Category: Articles

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.

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.

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.

Two years after the start of the Trudeau years and the whole new appreciation for the red rose, the Canadian life insurance industry was “shopping” substandard or near substandard life insurance applicants to reinsurers for their opinion and price. First in, with lowest price, wins were the predominant rule and today that stays true. Pioneering efforts by Ian Michie and team at M&G Re (a reinsurer once active but now merged into history) in its battle with “sister” company Canadian Re took every opportunity to encourage cedants to send their sub par business to the reinsurer. The reinsurer in turn would surely price the impact of whatever the impairment at a much lower price. Voila, reinsurer happy; cedant happy; agent (surely you jest to speak of brokers in Canada in the 60’s) happy; applicant a policyholder.

The arrival of some rookie European reinsurers heated the battle for not just automatic standard excess insurance but the “sickies” that, as we were to learn, agents had files on in the back room or at least the bottom of the bottom drawer. Late 60’s and early 70’s were full of fascinating stories most of which have to wait the 30 years before publication. But the reinsurance industry had its share of alcoholics (could note understand why anyone would rate someone who drinks a bottle a day), nymphomaniacs (a marketer never to be witnessed again), egotistical doctors (instant “I can take that standard”), actuaries (antiselection, not a pricing consideration) and underwriters (pass one exam that was written in the 1940’s and you too could bind risk for billions), and stupidity. The latter can be said only in hindsight since at the time most of the industry thought the moves to be merely avant-garde or “stepping outside the nine dots”. From the 1998 vantagepoint the nine dots were often nothing more than the 5 stars on a liquor bottle.

Easy, don’t lynch me yet you old folk. The times were great and everybody did drink more and had a different approach to life compared to today’s mineral water craze (will that be sparkling or not, imported or domestic, with sulphur or without). Jeez it was much easier to sit down with the upper echelon of the 70’s and have the kingpin host just say “doubles all ’round”. Within minutes we could be eating. Over the sumptuous red meat meal, talk of starlets, hockey scores, and cars predominated. As if by magic the last five minutes saw a side bar discussion (the 90’s tribute to our vocabulary) on the merits of entering into or expanding the shopping program or perhaps begging for a chance to take some automatic excess.

As usual I digress. The fledgling world of reinsurance was in reality just getting its license to fly so to speak. After decades of only trivial amounts of reinsurance going to “foreign reinsurers” and the predominant amounts going to either the parent company or in trading agreements with other cedants (i.e. Manulife would give some to Sun, Sun would give some to Manulife, Maritime gave to Empire, Empire gave to Dominion, etc). In fact, if my old tattered notes from 1970 are to be believed, less than 4% of all mortality risk was being reinsured outside the aforementioned. The exclusive reinsurers were far from a mainstay in Canada. Compared with today’s approximate 30% plus of all new business mortality risk being reinsured the paltry amounts then seem barely adequate to pay the salaries of all the reinsurance staff. Of the tiny amount of reinsurance perhaps 20 to 25% was facultative shopped business. Today that percentage is about the same.

Even with the full understanding of the volatility of facultative business, the antiselective nature of some participants (honestly, very very very very few) and the poor placement ratio of extra premium decisions, it has blossomed. In 1998 we are witnessing about 4% of all cases being written (not necessarily issued) ending up in the reinsurers offices (yes plural) for individual appraisal. As a bit of background the CLHIA statistics show that during the last decades about 4% of all business is declined and upwards of 4% is issued other than as applied for. Since at this point in time reinsurers have not started bidding the price down on standard business it is safe to assume the ultimate target for the reinsurers is to get to see all 80,000-problem cases per year.

Getting back to the reinsurance underwriter, we see someone who needs to be knowledgeable, innovative, somewhat gregarious, endowed with a strong sense of humour and finally a keen and confident communicator. An underwriter in a ceding company has similar skill sets but each takes on a different weighting. The ability to communicate with the broker trying to get a commission is much more challenging than the reinsurance underwriter calmly chatting about the merits of a particular facultative case with a peer in a ceding company.

The complexity of today’s life insurance world, the extreme pressures of “being profitable”, and the intensity of competition amongst too many reinsurers make the attributes of what I see as the successful reinsurance underwriter very visible yet not always easy to find. Even the constant workload that relentlessly consumes 10 hour work days is beyond the mental stamina of many underwriters. During a typical day the average reinsurance underwriter binds their employer to somewhere between $6 to 12 million of mortality risk (in a year that’s about $1 to 2.5 billion of risk).

The attributes I feel are important may vary from the many scholarly opinions of reinsurance and insurance executives who abound in our industry. To say I have always hired successfully would be wrong. To say I have never hired successfully is only a rumour fueled by jealous competitors. Remember the great words of Harold Ballard “When I want your opinion, I’ll give it to you”.

As succinctly as I can be I will try to describe what I think are the good attributes of the star reinsurance underwriters throughout the almost thirty years I have been witness to the risk selection process in our industry. Reaction will be from the “Who are our underwriters?” by some senior executives to “Never met a good underwriter yet, let alone a star!” by some brokers. There are after all many a consistencies in our business that never diminish in value.

Knowledge plays less of a role than I initially thought given that it is more often the ability to shape knowledge into solutions that measure a human. In fact marine scientist Dr. Joe MacInnis said “The larger the island of knowledge, the longer the shoreline of wonder.” The original underwriter was burdened with only rudimentary information and relied an others to contribute the knowledge — medical advisors, actuaries, lawyers, financial consultants, and marketing directors. As costs and scarcity of advisors took hold the dependence on one underwriter to make a decision based on a spectrum of knowledge beyond any one degree became commonplace. Underwriters attended seminars, tended to come to occupation with a university degree (never seemed to matter in what as even my abstract math degree worked), found a new set of exams under the auspices of the Academy of Life Underwriting, CLU courses, formal mentoring programs and time spent reading claims! But at the end of the day it was the “wonder” about the individual case that made for successful application of knowledge.

Innovation is so easy to talk about but so hard to witness in every day life. When a case arrives at a reinsurer it 99% of the time has a problem attached, be it medical, aviation, occupation, avocation or financial. The underwriter in the cedant has discovered the problem, now the reinsurer’s underwriter must find a solution. One of the most famous underwriters of the last 50 years, Charlie Will, penned or at least immortalized the words “Does it make sense.” Looking hard for all the good things about the case that soften the impact of the impairments to standard issue, the reinsurance underwriter is trying to make a decision that makes sense. There are times that even with extremes of innovation at hand there is still the decline because it does not make sense. The greatest challenge for the underwriter is to not just say no, since that was the initial option at the insurer.

Gregarious characters survive in underwriting because they thrive on all the flocks of brokers, marketers, actuaries, claims personnel and others who flock around to either encourage leniency (almost clemency at times), lunacy, meeting unprecedented mortality assumptions, failure (brings more work to claims area) , and of course lowest cost producer. There is always someone or perhaps a team hovering over the underwriter to see that it is done right, which is a moving target. If you are not gregarious by nature watch out for the stares will wear you down. Of course, since there is always an “of course”, being too gregarious can shorten ones career as entertaining the flock takes precedence over getting the work done.

Laughter is always the best medicine. Read twenty sick cases in a day about every possible impairment and body part and you are ready for release. Release is in good nature humour or running to your doctor with the symptoms of the day. Barely 24 months go by and we see one or more neophytes leave underwriting because they have sympathetic illnesses directly related to the days reading. The underwriters who can poke gut wrenching laughter from their colleagues are super. Those who can find humour in the sickest of cases also break the spell of impaired underwriting. The somber individual does not survive the cut. If you are not clever with the use of humour, you better be a klutz that attracts laughter with every guffaw.

