Risk Management Reports

August, 1997
Volume 24, No. 8

A Babel of Sounds
What does it all mean, this mounting cacophony of noise about risk management designations? Professionalism today seems to require multiple sets of initials after your name, apparently to give credence to advanced learning or expertise. The problem is that we still cannot satisfactorily define this discipline and no organization as yet has put together a course of instruction that includes all of its pieces. The Society for Risk Analysis bestows the honorific "Fellow" on a few acknowledged leaders in the field of risk analysis, for lifetimes of leadership and contribution, but it does not intend it as a "designation." It is the only risk management award worthy of the name today. The Insurance Institute of America (IIA), building off its long-standing professional designations "Chartered Property & Casualty Underwriter" (CPCU) and "Chartered Life Underwriter" (CLU), created in the 1960s a series of three examinations for the "Associate in Risk Management" (ARM) designation. But does being an ARM connote more than successfully passing three exams? The IIA recently created a new Institute for Global Insurance Education, working jointly with the Chartered Insurance Institute in London and similar insurance organizations in Australia, South Africa, India, Brazil and New Zealand. The focus remains on insurance, not risk management. For more than a decade, The Institute of Risk Management in London has granted the title "Fellow in Risk Management," based on another series of rigorous examinations, broader than those of the IIA, but still insurance oriented. As of last year 262 "Fellows" (of whom I am one) exist worldwide. Now the members of RIMS, the Risk & Insurance Management Society, have approved the suggestion of its Advanced Designation Task Force for executive management and "distance-learning" master of business administration programs, also leading to the designation "Fellow." Canada has a new "Institute of Risk Management" developing, in concert with nine universities, its own examinations leading to a "Fellow" designation . There is even a "Certified Risk Manager" designation available simply by attending (at $395 a clip - a term used pejoratively!) a series of five 2.5 day seminars and examinations. Caveat emptor! All of these efforts are heavily insurance oriented.	I find the same problem of narrow focus in other programs. Macquarie University in Sydney, Australia, offers a Master in Finance degree where risk management is one of the three core curriculum elements. Its definition, however, is limited to credit, currency and investment risks. That's too narrow. In March of 1997, the American Society of Testing & Materials (ASTM) in the US published a new "draft framework for managing environmental risks," through its E47.14 subcommittee. Again, while the "Nine Principles" for its proposed framework are broad, they do not include the forms of risk that finance officers and insurance managers commonly grapple with. The Nine: (1) the management of risk should be holistic; (2) it should begin with ends and consequences in mind; (3) it should identify and involve stakeholders in the process; (4) it should integrate science, law and societal values; (5) it should evaluate concurrently potential human health and ecological risks; (6) it should review concurrently information from all sources; (7) it should include the elements of risk characterization, such as risk prioritization, evaluation of sources, magnitude and impact of uncertainty, review of relevant law, regulations and policy, and evaluation of management alternatives; and (9) any action should result in a net increase in benefit, as compared to no action. While these principles include a bit of techno-babble, they are broad enough to serve as the basis for a new "unified theory" of risk management. Now we need an Einstein to pull together these different pieces and varying voices! Does risk management now have a sufficiently common definition and "body of knowledge" that gives real meaning to the use of the term "Fellow?" Do any of these organizations reflect the breadth of risk management, from public policy, to finance, quality assurance and insurance? I do not see it. Thus I think these efforts to examine a person for true risk management competency and excellence are premature. With risk management meaning different things to those involved in public policy, corporate finance, or corporate insurance, the rush to create certifications, fellowships and other professional monikers only serves to reduce, not enhance, the public's comprehension of and appreciation for the term. I have no quarrel with continuing and advanced education, only with thinking that a third of a loaf is the whole thing! Yes, a comprehensive educational program encompassing all of the elements of risk management is necessary, but the current efforts require more discussion and inter-action. Let's talk and listen before we hatch new designations.

