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    Off to the races!

    The flag has dropped for the “Race to 100” – the Alliance’s national grassroots advocacy initiative to secure 100 co-sponsors for our “Fraternal Resolution” (officially known as H.Con.Res. 19).

    car race washington-dc

    Late last week the Alliance sent this bulletin to the leaders of each of its U.S.-domiciled member societies briefing them on the program and encouraging them to engage their societies key audiences – employees, local chapter leaders, field representatives, and individual members – in this important advocacy campaign.

    The two-part project begins with societies educating these audiences on the value of the fraternal tax exemption and the importance of participation in the political process.  We’ve provided members with a variety of tools to help them accomplish this objective, including the Alliance grassroots video that makes it easy for you to prepare your grassroots networks to take action early in 2016.

    The on-line outreach campaign will begin in February and we’re hoping that thousands of emails from fraternal constituents coupled with Capitol Hill and in-district visits from Alliance leaders will push us over the 100 co-sponsor goal by July 2016.  As of today, we have 62 co-sponsors, so the 100 co-sponsor goal is within reach if every Alliance member does its part.

    We’ve designed this effort to make it easy, enjoyable, and fulfilling for member societies to participate in a grassroots campaign that is important to the future of EVERY society.  We’ve all got a stake in the outcome of future tax reform debates, and the time to make our case and secure support from a broad cross-section of members of Congress is now – before serious discussion over tax reform proposals begin.present

    You’ll be hearing much more about this initiative from the Alliance in the coming weeks.  Give your society an early Christmas present by committing to participate in the “Race to 100” campaign.




    Liberté, égalité, fraternité

    Vive la France!

    A fall cornucopia of ideas and information…

    I’ve been meaning to share these items with you for a while now, so here’s a bundle of little gifts to kick off the holiday season…cornicupia

    • Insurance Disrupted – Insurance industry leaders will hear from dozens of executives from Silicon Valley “start-ups, venture firms, and innovation labs” at the Disruptive Leadership Summit on November 19-20. Alliance staff will participate in this event – electronically, of course – as we try our best to learn more about everything from “engaging digitally empowered insurance customers” to “big data and analytics.” This might be something that executives – or millennials – from your society would like to attend.
    • Bob Dylan’s Guide to Being a Better CEO – Loved this piece in a recent issue of Forbes and thanks to Harald Borrmann of Catholic United Financial for sending it to us. “And I’ll know my song well before I start singing.” Thanks, Bob!
    • Google Has Always Been There – At least three times this past weekend my wife and I used Google to verify the facts of whatever we were discussing, whether it was a supporting actor in an old movie or her nephew’s high school basketball schedule. Each time this happened we asked ourselves, “What did we do before Google?” Well, according to the Beloit College annual “Mindset List,” the current crop of college freshman NEVER ask that question because they’ve never known a world without the search engine.
    • Friends in High Places – This may be old news to some of you, but in case you missed it in Weekly HeadlinesI wanted to make sure it got reported here, as well. Eivind Heiberg, president and CEO of Sons of Norway, has been named the new Honorary Consul General of Norway for the State of Minnesota. Eivind will be working with the Norwegian government to facilitate the development of commercial, economic, cultural and scientific relations between Norway and the upper Midwest. Congratulations, Eivind! Lutefisk for everyone!
    • An Easy Way to Collect Email Addresses – Karen Deschaine of Woman’s Life provided us a copy of this stuffer that they use to collect email addresses from their members. Gathering email addresses is increasingly more important for fraternals as it allows societies to communicate with members on a cost-effective basis and provide them the opportunity to send members electronic links on important initiatives – like the Alliance’s 2016 grassroots campaign to secure 100 co-sponsors for our congressional resolution!  More on that in next week’s posting…
    • Millennials Want Advice, Too – Check out this article about millennials and bank branches. While these younger consumers want to do their own homework on products and providers, they still need someone they can trust to provide authentic advice before they make a purchase. How is your society filling that need?
    • Mergers Make Sense – Mutual banks are looking for a “third way” to preserve their independence and integrity without being forced to sell to larger competitors. Read this entire article and tell me if the same issues don’t ring true for fraternals. Is the concept of a “merger of equals” on your radar screen?

    It came upon a midnight clear…

    Don’t worry, this isn’t a “Christmas” post (despite the fact that retailers will blow right past Thanksgiving and be Start with Whytotally decked out in their holiday finery by the time the doors open this morning). The headline is inspired by the fact that it takes me a week to adjust to that ridiculous one-hour time change we go through twice a year (can someone please tell me why we need these semi-annual interruptions to our circadian rhythms?) and for the last couple of days I’ve been wide awake at 3:00 a.m., reading Simon Sinek’s fabulous book “Start with Why,” and thinking about how fraternals are different from any other financial services organization. Here’s a summary of my latest brainstorm…

    When you buy a product from a traditional life insurer, you take your shiny new policy home, put it in a file, and think about it only when it comes time to pay that pesky annual premium. This provides you the annual opportunity for a good case of buyer’s remorse, because no matter how much peace of mind you thought you purchased, there are still 50 other things you could spend that money on that you REALLY, REALLY NEED!

