Recently, while in my Bangor, ME office I asked a fellow business person why they didn’t include a fairly common Internet solution offered by almost everyone in the current business environment. The answer was striking. He said, “Because that’s the way we do things in Maine.” As if to say, Maine business held a special exemption, due to its regional uniqueness, from providing customers with basic services that most other businesses offer as a matter of course.

As someone born and raised in the state of Maine, I was frankly shocked. The Internet, CNN, fiber optic cable and international cell phone coverage, to name just a few technologies, flattens not only our experience of the world, but the experience of our customers. When people talk about a “flattened” world what is meant is a world that is now much more transparent. Anyone or anything can be Googled. Any process or technology is available on line for all to see whether in Bangor or Bangalore. In short, everything is visible to everyone.

Since transparency is the rule of the day, business is impacted in new ways. Not only is process visible, but most processes become commoditized. In other words, few will find any particular edge in the platform or process itself. In my business of pensions and 401K plans, as just one example, there is almost no difference in platform from one 401K provider to the next. The only difference now is me. Globalization creates a transparency and commoditization that creates very little differentiation in basic products and services.

This means business needs to rethink its approach. The approach that matters in this new environment is refocusing on “how” we do business. In other words, if everyone now sees what everyone else is doing and can offer what everyone else offers, then the distinguishing feature of our business is the “how” of our particular approach. Character is going to count again. Honesty, integrity and placing the customers needs above our own is what will rule this new global day.

There is no longer the “Bangor way of doing things” or the “Bangalore way of doing things.” Now, there is one very transparent way of doing things that the whole world can see. What does Bangor have to do with Bangalore? A lot! The new standard of business is a global standard. No one is safe in their small, parochial world. Business cannot be accomplished well if uninformed, much less if delivered in a sloppy or unprofessional way, all in the name of “regional style.” Further, business people will no longer be their own arbiter and judge as to whether or not they are uninformed or unprofessional. The standard will be the definition adopted by their customers as those customers become shaped by the global standards that are delivered to each customer as they sit looking at their laptop. Bangor and Bangalore are very close indeed.

For further information concerning retirement please visit Stephen O Meidahl’s website or read Steve’s well regarded book, “Lessons OF A Real Life Investment Advisor.”

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Tags: business, ethics, global, institute, marketing

“Post-Katrina Role Of Property Insurers Threaten Consumers Nationwide
By Diane M. Grassi Platinum Quality Author
Diane M. Grassi
“Prediction is very hard, especially when it’s about the future.” Yogi Berra

Given the focus on the recent one-year anniversary of Hurricane Katrina by the media and government officials and its label as the most costly catastrophic disaster in United States history, there has been little focus on the nationwide impact the property and casualty insurance industry has started to impart on homeowners and businesses in a post-Katrina world.

There has been serious discussion about reforming U.S. insurance laws in the U.S. Congress since 2004, before four hurricanes battered the Florida coast and well before the Katrina and Rita storms hit the Gulf Coast in 2005. However, the insurance industry since Katrina is now not only fighting hundreds of individual and class action lawsuits in Mississippi and Louisiana in the wind v. water debate, but also advocating change in the event of future catastrophic events.

The McCarran-Ferguson Act, enacted in 1945, delegated sole enforcement of insurance regulations to the states, where it was believed better oversight would take place rather than federal government mechanisms. However, state regulators are not law enforcement agencies and do not have the benefit of the arm of the federal government in cases which are beyond their means. Now, many state insurance commissioners, members of the Congress as well as consumer advocacy agencies believe that the whittling away of consumer protections over the years and recent staggering premium hikes, with little public disclosure, builds a case for federal insurance legislation and industry reforms.

Since 1945 the insurance industry has enjoyed an antitrust exemption and the viability of that rule has been seriously discussed and revisited by the Congress. There have been state accusations of price fixing and price gouging along with collusion in the industry leaving consumers with little information about their homeowners and business property policies, with only the civil or criminal courts left for recourse. It is argued that the antitrust exemption only fuels such a scenario.

The proposed National Insurance Act of 2006 (S.B. 5209) introduced by the Senate Banking Committee on July 11, 2006, would allow insurers to be licensed under a federal umbrella license, to choose between federal or state regulation and to do business in any state without need of state licenses. The U.S. Department of the Treasury would then have jurisdiction to regulate such national insurers. Arguments against such an arrangement cite more endless bureaucracy and red tape with fears that individual states would not be equally treated.