A Babel of Sounds

What does it all mean, this mounting cacophony of noise about risk management designations? Professionalism today seems to require multiple sets of initials after your name, apparently to give credence to advanced learning or expertise. The problem is that we still cannot satisfactorily define this discipline and no organization as yet has put together a course of instruction that includes all of its pieces. The Society for Risk Analysis bestows the honorific "Fellow" on a few acknowledged leaders in the field of risk analysis, for lifetimes of leadership and contribution, but it does not intend it as a "designation." It is the only risk management award worthy of the name today.

The Insurance Institute of America (IIA), building off its long-standing professional designations "Chartered Property & Casualty Underwriter" (CPCU) and "Chartered Life Underwriter" (CLU), created in the 1960s a series of three examinations for the "Associate in Risk Management" (ARM) designation. But does being an ARM connote more than successfully passing three exams? The IIA recently created a new Institute for Global Insurance Education, working jointly with the Chartered Insurance Institute in London and similar insurance organizations in Australia, South Africa, India, Brazil and New Zealand. The focus remains on insurance, not risk management.

For more than a decade, The Institute of Risk Management in London has granted the title "Fellow in Risk Management," based on another series of rigorous examinations, broader than those of the IIA, but still insurance oriented. As of last year 262 "Fellows" (of whom I am one) exist worldwide. Now the members of RIMS, the Risk & Insurance Management Society, have approved the suggestion of its Advanced Designation Task Force for executive management and "distance-learning" master of business administration programs, also leading to the designation "Fellow." Canada has a new "Institute of Risk Management" developing, in concert with nine universities, its own examinations leading to a "Fellow" designation . There is even a "Certified Risk Manager" designation available simply by attending (at $395 a clip - a term used pejoratively!) a series of five 2.5 day seminars and examinations. Caveat emptor! All of these efforts are heavily insurance oriented.

I find the same problem of narrow focus in other programs. Macquarie University in Sydney, Australia, offers a Master in Finance degree where risk management is one of the three core curriculum elements. Its definition, however, is limited to credit, currency and investment risks. That's too narrow.

In March of 1997, the American Society of Testing & Materials (ASTM) in the US published a new "draft framework for managing environmental risks," through its E47.14 subcommittee. Again, while the "Nine Principles" for its proposed framework are broad, they do not include the forms of risk that finance officers and insurance managers commonly grapple with. The Nine: (1) the management of risk should be holistic; (2) it should begin with ends and consequences in mind; (3) it should identify and involve stakeholders in the process; (4) it should integrate science, law and societal values; (5) it should evaluate concurrently potential human health and ecological risks; (6) it should review concurrently information from all sources; (7) it should include the elements of risk characterization, such as risk prioritization, evaluation of sources, magnitude and impact of uncertainty, review of relevant law, regulations and policy, and evaluation of management alternatives; and (9) any action should result in a net increase in benefit, as compared to no action.

While these principles include a bit of techno-babble, they are broad enough to serve as the basis for a new "unified theory" of risk management. Now we need an Einstein to pull together these different pieces and varying voices!

Does risk management now have a sufficiently common definition and "body of knowledge" that gives real meaning to the use of the term "Fellow?" Do any of these organizations reflect the breadth of risk management, from public policy, to finance, quality assurance and insurance? I do not see it. Thus I think these efforts to examine a person for true risk management competency and excellence are premature.

With risk management meaning different things to those involved in public policy, corporate finance, or corporate insurance, the rush to create certifications, fellowships and other professional monikers only serves to reduce, not enhance, the public's comprehension of and appreciation for the term. I have no quarrel with continuing and advanced education, only with thinking that a third of a loaf is the whole thing! Yes, a comprehensive educational program encompassing all of the elements of risk management is necessary, but the current efforts require more discussion and inter-action. Let's talk and listen before we hatch new designations.

You can be smart as a whip and know all the rocket science of finance, but if you can't communicate well you have no value.