Communication is the key to success in many occupations, perhaps all. The reinsurer has to communicate well within their company to try and enlist all resources in building the solution for the client. Getting the message through the myriad of obstacles to the broker via the cedant is often a hair-pulling extravaganza. You know what you need but can you communicate well enough to the cedant underwriter so they in turn can communicate the message to the broker. Most of the time it works but in about 5% of cases it fails. Reinsurer error. I have yet to discern early in an underwriter’s career who will be the super communicators. The maturity element has a lot to do with it as does the self-confidence that comes often years into the program.

A lot of what makes the reinsurance underwriter successful in a never diminishingly competitive industry can apply to the underwriters in any ceding company. The biggest differential is the nature of the biggest issues I have always heard about. In the insurer it is often the seemingly constant battles with brokers or agents over trivial items or even the repetitive nature of each challenge that provokes departure or worse, disdain for the job. In the reinsurer it is the never ending files of impaired lives that are always wanting standard and the fact underwriting has for decades been the whipping boy (today it should person but I cannot even pen the words whipping girl) for reinsurance decline in new business or loss of a automatic treaty. Never any applause but always lots of cryptic criticism.

With the advent of machines taking over underwriting and margins narrowing underwriting will change again but the root issues will follow once the broker realizes he is talking to a machine. No one will think of the standard lives according to a machine but those spit out, as rejects will now be back to human intervention. Today’s facultative leadership in the likes of RGA is an example of the torch being handed to the new leader in facultative decisions. As much as the company I work for feels confident in its risk selection, it would always relish ways of sharing that creative task with the insurers. We have to get that talent and authority to underwrite back in the ceding companies to partner the reinsurer more on substandard. As that happens it will be even more profound that pusillanimous underwriters need not apply to either of the insurer or reinsurer. Become an actuary or claims executive.

Over the past many months I have spent a considerable amount of my valuable time with systems people. They look the same, except for the pens in their pockets and intense giddiness when hardware and software is mentioned. They, these gurus of tomorrow’s solutions at today’s bargain prices, do speak a different language from us farm boys from rural Ontario. Because of these glaring differences I was astounded to hear reference to “paving the cowpath” by non other than an individual from IBM who spoke with a Texas twang.

The cowpath was fundamentally the route that paper takes from the customer’s desk or kitchen table to the bowls of the large life insurance company. Yes there are bowels deep inside often supplanting the heart but that is another story. The reference was of course to the making the path smoother to travel as step one and perhaps straightening it as step two. Benefits include not stepping in some great fertilizer or trying to poop and scoop with a plastic bag.

Filling in application forms is an integral part of our business and without the abundance of forms of all shapes and sizes we would have less bureaucracy, fewer lawyers and less of an encumbrance at the front end of the life insurance business. Unfortunately the paper is around for a few more years and there is a great struggle to reduce the volume what looms on the horizon may not offer much of an alternative unless everyone pitches in to make the choices viable. The worst possible scenario is for paper to not be reduced but exaggerated to serve no concrete purpose. Using two words to spell cowpath goes against my humble origins.

In late 1994 a rather sharp, as in bright pink paper, piece of mail came to my attention thanks to someone who was in cardiac arrest after having himself received the article in question via the Queen’s postal system. It was not that he wanted moi to follow his heart’s reaction but rather hopefully and erroneously tell him it was a mirage. Behind the vibrant pink cover were six pages that represented the culmination of countless hours of work by industry professionals. There was also the covering note reflecting the praises of the industry “alert getter”. My review of the onerous material was the same as the provider of the sleepless night, “Who is going to use this form?”

Not to hurt anyone’s feelings but “The Uniform Paramedical Part II” designed by The Uniform Part II Development Committee was a shock to the system (human not computer). Six pages of square boxes for nurses or doctors to steadily and exactly within the squares write in all that ails our potential customers. I never learned who was to pay for the filling in of same nor the training on printing and brevity. December 1995 and I am still searching for a company that is using this new and evolutionary form.

The intention was fantastic and well directed at the gathering of information that would free our computer’s desire for encodeable data via optical readers or at least clever data entry clerks (is that still politically correct or is there a more apt description of an age old unction? The race was definitely on to either have all concerned with an application for life insurance enter data directly onto a computer or at least print like you did in grade three. Unfortunately but probably predictable the race became a three-legged race. One leg represented the standardization of all our forms. The second leg represented ANSI standards (a North American wide move to standardize our data by number and specific locations. Lastly we had the laptop race, which became closer to fiction than fact in 1995.

Today we have hard earned real cash being spent on all legs of the race and yet there appears to be little concerted effort to bring all the factions together to build a vehicle that encompasses all that is needed now and sets up the future. I will mention a few initiatives that are going on with a restraint on my usual unbridled critiques of things that go bump in the night or in this case the light of day in our insurance industry. My apologize to any of the hard working committee members that I offend through my candour but I am sure you or they (if they are not readers of MO) will take in stride and put me on another task force.

The ANSI standards group has been looked at from afar by yours truly with admiration for its unfailing enthusiasm for what is a boring and tedious project spread over hundreds of volunteers who see gain from the pain. Their task is to get all our forms and procedures reduced to simple numeric codes that will enable the rapid assimilation by machine of our data and our directions for that data. In the world of the future their diligent and extremely detailed work will pay for itself many times over. For right now, as I learned when working on an insurance industry system, the standards are often ahead of the need or not quite ready where needed. Fact and fiction are merging though so lets not give up. At last count the life application had 400 plus encodeable pieces of data. That of course is the biggest xzy%$#… of an application any one of us will ever see. Again I will be pleased to see the abridged version of only two hundred.

The laptop as means of collecting data be it the application or the medical data via doctor or nurse is on its way and is in real use in some organizations — usually those that have captive field forces and can bear the cost. If we had a world whereby every agent or broker could enter all that personal data of customers and have it feed the illustration systems and on to the application for insurance, paper would disappear and layers of data entry people would be redundant. I was recently told of one large US company that has 11 (lucky eleven) points where critical data like name, SIN, date of birth and address are entered! With electronic applications we can feed the life insurance company with “EDI” that turns the crank of underwriting and administration systems.

I am waiting for this day, which I predicted, would happen in 1990. Maybe 1998 is the transition year between paper as our medium and binary numbers (binary numbers were designed for simple folk) as our salvation.

The generic application is just like generic medicine — it’s not only good for what ails you but also it costs so little. The largest cost is in the ownership ritual people have for what is coveted in their own application both part I and part II. Twenty-five years ago I was trained on the existing generic (it was not called generic since I think the word generic was not invented yet) part II. Individualism was the rage and the uniform part II was devoured by numerous precocious lawyers, underwriting academics (I enjoyed that period) and verbose medical practitioners. Today we look back on valiant yet futile attempts to get a generic application and notice our sister/brother (Steve, which is politically correct) industry in the automobile insurance environment using a simple, cheap and thin generic application.

Most recently a new beginning is sought for a generic application because agent, broker, underwriter, administrator, etc. wants to reduce costs, increase simplicity, carry less paper and move us to an eventual smooth transition to electronic data flow. A small group of forward thinking entrepreneurs unfettered by the past and encouraged by their employers want to have a generic application on the street by the end of the first quarter of 1996. It can be done and it would be a tribute to today’s life industry if we could drop the comical rivalry in building pretty to view but cumbersome to use applications. For the group I sampled a dozen brokers and two career agents (closet brokers who’s secret will follow me to my book) and six underwriters (had to have less than the producers for fear of reprisals). Unanimous in desire to have a generic application. Not quite so one-sided in support. One of the latter said it could not be done and is a waste of effort. The gauntlet is on the turf and I sincerely hope the whole spectrum of industry movers and shakers step up to retrieve it and bring about a miracle.