Alternatively, the State Modernization and Regulatory Transparency (SMART) Act introduced in 2004 addresses market conduct, licensing and antifraud data exchanges but has failed numerous times to move through the legislative process. It would leave regulation up to the states but to comply with uniform standards without federal oversight. The attempt to “modernize” the regulatory framework of the insurance industry has become synonymous with deregulation and appears that resistance on both sides of the argument makes reform more and more insurmountable along with immense struggles to provide sufficient delivery of adequate insurance for property owners.

The repeal of the McCarran-Ferguson Act has also caught the attention of the Senate Judiciary Committee which held a hearing on the issue on June 27, 2006 for the first time since 1994, precipitated by numerous complaints of less and less public disclosure of information and devices used for premium calculations. Such has impeded consumers from making a proper decision when purchasing policies. Travis Plunkett of the Consumer Federation of America (CFA) testified that “Insurers want competition alone to determine rates, they say. How about a repeal of the McCarran-Ferguson Act to test their desire to compete under the same rules as normal American businesses?”

The CFA has also called for regulation to ensure consumers have availability of enough information in order to compare pricing of policies between insurers in order to make informed decisions. Unlike the way most consumer service products are purchased, insurance costs are based upon a non-finite uncertain condition to happen some time in the future. And consumers must rely solely upon the agent, especially when actuarial tables and insurance models are non-accessible. Thus, more scrutiny not less has been called for.

But deregulation has also brought about insurance products sold worldwide as investments and annuities and reinsurance companies which provide catastrophic coverage for domestic insurers primarily are located overseas. Therefore, in a global economy, federal oversight is far more necessary than in the past. Leaving global oversight up to state regulators is arguably negligent given the ramifications of lack of coverage during a catastrophe.

The insurance industry itself has been campaigning for some type of legislative reform to provide for a federal catastrophic fund which would subsidize insurers in cases of terrorism and natural catastrophes. The American taxpayer and consumer have gotten their fill of that, however, where the Federal Emergency Management Agency (FEMA) has been and continues to pay out damages to the Gulf Coast states and primarily the City of New Orleans for rebuilding costs, with FEMA’s National Flood Insurance Program (NFIP) to homeowners and businesses and for FEMA housing costs for the displaced.

But an unexpected phenomenon followed the 2005 hurricane season and is primarily fueling the fires for insurance reform and that is the record high premium rate hikes on homeowners as well as commercial property policies. In addition, hundreds of thousands of policies are being dropped and non-renewed by the country’s two largest insurance companies, namely State Farm Insurance Co. and Allstate Insurance Co., from the Gulf Coast all the way up to the tip of Maine.

Even more unexpected, however, were renewal denials for inland properties for policyholders in the Northeast including New York City, where property owners have never even previously filed a claim for property damage. With premiums on the Gulf Coast having at least doubled since 2005, thousands of dollars have been added to mortgage loans. In some cases, many homeowners policies were not renewed at all, preventing homeowners from obtaining mortgages or rebuilding at all.

With insurers’ withdrawal from writing homeowners policies throughout regions of the U.S. and gutting those with less and less coverage for those in place, the industry believes it will be able to stay healthy. Astonishingly, in 2005 it made a record profit of $45 billion post-Katrina and after four storms in 2004 it realized a profit of $38 billion.

The models associated with risk management amongst insurers are also changing. The 100-year average of history for forecasting future hurricanes, for example, is presently being revised. And as those methods of calculations become murkier, homeowners can hardly feel safe or comfortable when purchasing new properties. There are also several states which only allow for the issuance of property insurance based solely upon a consumer’s credit history and income which makes it far more difficult for the working class consumer to be able to purchase insurance.

Over the next year, 43% of the U.S. population which covers 18 states can expect their policies to either be dropped by their insurance carriers or have their premiums escalate between 20% and 100%. And for that reason alone it might be time to reel in an industry which not only is in business to make a profit, but also has a moral obligation to help protect communities nationwide and such becomes necessary in the face of absolute destruction.

Copyright ©2006 Diane M. Grassi

Diane M. Grassi is a freelance columnist, reporting and writing commentary on current events of the day providing honest and often politically incorrect assessments. From U.S. public policy to Major League Baseball, she is an eclectic thinker, and demanding of her readers to reflect on their own thinking patterns from an alternative perspective. Whether you agree with her or not, Diane M. Grassi will have you coming back to note her opinions, and if at best she wakes you up, then her goal will have been accomplished.

Ms. Grassi is featured with the online publications: New Media Journal.us; American Chronicle; Mich News.com; Opinions Editorials; the Conservative Voice; Renew America .us; Liberty Watch Magazine as well as many others. She also writes regular columns on Major League Baseball where she is a featured online columnist with The Diamond Angle Baseball Ezine and Sports-Central.org

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Tags: business, ethics, institute, international, ethic