Bob Thompson, vice president and controller, Whirlpool Corporation, as quoted in CFO, April 1997

New Textbook
I continue to seek a single volume that presents the risk management discipline in all its holistic glory. Nothing yet fills the bill, covering insurance, public policy, quality control and finance. Old standbys such as the 1963 Risk Management in the Business Enterprise, by Mehr and Hedges, and the 1981 Practical Risk Management, by Bannister and Bawcutt, built on a solid knowledge base of insurance. Even the 7th edition of Risk Management and Insurance, by Williams, Smith and Young, thoroughly revised in 1995, devotes more than half its pages to the technicalities of insurance. Its discussion of public policy and regulatory issues and risk analysis is limited and it never mentions credit, currency, interest rate and other financial risks and responses. Vernon Grose's Managing Risk: Systematic Loss Prevention for Executives (1987) and Fred Church's Avoiding Surprises (1982) are clearly written and worth re-reading, but they too lack the required broad perspective. Peter Bernstein's Against the Gods (1997) is more a discussion of the nature of risk than a guide to risk management. Three collections of papers are worth noting: "Risk: Man-made Hazards to Man," edited by M. G. Cooper, from the Clarendon Press in Oxford, in 1985, "Risk Management Today," in the July 1992 issue of The Geneva Papers, with substantial contributions from insurance, technological and public policy perspectives, and "Risk," in the Fall 1990 issue of Daedalus. The most recent addition to my list of risk management texts is Fundamentals of Risk Analysis and Risk Management, edited by Dr. Vlasta Molak, and published earlier this year by CRC Lewis Publishers, in Boca Raton, Florida. The editor clearly recognizes the inter-disciplinary nature of risk management, even though she focuses heavily on environmental and public policy issues. Dr. Molak and her 23 contributors begin with the theoretical background of risk analysis, moving to specific applications (residential, pollution, ionizing radiation, global climate change, etc.), and finally to risk communication and risk management. The chapters on "Uncertainty and Variability in Risk," by Wilson and Shlyakhter, and on "Monte Carlo Risk Analysis Modeling," (David Vose) are succinct and clear, excellent for non-mathematicians. The chapter on "The Basic Economics of Risk" stresses that "few risk-reduction decisions are purely private: individual choices typically have social consequences."	We do not operate in corporate or individual vacuums. Howard Kunreuther and Paul Freeman's piece on "The Insurability of Risks" is worth reading as a reminder of the principles that underlie a strong insurance market. The best chapter, however, is Paul Slovic's "Risk Perception and Trust." He writes, "Perceived risk can best be characterized as a battleground marked by strong and conflicting views about the nature and seriousness of the risks of modern life." The more we learn, the more risk-averse we become. This has led to the "rise of powerful special interest groups, well-funded (by a fearful public), and sophisticated in using their own experts and the media to communicate their concerns and their distrust to the public in order to influence risk policy debates and decisions." Look at the clean air debate taking place in the US! Slovic concludes that the erosion of trust in the risk responses of both government and social institutions (corporations included) call for the creation of increased public trust in the risk management process through the active involvement of stakeholders in decisions. How many corporate risk managers bring all critical stakeholders into risk management decisions? In the future they may have to be more public communicators and facilitators than risk financiers or internal managers. Finally, one of the best chapters summarizes useful Internet and World Wide Web data and resource sites. Bert Hakkinen lists journals, software, databases, professional societies and useful homepages. Risk managers from the insurance and finance sides will find much of use here. Overwhelming concern with risk can lead to socially undesirable consequences. John Garrick concludes in his paper on risk management in the nuclear power industry that "the defense-in-depth concept has resulted in a very safe industry, but it has also made nuclear power very expensive by requiring extensive equipment redundancy and greatly increasing plant complexity. The concern among many experts is that the safety management process is overemphasizing safety and creating a serious imbalance between safety and societal benefits." I highly recommend Dr. Molak's new text for the risk manager's bookshelf.

New Textbook

I continue to seek a single volume that presents the risk management discipline in all its holistic glory. Nothing yet fills the bill, covering insurance, public policy, quality control and finance. Old standbys such as the 1963 Risk Management in the Business Enterprise, by Mehr and Hedges, and the 1981 Practical Risk Management, by Bannister and Bawcutt, built on a solid knowledge base of insurance. Even the 7th edition of Risk Management and Insurance, by Williams, Smith and Young, thoroughly revised in 1995, devotes more than half its pages to the technicalities of insurance. Its discussion of public policy and regulatory issues and risk analysis is limited and it never mentions credit, currency, interest rate and other financial risks and responses. Vernon Grose's Managing Risk: Systematic Loss Prevention for Executives (1987) and Fred Church's Avoiding Surprises (1982) are clearly written and worth re-reading, but they too lack the required broad perspective. Peter Bernstein's Against the Gods (1997) is more a discussion of the nature of risk than a guide to risk management.