ANSI, laptops and generics (not to be mistaken with geriatrics) are here and evolving. There are no shortcuts to retooling our industry but a network that binds us all at the most cost effective unit cost an bring about all of the above as it forms a catalyst for evolution. Imaging paper and gradually increasing the EDI segment as it evolves and brokers learn to type faster than me is one way of getting the paper collected in front of the nose of the underwriter immediately. This will give immediate results to the broker while setting up the electronic infrastructure to handle more and more of those elusive binary numbers. The latter being a home run for the head office staff.

Telemarketing is a proven phenomenon that has been used to sell everything from chimney cleaning to insurance. Success varies by product but it generally has a large following of believers who hope it grows in life insurance. The latest upstart of similar genetic structure is the teleunderwriter. The agent does his or her think in finding the customer, assessing the need and closing the sale. The basic data about the human being are given to the teleunderwriting team who has an underwriter call the customer at a predetermined time. The success of the underwriter customer interaction has been very high. Less attending physician statements is a real big plus as they account for the single largest reason for delays in underwriting (although lost files really ran a close second right up at the echelon of significant issues).

Brokers sell. Underwriters underwrite. Medical evidence providers provide data. Laboratories get the spit, peepee (another one of those descriptive words that only a mother could invent) and blood. Administrators administrate. Network managers manage it all. What a great world we are heading into as an industry. Now if we could only get all brokers to be data entry persons!

Many a flight in 2006 went well and actually took off and landed on time. I take no credit for such good fortune but rather applaud the rarity of such events when they do happen. I think airlines in general are just penurious with their “on time” delivery. Switching carriers rarely does any good as each airline has their “bad days” or better yet their “good days” do occur amongst the “bad days”. What prompts this musing is the seemingly elongated stretch of misfortune of not having any flight leave, arrive or behave as advertised. From May to early September 2006 my destiny was to suffer the most irritating of delays and generally terrible ground and flight crews that did nothing to make the misadventures more palatable.

To recount all the flights from hell would bore even an airline critic or the travel ombudsman. Thus my tale uses the most taxing trip and the capstone of five months of travel. It started as what should have been an easy flight from Toronto to Heathrow, change planes and head to Budapest. “Should have been” ended up as “not a hope in Hell.”

True to my habits of on time delivery of my body and luggage to airports well in advance of takeoff, I arrived at Terminal 1 of Toronto’s Pearson Airport some two hours and thirty-two minutes ahead of flight time. Usually for frequent flyers, with enough miles in the air (or on the ground waiting for a gate), there is a privilege line to fast track me through the check in process. It was indeed a short line. I must be truly blessed this day.

The short line was short but also, much to my chagrin, not even moving. Why I did not move from my stationary position as next in line began to wear on me? What could be taking the person ahead of me so long to check baggage, get boarding pass and disappear through the security check? It sounded and appeared that he was rerouting himself through a dozen countries, trying to use the complex upgrade certificates on each segment and insisting on seat “3A” as he had a phobia about every other seat. His patience was being tested as was the ground staffs. My patience was being toyed with but I had time to spare so another 5, 10 or 15 minutes did not matter. But it was 16 minutes and 33 seconds before I advanced to check in. Meanwhile all the other check in staff serviced regular passengers who lacked the “privilege” status. Who said “loyalty” has its privileges? Certainly it was not the airline, but perhaps “loyalty” is an overused word in even our business these days. “Loyalty” is but another seven letter word to be used in a willy nilly fashion by employers, staff and suppliers.

As I moved to step two, which was to make it through security, I heard the check in staff say there has been an “equipment change” but it did not affect my assigned seating. Other than the knowing that an equipment change announced two plus hours in advance of departure time is no deterrent to “have a good flight”, I became apprehensive for some unknown reason.

The mandatory security screening was just as it had been for the last several years but exaggerated in intensity since “liquids” were added to the list of prohibited items like knives, AK 47s, gel explosives and nail files. Why is it that I get in the line behind someone who has not flown in 20 years, carries enough cosmetics to be considered a travelling Avon Lady and has enough trinkets adorning her body to indicate she watches too much of the “Shoppers’ Channel”. Four attempts latter she finally strips herself of all the banned substances and metal but with the anger and blasphemy directed at the security team which would make a sailor blush or at least take notes. Thankfully we were spared the sight of her body search as that would have taken an hour! The imagination runs amok at what one might find in the numerous body folds of the dear lady. The husband on the other hand having slid through with no encumbering paraphernalia kept yelling at her “I told you it was forbidden to travel with so much illegal contraband like body spray, anti aging creams and steel toed shoes.”

My experience comes in useful as I clear the dreaded portal and not even my watch sets off the alarms (leather strap being the preferred binding over steel). Too bad, because on this occasion, it is a rather attractive security guard who would have done the body search. Note to self, wear a bigger belt buckle next time with iron crucifix buried under shirt.

Step three varies dependent on how one likes to spend time waiting at airports. I like to sit in the “privilege” lounge and use their internet and phones. The afternoon cookies are also an attraction! It is a crowded lounge and makes one wonder if the environment on a crowded day is better here or in the spacious common areas of Terminal 1. Even with the crowd of people and buzz of 200 cell phone conversations, I could hear the voice or twang of my traveling business connection who shall be labelled “N” to protect Neil’s identity. We make the perfunctory “How Are You’s” and then get caught up on company and local office gossip and politics. That killed the hour rather quickly and we never did finish the list of office political misadventures. If enough people gossip one can piece together what is actually happening in an office where leadership lacks communication skills. If the office does have good communication skills they write a book about it. When was the last time you read a good book of an actual real life company’s successful office communications? Off to the plane.

Not only had there been a change of aircraft but someone forgot to use the new seating configuration so the gate was a clutter with people scrambling to get new seat assignments, business class people fuming that they now had to ride with the masses and children who should have been asleep. We are definitely going to be late leaving Toronto and true to form the Spartan team of Air Canada staff were in a foul mood, seemed disorganized and at times abandoned the process for a latte. Take off came over one hour later than scheduled and the air travellers all knew arrival at Heathrow would be late. For those with connecting flights like “N” and I the 80 minute period to make the connection is now down to 20 minutes. Only an Olympic sprinter on drugs could even attempt that challenge at Heathrow.

We hit the ground determined to sprint to our next terminal and pray all the while that the plane to Budapest was somehow delayed enough for two middle aged men to manoeuvre Heathrow’s myriad of travelers obstacles. Carrying too much hand luggage can slow one down in a sprint. Against all odds “N” and I made it through using the “privileged lanes” that the Brits still know are important to those who can pay or can prove royal lineage or at least one’s mother slept with royal lineage. That plus some intimidating looks got us to the Hungarian Airlines desk a mere 10 minutes after scheduled departure of the plane. The smiling check in man said calmly that the gate is closed so too bad. He said go sit over there and cool your heals (it was the heart rate I was more worried about) while he checks flights. Then as if only seconds later (heart rate must have brought on delirium) the smiling check in man waved at us to come on over. He announced that if we hurry there might be a chance to get on the flight. Great news.