    But when you secure your family’s financial future by purchasing a product and becoming a member of a fraternal, at least a part of your policy premium (as well as your participation in any community service activities) starts working to improve the quality of life within your community RIGHT NOW! You don’t have to wait for the benefits until after you die – you can experience them while you’re still here. That, to me, is an essential FRATERNAL DIFFERENCE that I’m not sure is fully understood by all fraternal leaders or field representatives. I think we may sometimes get too caught up in WHAT we’re offering (i.e. product features and price) and not WHY we’re offering it. (Each of you has to fill in the WHY, but one thought would be to help make our world a better place to live). Something tells me that if we can more effectively communicate that, new members (young and old) will beat a path to our doors.

    Your thoughts?  Share them here or send them to me in a private email at jannotti@fraternalalliance.org.

    On speakers and chairs and prime ministers…

    After much contemplation and debate, it appears that Rep. Paul Ryan (R-Wis.) – the current Chair of the House Ways and Means Committee – will soon be elected as Speaker of the House of Representatives. Ever the optimist, I’m hopeful that his election will be one step toward more bi-partisanship and less polarization in the GOP, the House of Representatives, and the Congress. Perhaps it will even signal a return to legislators seeking ways to work together for the good of the nation rather than the good of what seems to be increasingly narrow and fragmented constituencies. Let’s all hope so.

    Paul Ryan

    One thing is for certain, however, and that is that Rep. Ryan’s move to the Speaker’s office will mean that the Ways and Means Committee – the chief congressional tax-writing body – will have a new Chair. The Alliance has enjoyed a solid working relationship with Rep. Ryan. He is a member of one fraternal, has a close working relationship with the fraternals domiciled in his home state of Wisconsin, and always expressed support for the fraternal model to Alliance leaders that met with him both before and during his tenure as Chair of the Ways and Means Committee. One characteristic I appreciate about Rep. Ryan is his straightforward assessment of the fraternal tax exemption. He once told me that “as long as you are relevant to current members, growing your organizations by appealing to new members, and doing the right things with the money you would have paid in taxes, you’ve got nothing to worry about.” Amen.

    Right now it looks like three individuals – Rep. Kevin Brady (R-Texas), Rep. Pat Tiberi (R-Ohio), and Rep. Devin Nunes (R-Calif.) are interested in taking over for Ryan as Ways and Means Chair. Alliance members and staff have visited with each of these policymakers during our biennial “Day on the Hill” events in Washington, D.C., and our federal advocacy counsel has regular contacts with staff members in each of these legislators’ offices. Nonetheless, the change in the chairmanship of the Ways and Means Committee means that there is more work to be done in terms of building relationships and promoting the value of the fraternal business model and the tax exemption that allows us to fulfill our unique financial and fraternal missions.

    And speaking of changes…

    The surprising results of recent elections in Canada mean that our member societies domiciled and doing business in that nation have some new political challenges on the horizon. In case you haven’t heard, Justin Trudeau – the son of Pierre Trudeau (probably the only Canadian Prime Minister most Americans can name) – was elected Canada’s Prime Minister earlier this month. Trudeau’s election came after the longest political campaign in Canadian history – 78 days. (Come on, tell me you wouldn’t kill to have a 78 day presidential campaign here in the U.S.) Canadian political analysts are still trying to sort out what it all means, i.e. a shift to the left after more than a decade of conservative control of Parliament. I’m wondering if it means that we’ll elect a Clinton or a Bush to the presidency in 2016 continuing political dynasties in both nations.Justin Trudeau

    But again the election comes with a certainty for Canadian fraternals. Many of the friends we made at this year’s first ever “Day on Parliament Hill” have been sent home. That means an entirely new set of legislators will likely be determining the fate of the renewal of the Insurance Companies Act – the federal law that establishes the regulatory guidelines for Canadian insurers – in 2017. And the time to get to know these folks is now.

    If ever there was a need for the Alliance…

    I guess the underlying message here is that effective political advocacy is never completed. Political winds change, but the need to communicate effectively with lawmakers doesn’t. That’s why most fraternal CEOs say that political advocacy is the primary benefit of membership in the Alliance. With plates full of decisions to be made on governance, distribution, product development, local chapter management, and a host of other complex issues, they find confidence and comfort in the knowledge that the Alliance’s number one priority is making sure the fraternal message is heard by members of Congress, state legislators, and state regulators whose decisions can dramatically impact the laws and regulations on which the fraternal model is built.