Three collections of papers are worth noting: "Risk: Man-made Hazards to Man," edited by M. G. Cooper, from the Clarendon Press in Oxford, in 1985, "Risk Management Today," in the July 1992 issue of The Geneva Papers, with substantial contributions from insurance, technological and public policy perspectives, and "Risk," in the Fall 1990 issue of Daedalus.

The most recent addition to my list of risk management texts is Fundamentals of Risk Analysis and Risk Management, edited by Dr. Vlasta Molak, and published earlier this year by CRC Lewis Publishers, in Boca Raton, Florida. The editor clearly recognizes the inter-disciplinary nature of risk management, even though she focuses heavily on environmental and public policy issues. Dr. Molak and her 23 contributors begin with the theoretical background of risk analysis, moving to specific applications (residential, pollution, ionizing radiation, global climate change, etc.), and finally to risk communication and risk management. The chapters on "Uncertainty and Variability in Risk," by Wilson and Shlyakhter, and on "Monte Carlo Risk Analysis Modeling," (David Vose) are succinct and clear, excellent for non-mathematicians. The chapter on "The Basic Economics of Risk" stresses that "few risk-reduction decisions are purely private: individual choices typically have social consequences."

We do not operate in corporate or individual vacuums. Howard Kunreuther and Paul Freeman's piece on "The Insurability of Risks" is worth reading as a reminder of the principles that underlie a strong insurance market. The best chapter, however, is Paul Slovic's "Risk Perception and Trust." He writes, "Perceived risk can best be characterized as a battleground marked by strong and conflicting views about the nature and seriousness of the risks of modern life." The more we learn, the more risk-averse we become. This has led to the "rise of powerful special interest groups, well-funded (by a fearful public), and sophisticated in using their own experts and the media to communicate their concerns and their distrust to the public in order to influence risk policy debates and decisions." Look at the clean air debate taking place in the US! Slovic concludes that the erosion of trust in the risk responses of both government and social institutions (corporations included) call for the creation of increased public trust in the risk management process through the active involvement of stakeholders in decisions. How many corporate risk managers bring all critical stakeholders into risk management decisions? In the future they may have to be more public communicators and facilitators than risk financiers or internal managers.

Finally, one of the best chapters summarizes useful Internet and World Wide Web data and resource sites. Bert Hakkinen lists journals, software, databases, professional societies and useful homepages. Risk managers from the insurance and finance sides will find much of use here.

Overwhelming concern with risk can lead to socially undesirable consequences. John Garrick concludes in his paper on risk management in the nuclear power industry that "the defense-in-depth concept has resulted in a very safe industry, but it has also made nuclear power very expensive by requiring extensive equipment redundancy and greatly increasing plant complexity. The concern among many experts is that the safety management process is overemphasizing safety and creating a serious imbalance between safety and societal benefits."

I highly recommend Dr. Molak's new text for the risk manager's bookshelf.

The Uncertainty Principle of Risk Management: You will never know the loss(es) avoided because of good risk management, but you will eventually know the consequences of inadequate risk management.

Chuck Marshall, Group Risk Manager, BHP, Melbourne, Australia
RiskWeb comment, June 13, 1997