Once again the heart rate was maximized, sweat was more evident and 24 hour deodorant was tested to its full commercial advertised limit. Turning the corner we hit, in a figurative sense, a closed boarding gate door. Only a couple of people were in the departure hall at our gate so our assumption was we ran for nothing. It was only now we decided a bio break was the smart thing to do. As we turned to hunt down the “Male” sign a security guard asked why we looked so forlorn. Our answer was the missed flight. His bright faced smile said we had plenty of time to catch the flight as it had not even arrived at the gate and thus the gate doors were still closed! As our minds reflected on the sadistic check in man, the need of the bio break was a top priority especially for “N”. Too much water is sometimes a curse and even a great reinsurer like “N” could not calm the 4 litres of liquid inside his bladder. (Note: reinsurers are noted for large bladders which enable them to never leave the negotiating table or cocktail party before there guests. There is one exception to this and I have pictures to someday show the world of her in her favourite position.)

Feeling under less of a biological strain as well as a travel strain we now appreciated that with almost two hours to cool our heels and underarms our luggage would surely make the flight to Budapest. “Don’t worry Be happy” came to mind as we sat very still hoping for a pulse rate below 100 per minute to arrive before we had to lug carry on stuff onto the plane. Life does not get much better than sitting knowing where you are going (few executives today know or at least their staff believe they have no idea), your baggage is going to arrive with you and the thought of another new city finally took hold.

My luggage came through the luggage belt unscathed in Budapest and near the end of all arriving luggage which is usual when they put a “priority” tag on it. “N’s” luggage decided Heathrow was a nice place so it stayed behind. We did not realize that until all luggages were off the conveyor belt and no one was left in the area except the baggage handlers. “N” took his foul mood to the lost luggage window where the usual smiling clerk asks you to fill in forms and asks that infamous question “When did you last see your luggage?” Is the answer “When I checked it in, in Toronto?” or is it “When I went into the cargo hold mid flight to see how it was faring as we crossed the Atlantic?” We are now about 4 hours behind schedule and poor “A” has been waiting at the airport to meet us for the last 6 hours. Instructions on how to get a modest amount of “we are sorry” cash from the airline consumed more time and mental acuity in finding where and how. Hungarian was neither our second, third or fourth language.

Okay the worst has to be over and we can now control our own destiny as we take to a rental car and drive a modest distance to 14 Bajcsy-Zsilinszky Street in Balatonalmadi, Hungary. What can happen in 110 kilometres of expressway?

Each of us (“A”, “N” and I) had copies of the “Yahoo” driving instructions plus a route map from here to there and back. Three turns onto an expressway, change expressways once and three turns off the expressway and we would be safely in bed at the Ramada Hotel and Conference Centre (not exactly the Grand Hyatt Resort and Spa but that was reserved for leadership travel only). Written word and pictures of the route were not adequate for “A” who paid the extra currency for a talking GPS machine to be fitted in our rental car. Now we had three sets of instructions, three route maps and a GPS navigator. A stranger could see in a flash that we were in the risk management side of insurance! The salesman would have hired a taxi and the leader would have employed a limousine and consort to while away the travel time.

“A” was insistent we listen to the machine as it calmly told us where to go! The frustration was almost immediate as the machine made the three turns shown on paper instructions become six turns. Not only that but every time we got on an expressway we were calmly told to exit freeway and take a secondary road. Strange how different “Yahoo’s” instructions were from the friendly and monotone GPS voice. Get on the expressway. Get off the expressway. “A” had to find a service centre since “N” needed badly a bio break (again consuming so much water, although great for the complexion and bodily functions does have its down side) and we needed to buy an expressway pass. With pass in hand and water level down to tolerable level we traveled on. Why did the GPS seemingly keep us going in circles? We all knew we had passed the same homes and the same scenery many times and thus concluded we were traveling in circles. As darkness descended only the lights and intersections were recognized over and over again. “A” though secretly had unbending faith in the technology and perhaps thought the GPS was saving us from a revolution (actually started two days later) or a washed out freeway. “N” sat stoically in the back seat fretting over his upcoming appearance in front of important customers dressed in tacky shirt and jeans (without a crease). More accurately as much as we did not want to admit it, we were traveling the same circle route over and over again. What did the GPS have against the freeway? How long before “N” wanted to stop at he same expressway gas station for a bio break. Maybe then he would be convinced he had seen that urinal before.

Okay we would over-ride the GPS, take the freeway and head for our destination. Finally three hours plus late we were driving down “Bajcsy-Zsilinszky Street”. Problem was there was no hotel at #14. The family home looked far too cozy to host hundreds at an insurer’s conference! Okay, collectively we knew there was a problem, so we agreed after much debate to ask a pedestrian if he could tell us where to go. Three men succumbing to asking for instructions was thought to be a world record and fit for the Guinness Book. “N” sure would like a Guinness about now. In English we hoped the pedestrian had some understanding of our hand gestures, points at map and slow English. His English was very rudimentary but he was clear when he said we were on the right street but we were in the wrong town or more rightly wrong village. I could never have helped someone in Richmond Hill who needed my rudimentary Hungarian. He very carefully told the three of us how to get out of town and in the right town and on the right street.

In a moment of reflection I wondered if the competition had sabotaged our GPS! It would clearly be they that benefited from a tired band of three arriving at the meeting haggard looking and without the right attire. Sorry only “N” would be shabbily dressed. We did try and console “N” with the comment that a new sport coat, pants and shirt would be less than people we know who squander more on golf and wine. At least this was in the name of marketing and image building; when golf with staff helped who, one could ask.

Finally we arrived at the address in the right town and were whisked through reception in a most efficient manner. One could think the super service was due to any combination of a) it was midnight in a small town, b) three big men looking ready to kill their GPS, c) “N” badly in need of a bio break and d) the 24 hour period on their deodorant had expired.

The rest was boring. The talks went well although the message was tampered with at the last moment or after. The audience through the translators’ version seemed happy with only a few sleeping or left wondering what they missed in the translation. “N” made a public apology for his lack of proper attire. “A” still fretted over the belligerent GPS and the numerous emails changing all the plans at the last moment for the next event in Warsaw. Why is it those who delegate responsibilities because they do not want the responsibility make sure those that take responsibility are driven to drink with micro management? You will have to wait for the book and the insight it will bring to management or what passes for management.

“N” and “A” went on to Warsaw to another story I can only one day write about in my management script. “N” happy as bio breaks were less frequently needed (learned that 3 litres will suffice) and he had clean underwear (simper ubi sub ubi) and a tooth brush. “A” would take weeks to come down from his “high” of two public spectacles (the good kind that warm the heart) in the same week.

For me the flight home was just perfect. A rare great airline crew on all flights. A quiet lounge offered mid trip solace. On the way to Vancouver passing near the Pole I wondered if the isolation of the Arctic is where we should send all incomplete management to see that they cannot control the environment even though they think they can. Enough of that political thought as Vancouver grew closer and I still had two more stops to make this week. If its Wednesday the speech is on…

Great literature has included the experiences of one person from one culture experiencing the life and nuances of another culture. Reading the book, the Reader’s Digest abridged edition or watching the movie cannot convey the depth of the impact another country can have on the uninitiated. Travelling between the two super powers of North America is virtually seamless — Melrose Place, As the World Turns and the latest hockey scores and trades are available in all local media. If only we could make the border patrols or better known customs and immigration officers understand that it is a seamless border.

Get on a plane or, for the claustrophobic and acrophobic traveller (one could add mysophobia to the list given the conditions I have on rare occasions experienced), a boat and journey abroad to a far away land of inherent differences. Only then can you truly experience what is the perception of us Canucks and also the scorecard on how we are doing. As the millions of readers of MO know I have been blessed with business travel to the green pastures over both oceans. I will however curtail my writing to over the Pacific for reasons of brevity and my laptop batteries are running on their last legs. Unless I forget I will stay away from digestive feats that test the squeamish and only bring back memories of an embattled sphincter muscle. I also act presumptively in assuming the reader will not mistake my prose for great literature.

