between our teeth and start rocking on the front porch.

Chicago – “that wonderful town, that wonderful town.” What a change after slow moving Des Moines. Well it wasn’t that it was faster since we sat in the cab for almost two hours in 90 degree temperatures on a freeway while everyone looked at an accident where somebody had scratched a bumper. No kidding that’s all the damage! But everybody felt that it was worth stopping to look at. Once again hundreds of feet of film were taken of this event and will be presented to the National Association of Road Accidents.

Have we lost Brack? No! He is merely out shopping again and taking movies of more buildings and roadsides. I think he is going to have difficulty deciding whether Smith Street was in Washington, Minneapolis or Chicago. That’s his problem; the M. & G. Canada staff doesn’t have to edit his film we merely have to endorse it. Chicago was successful – books on time, hot meal and very few “no shows” for a circus performance. RD and his lovely wife were exceptional hosts and did not have to apologize too often for the haggard look on the faces of three M. & G. staff that were now in their eighth-day of the Magical Mystery Movement. It must be Chicago since its Wednesday. Let’s get out of the place.

Ah…..home to Toronto. The town that beats all other towns and where the performance would surely peak – at least it would peak in the English language – one could not speak for the French language edition which was to follow. Toronto was a success with numerous jokes provided by Dr. C who was in rare form and provided jovial entertainment for all those who accompanied the guest. We were very fortunate to call in this guest performer and his addition to the Magical Mystery Movement and/or Traveling Circus was very fortunate. Between Dr. C and Brack it was very hard to get the meeting “on topic” but who cares. I can go home tonight and have a good sleep. Apparently, after this meeting wrapped up, several of the M. & G. bit players and walk on performers joined several of our clients in various bars throughout downtown Toronto and drank the wee hours away.

For those of you who don’t like to read a book before seeing the movie you can be sure that the movie version of this will be provided by Brack & Company. (Note, six months later the team had to sit through countless hours of a movie that had just what one expected — buildings and road signs) Admission will be cheap or at least voluntary. For those of you who think that this was an easy trip I can only quote that famous American author who once said “sit on it”. Thanks Brack!

The bit players on this tour included the following individuals EG, GWCB, RW, RD, WH, PHT, RAM, MAM plus assorted characters who were called in at the last minute for necessary walk-on performances. Of course the star of the show was “Brack”.

Initials have been used for the various characters in this performance so as to protect the innocent yet titillate the imagination enough to let everybody know who was at fault or who was doing wrong during various, performances in the nine cities.

The author of the story would like to thank Brack, for his participation and we are sure that his performance will be remembered at the Academy Award presentations for the best foreign film made in the U.S.A. and Canada. (Note, his film did not win but his book and subsequent re writes are big winners.)