Is EMF Risk Dead?
In 1989, Paul Brodeur, the author who first brought the horror of asbestosis to the public's attention, wrote three articles in The New Yorker on the potential health risks of living in proximity to electric and magnetic fields (EMF). He followed up in 1992 with a piece entitled "Annals of Radiation: The Cancer at Slater School." These were dramatic and compelling arguments that cancers could possibly be caused by EMF. The 1992 article used research by Wertheimer and Leeper in 1979 at the Louis N. Slater School Elementary School, in Fresno, California. An unusual frequency of cancers led to the conclusion by the researchers and Brodeur that EMF was the culprit. Despite non-conclusive scientific evidence, a wave of fear and concern was created and we've read extensively of EMF and its potential liability in the press ever since. That same year, Keith Florig, writing in the Fall 1992 issue of Resources, recognized the human ingredient in the issue: "Even if scientists were to reach consensus on health risks due to EMFs, the public's growing distrust of risk management institutions may keep the most contentious EMF issues . . . alive in perpetuity. . . . Like other environmental issues, the EMF issue is as much about sociopolitical and ethical issues as it is about health risk. It has a sociopolitical dimension because it pits property owners, workers, and consumers concerned about exposure to risks against large organizations such as electric utilities, manufacturers, and government agencies.	The issue has an ethical dimension because it involves balancing individuals' desires to eliminate involuntarily imposed risks (however small) with society's need to have reliable electric power and electric products at an affordable price." All of the subsequent studies show little evidence of any causal connection between EMF and human injury. Yet skepticism remains. One actuarial friend, thoroughly read in these environmental studies, said, "I don't believe that there is anything in EMF, but I still wouldn't sleep under an electric blanket!" That'ss akin to James Thurber's "I don't believe in ghosts but fear them immensely!" The preponderance of evidence mounts. William R. Bennett published Health and Low Frequency Electromagnetic Fields (Yale University Press, New Haven) in 1994. He ffound no connections. The American Physical Society issued a similar statement in 1995. The National Research Council analyzed some 500 studies in 1996 and reached the same conclusion. Late the same year the National Academy of Sciences found no evidence of risk, and now in 1997, the National Cancer Institute, in an article in The New England Journal of Medicine, appears to put the nail in the coffin of this idea. But is EMF dead? The persistency of belief in the face of all rational evidence is a human reaction. The lack of supporting science doesn't forestall claims being made nor irrational fear. The best response of risk managers for those organizations faced with possible claims is to publicize thoroughly the newer studies to mitigate the situation.

Is EMF Risk Dead?

In 1989, Paul Brodeur, the author who first brought the horror of asbestosis to the public's attention, wrote three articles in The New Yorker on the potential health risks of living in proximity to electric and magnetic fields (EMF). He followed up in 1992 with a piece entitled "Annals of Radiation: The Cancer at Slater School." These were dramatic and compelling arguments that cancers could possibly be caused by EMF. The 1992 article used research by Wertheimer and Leeper in 1979 at the Louis N. Slater School Elementary School, in Fresno, California. An unusual frequency of cancers led to the conclusion by the researchers and Brodeur that EMF was the culprit. Despite non-conclusive scientific evidence, a wave of fear and concern was created and we've read extensively of EMF and its potential liability in the press ever since.

That same year, Keith Florig, writing in the Fall 1992 issue of Resources, recognized the human ingredient in the issue: "Even if scientists were to reach consensus on health risks due to EMFs, the public's growing distrust of risk management institutions may keep the most contentious EMF issues . . . alive in perpetuity. . . . Like other environmental issues, the EMF issue is as much about sociopolitical and ethical issues as it is about health risk. It has a sociopolitical dimension because it pits property owners, workers, and consumers concerned about exposure to risks against large organizations such as electric utilities, manufacturers, and government agencies.

The issue has an ethical dimension because it involves balancing individuals' desires to eliminate involuntarily imposed risks (however small) with society's need to have reliable electric power and electric products at an affordable price."

All of the subsequent studies show little evidence of any causal connection between EMF and human injury. Yet skepticism remains. One actuarial friend, thoroughly read in these environmental studies, said, "I don't believe that there is anything in EMF, but I still wouldn't sleep under an electric blanket!" That'ss akin to James Thurber's "I don't believe in ghosts but fear them immensely!"

The preponderance of evidence mounts. William R. Bennett published Health and Low Frequency Electromagnetic Fields (Yale University Press, New Haven) in 1994. He ffound no connections. The American Physical Society issued a similar statement in 1995. The National Research Council analyzed some 500 studies in 1996 and reached the same conclusion. Late the same year the National Academy of Sciences found no evidence of risk, and now in 1997, the National Cancer Institute, in an article in The New England Journal of Medicine, appears to put the nail in the coffin of this idea.