Canadians have been doing business from a life insurance view in parts of Asia for over a hundred years. Regrettably some of the companies have not lasted as long as the countries. Reversing that statement one can also record that some of the countries no longer bear the name earlier voyageurs ascribed to parts of Asia Pacific. The second great war coupled with the conflict in Korea provoked some Canadian companies to leave international expansion to all the pink countries and retreat to Canada and the pinkest country, Britain. Those that stayed often were very narrow in their choice of countries and very narrow in their tactics for expansion. In fact some or perhaps most were content “to just be there.”

By the year 1990 the Asia Pacific region was the “in place” to be and the gold rush was on. Rumours, bravado, innuendo and actual performance fuelled expectations of ROI’s of 30% or better when the Western markets were struggling to get double digits. In fact ROI’s of the former magnitude were being realized by entrepreneurial (yes, my broker/agent friends, insurance staff can be entrepreneurial) life insurance companies. The winners were often those in first with the new products and new means of recruiting and retaining career field agents. First, generally meant the competition both local and foreign (we are the foreigners outside of the confines of N.A.) was too comfortable or too slow to react to change in consumer demands. First, also meant being ahead of both local insurance regulation and reserving requirements while great pressure landed on the lap of pricing for the mortality where no mortality statistics existed. Actuaries without their mortality tables are like politicians without their constituents.

Canadian companies have tended to do well in the region and for the most part have excellent reputations both taken alone or in comparison with other foreign enterprises. Our staff in the region tended to be great at making allies of local governments, staff and the general public. We are seen as a benign people who add value to the region and are not associated with terms like plunder, taking advantage, selfish and dictatorial. You know, typically Canadian, eh.

Singapore, Hong Kong and the Philippines have been home to decades of Canadian “expats” who have slowly constructed leading companies in each country. Well, not always leading but a least consistently there. Through wars, economic and military, and political uncertainty our mutual companies stuck to the region knowing the life industry could and would survive these sporadic dailiences. Our Canadian confreres neither dominate a market or play second fiddle to large local or international players. Wherever I have ventured in these three countries it is with pride that as a Canadian I can share in the reknown.

More recently in the past, recorded live by CNN or frequent flyers, the Canadian contingent has made strides (well sometimes baby steps) into Indonesia, Taiwan, Malaysia, Vietnam, India, Thailand and South Korea. Often the start up operations are tough on staff and boards as local governmental obstacles and personnel practices tax to the utmost our Canadian ingenuity. Each market is different and requires the wisdom of past experiences tempered with an in depth study of the current local business culture.

Generally speaking patience, an understanding and committed board of directors and a big wallet pave the way to success. The timing of success is never certain and at times looks elusive but it generally arrives. The amazing thing about the timing is that success often arrives well after the initial management that made the risky decision are long gone due to retirement or reenginering.

Indonesia is a super market with a potential customer base of 195 million people. An emerging consumer group that regardless of its religious nuances (some notable religous groups are against the very idea of financial gain at time of death, which has curtailed the potential of some markets except for the takaful cooperative concept of life cover) will prove to be the most spectacular country for real and sustainable profits in the next five to ten years. The strange anomaly here is the lack of Canadian expats and the predominance of Australian, New Zealand and American expats. So many of the actuaries and accountants were from the land of Aus yet it was not for their familiarity with kangaroos (have never seen a kangaroo in Indonesia). There never seems enough Canadian content, yet we have a surplus of both disciplines in Canada and I am sure most of us nonCAs or nonFSAs would help them pack.

Like a lot of countries Indonesia insists that foreign companies partner with local companies and our two large mutuals who are in Indonesia have both chosen wisely. Picking a local partner is a serious business akin to picking a marriage partner. The conscequences of a failed marriage can pale in comparison to the failed business arrangement. From all points of view it is generally conceded that our Canadian companies have done a superlative job in picking partners. The partners have helped negotiate or perhaps navigate the local intricacies. The marriage of Canadian life insurance know how with local political and cultural savvy has produced leading offspring.

Indonesia was also the home of one of Morton’s lessons of travel. The lesson learned was read the papers and avoid countries that a Canadian statesperson has recently blasphemied for some human rights indignation and/or attack on the sanity of their government. On a trip to Indonesia, where custom was for a speedy flow through customs and immigration, I dutifully handed my passport and visitor paperwork to the man in uniform only to see the eyes grow fierce and the demeanor change from welcoming to threatening. I was immediately and without forewarning (no time for one phone call) whisked away to a private room where I was left to ponder my fate. What had I done? Why me? Would anyone care? MO might since Steve needed an article!

After what seemed like an eternity, but was probably 90 seconds, in walked three uniformed officers with bars and stripes that denoted power. They glared at me as I jumped to attention (Boy Scout salute in hand). Finally they attacked me for blasphemying their government and supporting terrorists on far off islands under Indonesian control. After some pleading and crying they let me disappear but not without a very stern warning that I should caution the Canadian Government about keeping their nose out of places it does not belong. I trembled for days wondering how I a mere slave of the insurance industry could tell Ottawa how to manage when even the CLHIA doesn’t listen to me! The fact that Ottawa had made a statement condemning Indonesia for the way they handled the East Timor incident was only hours earlier a piece of newspaper trivia. Everything can and does in my case affect my travels! It was the only time my Canadian passport let me down. If chastisement prevails in the papers I no longer visit the chastised. The next time the water torture or matches under finger nails may break me.

Korea, the south part, has been slower in its acceptance of foreign intruders and as such growth and future growth are not as one would target. My brief experience in this market made me feel very alien and very much the outsider. Contrasted with Indonesia’s warmth (with the one exception) and openness, I found Korea to be colder and very barricaded to new entrants. It is like visiting those rich and famous relatives who make you feel like you should go home early. Once over this initial cultural depravation I am told that there is a point when you are accepted into the business community but never 100% — that happens between the diverse sections of Canada so we should not take offense!

The Philippines are carrying the legacy of Marcos and ensuing turmoil, uncertainty and much ballyhoed assassinations. Since my first visit there I felt comfortable, even lying on the floor of a taxi as we sped through a spot where snipers may lurk. I like floors of taxis, what can I say. In all seriousness ( my dear wife thinks the former sentence was in all seriousness) the people of the Philippines are warm to visitors. They are fully cognizant of the North American failings in the insurance industry and want to avoid them locally. They have a preponderance of insurance staff that carry all the correct credentials to run life insurance companies very proficiently. Our Canadian operations here make use of both “expat” and local talent. Local talent will shortly man (or woman) all key roles since there is a plethora of talented staff in Manila or willing to return from far off lands to ply their insurance craft in a home environment. The Philippines has been under rated for too long and in my opinion it gives all the appearance of shaking the past’s biases.

My favorite country or city, depending on your perspective, is Hong Kong , perhaps because my wife was born there and I have so many business friends there that have educated me in the ways of Asia Pacific. They made sure my errors were minor, my recovery swift and my sins humourous. Their patience with the Canuck made me comfortable with all aspects of the local industry from agent to reinsurer. Canadian companies have an excellent reputation here although we are not the leading companies. We have one of our mutuals ranked in the upper echelon for so long it is taken for granted that its prowess will be eternal. Many a local leader has been founded in the principles of life insurance through working here in a Canadian operation or getting their early education and mastering a discipline back in Canada. Our ties are strong in a very tough market.