But is EMF dead? The persistency of belief in the face of all rational evidence is a human reaction. The lack of supporting science doesn't forestall claims being made nor irrational fear. The best response of risk managers for those organizations faced with possible claims is to publicize thoroughly the newer studies to mitigate the situation.

There is good reason to believe that EMF health issues and related litigation will be around for many years to come. As with other environmentally-related health issues, EMF claims will not disappear as the result of the publication on any single study or legal decision.

Mark Warnquist and Rob Manor, LeBoeuf, Lamb, Green & MacRae,
"Electromagnetic Field Liability: A Risk Management Overview"

The Risk Management Letter, Vol. 15, No. 5, 1994

Summer Complaints
As the heat and humidity press upwards in New England, the time has come for the release of my summer complaints, an exhalation of excessive intellectual phlegm. PORCs. Here they go again. A note in Captive Insurance Company Reports suggest a rise in the creation of "producer-owned reinsurance captives." The descriptive acronym PORC says it all. They are thinly-disguised mechanisms for insurance agents and brokers to skim off more income than they deserve. PORCs do little for the customers and nothing for the real insurers, only adding cost to the risk financing transaction. Using a thin veneer of "service" as an excuse for their creation, the owners - the agents and brokers - play a "heads we win; tails you lose" game. If losses are low, the reinsurance PORC takes the profit and runs. If losses are high, they flow through to the real reinsurer. PORCs: avoid them! WIN Here's another acronym. WIN stands for the World Insurance Network and its new Web site (http://www.worldins.com), a creature of the four largest insurance brokers in the world. It says it is "the most advanced use of information technology" and a major step toward aligning big risks with big insurance capacity. But have these brokers actually opened Pandora's Box? Once sophisticated risk managers realize that they can access insurance and reinsurance underwriters directly through the Internet, and corral their own capacity, will they have any need for their former intermediaries? Once both buyers and underwriters realize how inexpensive electronic communication can be, won't they discard the large chunk of expense created by existing commissions? Teach a risk manager to fish and he/she becomes self-reliant! Biased Study The headline in the National Underwriter crowed "Consumers Fearful, Confused on Bank Ins. Sales, Study Finds." It seems that "consumers who buy insurance from banks may be easy prey to a host of misleading and deceptive practices, including coercion and exploitation." Aha! But who commissioned this so-called objective study?	Nothing less that the "Independent" Insurance Agents of America. I can only guess the type of slanted questions asked of the 1000 persons called by telephone to generate the results IIAA wanted. It is so obviously trying to keep the banks out of insurance and to obtain scare headlines that it will resort to a blatantly flawed study. The IIAA continues to presume that the consumer desperately requires the succor and assistance of an insurance agent. Even the label "independent" is incorrect. Most agents represent less than five insurers: they are therefore hardly "independent." They seldom recommend mutual or other non-commission-paying insurers. I've always found the consumer far more sophisticated than insurance agents and insurance regulators care to acknowledge. Where an agent sees "coercion," the buyer sees convenience. I argued this point in Risk Management Reports in 1983 (See "Banking and Insurance," RMR, Sept./Oct. 1983), at the start of the distribution revolution in financial services. The key elements remain fiscal integrity, response to changing needs, reduced regulation and enhanced competition, not the protection of entrenched systems. Now, after fourteen years, the changes are starting to occur. I already deal with a bank owned by an insurance company, and I see that a Maine bank, Peoples Heritage Financial group, has recently acquired an insurance agency, Morse, Payson & Noyes. Exploitation and coercion are not the issues: competition, cost and convenience are. DVT I finally have an excuse to fly business or first class (as long as someone else is willing to pay!). New studies show that passengers in steerage, squashed into inhumanly narrow and constricted spaces, are more likely to develop "deep vein thrombosis (DVT) and potentially lethal blood clots. Not only that, but the tilt of these seats (35 degrees) is apparently the exact incline used by sadistic inquisitors to deprive victims of sleep! Having had my knees jammed by the back of the recliner ahead of me and my elbows glued to my sides for five hours flying across country several months ago, my travel terms are now "First or Nothing!"

Summer Complaints

As the heat and humidity press upwards in New England, the time has come for the release of my summer complaints, an exhalation of excessive intellectual phlegm.

PORCs. Here they go again. A note in Captive Insurance Company Reports suggest a rise in the creation of "producer-owned reinsurance captives." The descriptive acronym PORC says it all. They are thinly-disguised mechanisms for insurance agents and brokers to skim off more income than they deserve. PORCs do little for the customers and nothing for the real insurers, only adding cost to the risk financing transaction. Using a thin veneer of "service" as an excuse for their creation, the owners - the agents and brokers - play a "heads we win; tails you lose" game. If losses are low, the reinsurance PORC takes the profit and runs. If losses are high, they flow through to the real reinsurer.

PORCs: avoid them!

WIN Here's another acronym. WIN stands for the World Insurance Network and its new Web site (http://www.worldins.com), a creature of the four largest insurance brokers in the world. It says it is "the most advanced use of information technology" and a major step toward aligning big risks with big insurance capacity. But have these brokers actually opened Pandora's Box? Once sophisticated risk managers realize that they can access insurance and reinsurance underwriters directly through the Internet, and corral their own capacity, will they have any need for their former intermediaries? Once both buyers and underwriters realize how inexpensive electronic communication can be, won't they discard the large chunk of expense created by existing commissions? Teach a risk manager to fish and he/she becomes self-reliant!

Biased Study The headline in the National Underwriter crowed "Consumers Fearful, Confused on Bank Ins. Sales, Study Finds." It seems that "consumers who buy insurance from banks may be easy prey to a host of misleading and deceptive practices, including coercion and exploitation." Aha! But who commissioned this so-called objective study?

Nothing less that the "Independent" Insurance Agents of America. I can only guess the type of slanted questions asked of the 1000 persons called by telephone to generate the results IIAA wanted. It is so obviously trying to keep the banks out of insurance and to obtain scare headlines that it will resort to a blatantly flawed study. The IIAA continues to presume that the consumer desperately requires the succor and assistance of an insurance agent. Even the label "independent" is incorrect. Most agents represent less than five insurers: they are therefore hardly "independent." They seldom recommend mutual or other non-commission-paying insurers. I've always found the consumer far more sophisticated than insurance agents and insurance regulators care to acknowledge. Where an agent sees "coercion," the buyer sees convenience. I argued this point in Risk Management Reports in 1983 (See "Banking and Insurance," RMR, Sept./Oct. 1983), at the start of the distribution revolution in financial services. The key elements remain fiscal integrity, response to changing needs, reduced regulation and enhanced competition, not the protection of entrenched systems. Now, after fourteen years, the changes are starting to occur. I already deal with a bank owned by an insurance company, and I see that a Maine bank, Peoples Heritage Financial group, has recently acquired an insurance agency, Morse, Payson & Noyes. Exploitation and coercion are not the issues: competition, cost and convenience are.

DVT I finally have an excuse to fly business or first class (as long as someone else is willing to pay!). New studies show that passengers in steerage, squashed into inhumanly narrow and constricted spaces, are more likely to develop "deep vein thrombosis (DVT) and potentially lethal blood clots. Not only that, but the tilt of these seats (35 degrees) is apparently the exact incline used by sadistic inquisitors to deprive victims of sleep! Having had my knees jammed by the back of the recliner ahead of me and my elbows glued to my sides for five hours flying across country several months ago, my travel terms are now "First or Nothing!"

It is as illogical to regard insurers as motivated to achieve risk reduction as to believe that bookmakers are in business to eliminate horse-racing.