Hong Kong has such a dependence on strong distribution systems that Canadian expertise at building same especially within our mutual companies has made us often the model for staff development. Competition has hit Hong Kong but not to the same degree as in Canada. Rates are approaching North American aggressiveness (mortality is reported to be better in Hong Kong than it is in Canada). Term insurance still lacks a following because of commission structure and the tax advantage of permanent cover like endowments. I can explain an endowment to anyone who will send me a stamped self addressed manila envelop. This market is oblivious to 1997 and only those without a Canadian passpot show any concern. Life in this dynamic city state will no doubt remain state of the art and prosperous.

What are the odds for success in a country of 2.5 million people, 13 life insurance companies, strict capital regulations and severe agent recruiting and retention rules. Pretty slim! What is purported to be the toughest market in the world has proved just that for Canada’s largest mutual (not my words, theirs). This is a country known for no gum chewing, caning and a great airport. Canadian ingenuity coupled with a strong local partner failed to take our insurer to the top of the heap. We are still in the heap and perhaps the next century will accommodate our climb to the top.

Malaysia, Thailand, India (home of my worst travel experience which has MO’s editorial staff sick to their stomach), Vietnam, and other local countries all offer the opportunity for expansion and I am sure each will have the benefit of a Canadian company when the doors open. The Malaysian insurance industry has been praised in the past articles for MO and at this juncture I remain enthralled by its potential and its depth of insurance personnel well trained in all the insurance disciplines. If only they would open up the market to foreign operations. Canada had an open invitation to help build Indonesia’s own reinsurance company; but, for reasons I still do not fathom, walked away leaving somewhat hard feelings.

China is so big it deserves an article on is own but my brief trips there could not qualify me as an expert in any way. Beg for permission to open a representative office. Stay in the line and out of trouble for three years. Keep abreast of all the key political players. Only then you may get a license to actually sell insurance. I would rather sit back and wait for the gates to open wide which may be in 3 years or 30. My preference is for some semblance of insurance regulations to be tested and understood. Currently we are witnessing the birth of legislation, regulation and interpretation that will lay the foundation for future generations. One of the legacies of our mutual company par policy holders may be that they financed the birth. Generous policyholders all.

Given the creativity that abounds within the heirarchy of insurance leaders in China and propensity to adapt quickly, I am positive this market unequivocally will be the world’s greatest insurance market someday (for those of you laying bets the “someday” is anyone’s guess).

Lately Canadian companies not known for adventuresome movements have taken the plunge. Perhaps it was the Board decreeing that “we too should be global and earn potentially 30% on our investment. More likely it was management in need of new focus and distraction from the contraction of our home market. Surely it could never have been the attraction of 14 hours on a plane enduring tiny seats, meals and toilets. It gives a whole new meaning to “oh, what a relief it is”.

Following Sun and Manulife’s early lead the likes of London, Mutual and Canada have laid the foundations of new ventures in numerous countries. Each has a different view of which country, in which order and in which manner but they are all definitely on the move. It is a momentous occasion to see such giants of Canadian insurance history move back to first principles in new markets. Their historic expertise, if still available, in building and retaining career agents will certainly set them up as potential success stories since distribution is the key. Their respect for local customs and icons plus a marriage of their Canadian strengths with local people strength is guaranteed to hasten success.

I should not forget the smaller players who have been involved in the region over the decades. Imperial and Crown are names that emerge in conversation in the region. Both have never figured as major players or ascended the ladder of publicity others have but their names have added to the mosaic of Canadian enterprises throughout the region. With our shrinkage on the home front there may be no more new Canadian adventurers in the region, just expansion of those already entrenched. Pity. No one for me to consult to or hold their hand (figuratively of course).

Surprises do occur and the magnitude of statements, so far away from insurance related, can have on the average Canadian like me is never anticipated. In one country that was and is still a favorite, it was a shock to have an initial accusation thrust at me for which I had no predilection. I had no more met the local regulator when he and his associates asked if I and the company I represented (worked so hard for in Canada that was expanding depth and breadth in the region) would desert the market when the going got tough. Taken aback and short for words (an anomaly soon corrected) I asked the naïve question “Why?”

No sooner had my humble question pierced the stoney air than out came the answer followed by nods of agreement from those sitting opposite me at the inquisator’s table. In as few words as possible the local authorities recounted how just after the WWII a Canadian company pulled out of the country for reasons interpreted as unacceptable by predeacesors of the current bureaucrats. No hint of leaving obligations behind, merely not wanting to write new business (is it possible to write old business?). It firmly etched in my skull the implications of any error I may perform since it may for decades infringe on other Canadians entering the region. I would rather just be known as “He of delicate sphincter muscle”.

Never assume the past is the past and long forgotten. Governments and their legion of staff can and do document everything in the Asia Pacific region. Unlike this side of the Pacific, where time is fleeting and hardly worth preserving, the attitude over there is that everything said is worth preserving. Since if it was said it must be important. I also thing the odd one is just sadistic enough to try and catch those who change their tune every visit.

The Asia Pacific region is rich in human resources that are the equal of the world’s finest and often surpass so called Western nations who today often lack the enthusiasm for the future that abounds in every country over there. Canadian companies are part of the phenomenal growth and are doing Canada proud by transferring expertise and capital. The rewards are both monetary (par policyholders and share holders) and personal as our staff working or visiting the region acquire new respect for the world and its diverse people.

How times have changed. This was a follow up to the article entitled “Players” about the reinsurers in Canada and market share. It starts with a reference to global leaders and although the chart is not reproduced here the message remains clear for its time. In 1993 and ‘94 the talk was all about the giant Japanese companies and how they are growing to the point of dominating the top ten insurance positions in the world. Then bang as fast as they were idolized they were chastised for faulty management and leadership that almost bankrupt the financial services. The cry to run companies more like the Japanese quickly left the usage of all the motivational speakers. References were no longer glowing and Japanese examples declined from public view. By the end of the century there was no one referencing the Japanese conglomerates other than in a negative sense. Big without transparency was not good. The world was set on a course where “big” quite often meant problems once someone really uncovered the real financials!

In Canada at the time as much as we thought of a couple of our insurance leaders as giants they were not. Often they moved in and out of 50th spot but had no staying power. Not so today as we feel the impact of the demutualization and subsequent mergers and acquisitions. Canada now has some staying power in our top three companies or better “company groups”.

The Canadian numbers regarding reinsurance show how small in comparison to the new numbers I have put in to update the relevancy. Article shows the beginnings of reinsurers playing a more significant role in the Canadian industry. A role that became humungous in terms of risk transfer by the current year. Look at the astronomical amount of growth in new reinsurance amounts in 2003 versus 1993! Who would have believed such a market would exist. Thank all the smart actuaries for making risk transfer such a necessary evil and a management that became risk intolerant. Sort of like banks. Right?

Ross A. Morton

2004-05-10

Written in late 1994 and published in an edited form in MO

I have come at the subject of reinsurance from many angles before and will continue to retool the subject to fit the times. Years ago there was unwarranted fear of the reinsurers who operated in the Canadian insurance industry somewhat fueled by reinsurance mismanagement on the other side of the insurance industry, namely the property and casualty side. All of us in the industry deeply buried or sitting on the edge, must keep the role of reinsurers in perspective. The egos of some in the business would escalate the role beyond comprehension, while others meekly hide from any mention at all across the nation.

The Canadian industry has some giants at work yet in terms of our relative size we pale in comparison with the global giants. In Chart A you can see that our two bastions of life insurance no longer rank amount the senior global leaders. This is not all bad since a glimpse of the leaders’ points out that big is not necessarily good. In Canada we, too, have come to appreciate the old adage that the bigger you are the harder you fall (at my size this is more than a metaphor).

Notice how the Japanese companies have maintained a very strong presence in the top 10. If there was room and time to analyze the complete listing of 50 companies you would see a shrinkage in North American players by number and by relative size. The new world order reflects the expansion of foreign companies who increase their bulk and make their names universally recognized. Being on the edge of this list merely means one has to try harder internationally while protecting the national treasures with financial strength.

Reinsurers are merging, acquiring and globally expanding in pursuit of stable earnings, spread of risk, and economies of scale. Is there room for small, niche reinsurers? My guess is no. I see the need for significant spread of risk and avoidance of the variances of one market. Competition at times is so fierce that it is frightening. To be dependent on one overheated market place can lead to pressures on financial stability that belies comparison. In 1994, there was some merging and acquiring, plus lots of global expansion. Signs are the reinsurers are preparing to face the future with much stronger operations (have no fear the life reinsurers of the world are making money and are in strong financial positions). Watch for more strengthening in 1995.

In a 1990 publication by Actex Publications, called Life, Health and Annuity Reinsurance, the word or activity we all love called reinsurance was defined as: “Insurance purchased by an insurance company to cover all or part of certain risks on insurance policies issued by that company.” A great definition and quite acceptable to both the life and general insurance industries. On the general side there are some unnamed names who wish the definition was far more explicit. Personally speaking and out of fear of reprisal, I am forced to never name the names that are unnamed in any publication read by said names.

The reinsurers operating in Canada have been reviewed in a previous edition of Marketing Options and I know Steve could dig them up from the bowels of his computer if you asked nicely. Suffice to say not much has changed. They are all still here and the relative pecking order has not overtly changed. Volume of new sums assured remains the measure most publicly referenced, and, as such, falsely proclaims winners and losers in the fight for new business. When OSFI gets industry numbers out in a useable form and in timely fashion, like the developed nations of Singapore and Malaysia do, we may have far more comprehensive numbers to digest about our industry – insurers and reinsures alike.

All the reinsurers are as concerned with making money as the direct writers (the reinsurers’ term for companies that produced actual insurance policies). Most reinsurers would candidly admit that operating in the international arena brings a discipline to money management to survive. As companies look to reinsurers to be their silent partners in growth and capital management a demand for more than free lunches and golf tournaments emerges. Chart B shows which reinsurer is writing which volumes of new business. Notice how some companies have exited the industry in Canada while others have curtailed operations to better fit their Canadian strategy.

As the competitive pressure on reinsurance price increased and demand for jumbo cases (my definition is the $5 million up policy) decreases, the role of the retrocessionaires decreases. Note in Chart C the flat figures for retros (the affectionate name for retrocessionaires plus it saves twelve keystrokes). As always the retros are needed by the reinsurers to help spread risk as well as supply another source of silent and indirect capital for growing companies or those direct companies who wish to reconstruct their capital usage.

As an aside, because I like asides, when I got to this point in typing this article I used spell check. Several times my fingers hit wrong keys when spelling reinsurers. The suggested word, when “reinsurers” was found as wrong, was reindeer. Ho apropos as I fly north the day after the Santa Claus Parade in Toronto! Who says these laptops cannot think up humorous interjections? If it was foggy my laptop companion would probably recommend Rudolph.

Agents still are unsure about the reinsurers and the role they play with insurance companies and specifically their policy holders. To say, “Have no fear” would be repeating what one large company president said about the safety of very big insurance companies. He now avoids press releases and reprisals for that cavalier statement. Today in the wake of the unheard of, it is not sufficient to echo the phrase. There are few guarantees but the name of the international reinsurers is worth far more than the abandonment of any one country’s liabilities. There is not a reinsurer or international insurer that could survive the abandonment of a market without guaranteeing all future liabilities on its contracts and service of those contracts.

The very fact reinsurers are active in numerous life insurance markets around the world protects against the singular country financial downturn. Mustering the resources from all the other operations around the world helps negate the financial burden of any one county. Political, monetary and risk diversity is the strength of these global giants. They also stay very liquid in their investments, relying on very safe investments to protect them from any nuance in the bond or stock market. To the best of my knowledge there is no Canadian reinsurance operation on the life side that has any real estate investments. In fact, I believe only staff mortgages are held in the reinsurers’ portfolio (handcuffs on key staff).

The onus is on the insurance industry to be unified in its spreading the word on our security. Throwing mud at small or large companies does no one any good. In fact, the splash back on the perpetrator is most likely of greater magnitude than anticipated.

What has become evident to me in the last ten days is the need for unified education of all concerned so that there are no misconceptions about any facet of our industry. Tell the agents about insurance – both risk premium and coinsurance. Tell the agent that there is no binding contract between the insured and the reinsurer. Tell the consumer that there is protection in spreading the risk via a company that meticulously disciplines itself to spread risk. Do not cast aspirations on your fellow insurer because it is often the case that the recipient will not remember more than, “some company is in trouble.” Let us not fear the arrival of the banker in our midst. If we are the masters of mortality and morbidity, why are we worried about the neophyte in our domain? Show me a company that has excelled with a banker at the helm and I will show you a dozen life masters who have succeeded. Amen!

Preaching is complete. I still see us winning the battle of our lives and we will do it together. The “we” will exclude the few who sit and stew on the stove, scuttle their competitors, forget who the customer is and what the customer wants, and finally the industry leaders who long ago lost track of what it is we sell.

Canadian Reinsurance Assumed Amounts in U.S. $Millions

For the past 4 years, no forever, financial underwriting has been a mystery to all the neophytes approaching their first large risk appraisal. With great trepidation the risk appraiser moves cautiously, page by page, in search of the holy grail (they did find it is Daniel Brown’s book, right) in insurance. Pellucid financial justification or the undeniable link between owner, insured and beneficiary is the mandate of the underwriter. It is indeed the underwriters’ Holy Grail.

The underwriter has studiously spent years learning all the medicine they need to know to do heart surgery or make a psychiatric diagnosis. One wonders what a psychiatrist would label a person who believes without formal medical training that they can predict the rate of death of people. We label the person an underwriter. They do spend an amazing amount of time learning medical underwriting as it is called to the point they are so engrossed I nit they may not see the risk from the impairments. This is not meant to knock today’s underwriting education but merely but merely, no vociferously, state there has to be a balance between the medical and the nonmedical. The risk is more than a well controlled diabetic at age 42. It is a 42 year old diabetic who wants to buy insurance now for what reason — who is to benefit? Who is to pay the premium? Why now? Why so much?

Looking back I had a rudimentary education through outdated texts, medical doctor mentors and sage underwriters’ counsel in medical underwriting but an intense immersion in “does it make sense” or as many today refer to as “holistic underwriting”. The whole risk is most often greater than any sum of the parts and the mechanical approach of today’s underwriting clinicians seems at times to be blind to whole risk. Regardless of examples learned the hard way in many markets around the world they go ignored under the mantra of “it will never happen here” or “that only happens in textbooks to scare us”.

On a recent tour of duty and pleasure amongst global underwriters I heard of current (right then and there real cases) issues arising where because of poor diligence 5 insurers were faced with what appeared to be a case of fraud where the insured loaded up from five companies and then “died” (at least there was somebody’s body in the funeral pyre). Each policy was greater than t he average size normally issued in the market. In total the amount was extravagant and the agent’s notes were pathetic but overlooked by the eager medical underwriters (five of them). Did they all miss the risk? Yes but medically they did a great job.