Chris Best, Foresight, March 1997

The Eternal Apostrophe
The apostrophe in the English language has always caused grammatical indecision. When should we use an apostrophe with "its?" What is a correct possessive? When I started in consulting in 1957, we referred to "workman's compensation" and later "workmen's" compensation." As women flooded the workplace, it became "workers' compensation." Still later efficiency experts noted the financial savings derived from dropping the apostrophe - think of all the key strokes saved each year! - and moved to "workers compensation." As a resident pedant and traditionalist I resist what to me is an egregious grammatical error. Now comes my mentor and guide, David Warren, with a note from his famous balloon-piercing Uncle Pumblechook. Of course, you remember Uncle Pumblechook, the prosperous corn merchant who forever offered platitudinous advice, from Dickens' (note use of apostrophe) Great Expectations. My Uncle Pumblechook is a well educated man. He would never, for example, put an apostrophe in "its" unless it stood for "it is" or "it has." So you can imagine his puzzlement when he saw the state code titled "Workers' Compensation Law." "What" he asked me, "does that apostrophe do? Does it mean workers' compensation is compensation possessedby workers - a plural possessive?" I said I supposed so. "But then why do I see The New York Times and Wall Street Journal writing it "worker's compensation?"	I replied, "they look on it in the sense that the law does not apply to all workers. It is a law for each worker, but not necessarily all. The noun, therefore, is singular, but is still a possessive." "That seems more realistic," said Uncle Pumblechook, "but didn't I see an article in Business Insurance that used "workers compensation," dropping the apostrophe altogether?" "You did indeed. Business Insurance hasn't used apostrophes in "workers compensation" for many years - not since Susan Alt threw up her hands, saying that an apostrophe in workers compensation was meaningless." Pumblechook was impressed. "Smart woman. With no apostrophe, the true meaning of "compensation for workers" becomes clear. It is not a possessive at all." "Not only that," I said, "the generally accepted philosophical principle of Occam's Razor says that if there is more than one way to do a thing, the simplest should be chosen. There is expert opinion supporting all three usages, so why not choose the simplest?" "Quite true, Nephew. So do you think we'll see a general acceptance of this common-sense conclusion?" "We sure will, Uncle. When, as the Russian folk saying goes, a shrimp learns to whistle."

The Eternal Apostrophe

The apostrophe in the English language has always caused grammatical indecision. When should we use an apostrophe with "its?" What is a correct possessive? When I started in consulting in 1957, we referred to "workman's compensation" and later "workmen's" compensation." As women flooded the workplace, it became "workers' compensation." Still later efficiency experts noted the financial savings derived from dropping the apostrophe - think of all the key strokes saved each year! - and moved to "workers compensation." As a resident pedant and traditionalist I resist what to me is an egregious grammatical error.

Now comes my mentor and guide, David Warren, with a note from his famous balloon-piercing Uncle Pumblechook. Of course, you remember Uncle Pumblechook, the prosperous corn merchant who forever offered platitudinous advice, from Dickens' (note use of apostrophe) Great Expectations.

My Uncle Pumblechook is a well educated man. He would never, for example, put an apostrophe in "its" unless it stood for "it is" or "it has." So you can imagine his puzzlement when he saw the state code titled "Workers' Compensation Law."

"What" he asked me, "does that apostrophe do? Does it mean workers' compensation is compensation possessedby workers - a plural possessive?"

I said I supposed so.

"But then why do I see The New York Times and Wall Street Journal writing it "worker's compensation?"

I replied, "they look on it in the sense that the law does not apply to all workers. It is a law for each worker, but not necessarily all. The noun, therefore, is singular, but is still a possessive."

"That seems more realistic," said Uncle Pumblechook, "but didn't I see an article in Business Insurance that used "workers compensation," dropping the apostrophe altogether?"

"You did indeed. Business Insurance hasn't used apostrophes in "workers compensation" for many years - not since Susan Alt threw up her hands, saying that an apostrophe in workers compensation was meaningless."

Pumblechook was impressed. "Smart woman. With no apostrophe, the true meaning of "compensation for workers" becomes clear. It is not a possessive at all."

"Not only that," I said, "the generally accepted philosophical principle of Occam's Razor says that if there is more than one way to do a thing, the simplest should be chosen. There is expert opinion supporting all three usages, so why not choose the simplest?"

"Quite true, Nephew. So do you think we'll see a general acceptance of this common-sense conclusion?"

"We sure will, Uncle. When, as the Russian folk saying goes, a shrimp learns to whistle."