Quickly on to the next country. Man makes claim for loss of left arm from below elbow. Poor man lost it at job site where as a butcher’s helper he says he accidentally cut off is arm. That is certainly sad and it makes me want to pay the “dismemberment benefit” soonest. Wait! What is this; the arm is not at the work site nor is there any blood on the table the “accident” supposedly happened at? Further digging reveals the arm was found in an old shed and the person it turns out was out to defraud the insurer. Buy as much as you can and then inflict the unthinkable (at least in my world) by chopping your own arm off! Luckily the claims person noted it all made no sense — relative to person’s income and status in life the amount was exorbitant but okay as who really does financial underwriting on dismemberment policies or benefits? Long court case to fight and in the end the cost is still high to say no to the claim. Could the underwriter have foreseen the pending fraud? Probably not and thus we move on even though there is lots of controversy over that companies financial underwriting.

Next country and we see the North American phenomenon of lower prices bring “churning” and rampant replacements as soon as the charge back period is over. For years actuaries fall over each other lowering prices based on ever greater speculative pricing. They hide the steep and slippery slope downwards in ever harder to delineate risk classification monikers while pricing out the cost of delineation. Now the savvy and fiduciarilly sound advisor (agent, broker, and producer) has a strong duty to client who remains in good health or is cleverly hiding ill health to “churn” the business. Then full circle back to the actuary who says that is not fair since it leaves my old portfolio stripped of the much needed healthier lives and my mortality results will pale in comparison to that which was assumed in pricing. Not to worry because I am writing much more “new” business at lower premiums and inferior underwriting (remember the costs have been stripped to eliminate many standard requirements used that helped build the great mortality results of the 1980’s, 90’s and early 00’s.

In spite of the hazards of racing the price downward and encouraging “churning” these new countries know that like NA they can blame the “churning” on marketing and sales or better still lets tell the underwriter to fight the marketing people over justification and keep the actuary pure and free of incrimination.. Talks of cost slashing justification is focused on using smoker non-smoker splits and then let’s go to preferred even though we hardly have enough statistics to reflect select premiums from aggregate. In the emerging “churning” markets, without a clear mandate to control true replacements or seriously restrict the issuance of the new with the lapsation/termination of the old, the issues are a rising again without solutions. Instead overinsurance abounds as they do nothing to guarantee that the total in force is controlled beyond the weak “it is my intent to replace”. The latter comment in most applications has about as much validity as saying the Toronto Maple Leafs will win the Stanley Cup (last won in 1967 so at least I was around to witness it).

What is the solution to the underwriting the whole risk including “does it all make sense”. We can start with an equal amount of financial training by accountants, preferably those who did not work on the likes of Enron but do have forensic expertise. In most of companies the expertise lurks in both the investment and accounting areas where people routinely read, analyse and conclude on t he validity of value of an enterprise. That is our wise counsel. To take the financial texts of investigative accounting and investment and distil it into underwriting texts is the challenge and we as an industry have yet to do that.

In the very early 1980’s or very late 1970’s one of the world’s wisest underwriters had assembled the true financial expertise (both accounting and legal) and held education sessions for a handful of eager ears. Most of those ears went on to be the best “holistic” underwriters of modern times. At the same time those who became engrossed in only the medicine of more laboratory testing and mechanics fell woefully short of being “holistic underwriters”. Bob left the industry and with it his ability to garner the educators and the students to a common goal. Today there is indeed a grave shortage of mentors on the subject of “holistic underwriting”. Medicine is more than well served by tremendous expertise. Every where I poke my head (the rest of the body is slower to arrive these days) the demand for financial underwriting training — more please is the call over and over again.

It is not in the numbers stupid. It is in the whole case from the agent who writes the application up and their supposedly field underwriting to the senior officer who approves the underwriting budget. Somewhere in there we have to be able to learn to look between and through the numbers and discover what is really happening. In 99% of the cases it is obvious and there is nothing to get nervous about but to find the other 1% we have to look a t the whole case. Thanks Charlie (and Mom) for constantly asking me to ask “Does it make sense?” Wherever I go today it is still the best lesson to learn in underwriting and I hope every neophyte learns it early and before they are faced with 5 claims, five companies, five agents and worth five times more dead than alive. It does happen and in every country that ignores the global experience and underwriting weaknesses.

Ross A. Morton

ReassurerAdvisorMentor

2005-02-24

Approximately over Regina, Canada

Insurers blame reinsurers. Reinsurers blame insurers. Advisors scratch their heads and other parts if they are ex baseball players or rock singers. When the world of risk selection took a turn for the worst everyone wanted to be seen as an innocent bystander. No one volunteered to take the heat for what seemed like chaos. We all want to circumambulate the issue. But has it gone away?

A prolix definition of the issue would not endear me to the advisor or underwriter so I will use limited verbiage to describe my view on the changes in underwriting. The following has lead to the environment for underwriting becoming far different than in the good old days. The following means frustration for those who distribute our products and our decisions. The following was not a conscious tactic or strategy by any one company or the industry.

Training of new underwriters appeared to come to a sudden end. Yes there has been the odd company training new underwriters but the “experience” side of their development lagged and the wise old sages took flight. Retirement, reading attending physicians reports at home, working as an anonymous consulting underwriter or just plain disappearing grabbed many a talent from the experienced pool. This hurt the mentoring process as well as depleting the wise counsel the advisor sought on the problem cases.

Salesmanship or simply building self confidence was not seen as essential as medical knowledge. It appeared we wanted our risk selectors to have the knowledge of the neurosurgeon but the delivery skill of a nerd without his/her tapped glasses. As I travel the globe I realize this is a global issue so do not feel it is unique to Canada. Courses or mentoring on how to sell your decision and communicate well are a rarity. Without that skill set the esteem of the advisor drops further as they say “the blathering idiot of an underwriter left them comatose” ( I myself would never refer to an underwriter as an idiot).

Prices fell. Requirements were minimized. Speed was the mantra of the day. Reinsurers struggled with the whole concept of auditing to determine what the benchmark perfect underwriting decision was. All that occurred without a master plan. Risk selection or categorization was almost an afterthought of the marketing visionaries. Low prices sell so service surely must be a distant second or third on the advisors’ “want list”. How many advisors would dearly like to see a higher price accompanied by almost guaranteed better service from the new business processors? How many companies could sustain better service? When one senior industry spokesman was heard saying that their 2006 service goal is “to be no worse than everyone else in Canada” I have to ponder the likelihood of real tangible service improvement.

Despite all the mergers and acquisitions there is a shortage of senior super underwriters even though there may be many waiting to get to that esteemed title. Thus we have advisors scratching there “whatevers”.

Is the worst over? I think it is, as a quiet calm develops between insurer and reinsurer as both agree on a reasonable middle ground forged by trial and error more than skill and diplomacy. As witnessed by a more realistic approach to foreign travel, when all put their mind to an issue a solution is found to any problem. Separation of clerical function from technical function is becoming paramount to empowering the underwriter to really manage the cases with issues attached. New management directives will apply limited resources to the problems and find simpler ways to handle the mundane in new business work flow. Senior executives are now leaning to service as the true differentiator since the price we charge has reached a low point bordering on the point of looking like it was derived by the unconscious incompetent.

I sense the worst is over but the communication shortfall has to be addressed if we hope to stay positive and hope that more underwriters do not disappear to run a shebeen in Ireland. Surely it has to be easier for an underwriter to talk with an advisor than manage the frequenters of a shebeen.