    Five Management Imperatives

    Last week, I attended the biennial meeting of the International Cooperative and Mutual Insurance Federation (ICMIF) just up the road in Minneapolis.  This was one of the first large scale ICMIF meetings held in the U.S. in the recent memory and I couldn’t pass up the opportunity to experience a virtual “United Nations of Insurance” event (right down to the real time remote translation devices on each table!).ICMIF Logo Stacked

    While there are a handful of U.S. and Canadian insurers – including one fraternal – that are members of ICMIF, the bulk of their mutual and cooperative insurers (business models that are kissing cousins to fraternals) are domiciled in South America, Europe, Africa, and Asia.  ICMIF members include life, health, and property/casualty insurers.  Some are very large, others smaller than the smallest fraternals – micro-insurers, really, helping individuals in developing nations protect their families and businesses as they build the foundation of emerging economies.

    The Alliance and ICMIF have a solid working relationship, exchanging information on regulatory issues affecting fraternals, mutuals, and cooperatives (if you think state regulation is complex, you should take a look at the global regulatory schematic handed out at the ICMIF meeting!).  And it wasn’t surprising to learn that whether they are doing business in Kenya, Kyoto, or Kansas, the challenges and opportunities facing insurers are not that different – over-regulation, low interest rates, and those confounding millennials.

    One presentation that particularly struck me was conducted by Mike Pritula, a Director of McKinsey and Company and a leader in the consulting firm’s insurance industry strategy practice.  He highlighted five “management imperatives” that should be top of mind for every CEO.  Here they are:

    1) You must continually grow the business – While technological advances make it more feasible for smaller companies to compete with larger ones, scale in the financial services business is still important.  Standing pat or slowly losing members/policyholders is not a recipe for success.

    2) You need to be more technologically savvy – You don’t have to become a computer geek, but you’d better be familiar with how the consumers of your product use technology and how you can make it work for you.

    3) You need to take a more quantitative approach to business due to the sheer explosion of data – Prospective members have access to more data about you, your company, and your products than ever before in history.  That changes the balance of power in the sales process.  Likewise, you have access to more information about your members and can utilize that to enhance the type of products and member service experience you provide.  If you don’t, someone else will.

    4) You need to be more efficient – Make sure you are running the company for the benefit of the members, not the board, the delegates, the employees, or anyone else.

    5) You need to understand your customers better than ever and better than anyone else – This is the bedrock advantage of the fraternal “common bond.”  We should have a built-in affinity that provides us a competitive advantage with prospective members who share our organizations’ values.

    It seems to me that if you accomplish numbers 2-5 you will almost inevitably accomplish the number 1 goal – membership/policyholder growth.  This “growth problem” is not unique to the fraternal community.  Every life insurer is struggling to find the solution to steady growth.  And interestingly, most large U.S. life insurers view “emerging markets” – those very same areas where most ICMIF members do business – as their best growth opportunity.

    But since fraternals are virtually landlocked in North America, let me ask you once again: What is your society’s emerging market?  Share your thoughts here or in an email to me at jannotti@fraternalalliance.org.

    What’s all the fuss about corporate governance? – Part 2

    Last week’s post about the primary reasons for increased scrutiny of corporate governance practices by insurance regulators generated quite a few emails from member society executives, most of which fell into the “Thanks, this needed to be said” category.

    This week, we’ll explore the potential for regulators to move beyond the parameters of the NAIC’s new Corporate Governance Model Act – regulations that require all insurers (not just fraternals) to disclose the details about their organization’s corporate governance structure – and actually require companies to meet specific governance standards. While there are no such proposals on the horizon, it’s not a stretch to think that regulators won’t attempt such an expansion of their authority sometime in the foreseeable future – especially if we provide them an excuse to do so.


    In fact, two states (Illinois and Ohio) have considered enacting rules that would impose stricter corporate governance standards on fraternals than on commercial insurers. These governance issues were included in broader legislative proposals that addressed fraternal solvency regulation. Both states enacted similar solvency laws and the Illinois legislation included a section that authorizes the Department of Insurance to establish the qualifications for fraternal CEOs that are elected by the organization’s delegates or members.  This specific provision of the new Illinois law becomes effective on January 1, 2019.

    Regulators’ primary concern when it comes to fraternal governance is the election of officers rather than the hiring of a CEO by an elected board of directors. Most regulators believe that the election of a CEO (and other officers) can more frequently result in the selection of a very popular, but not always qualified, individual to manage the operations of a complex financial services organization. Moreover, regulators point out that the election of other officers – vice presidents, etc. – makes those individuals more accountable to the people that elected them and less accountable to the CEO who is charged with leading the organization.  I’ll be honest, in this case I agree with the regulators.

    Surprisingly (or maybe not so surprisingly), so do many leaders of Alliance member societies who still maintain the “elected CEO” corporate governance model. During the debates over the governance provisions of both the Ohio and Illinois fraternal solvency measures, member society executives suggested the Alliance may want to support stricter governance standards, including a requirement that CEOs and other executives be hired rather than elected. When asked why they would endorse a proposal that would overhaul the governance of their own societies, they said candidly that a regulatory mandate was the only way such changes could be made. They felt that the leadership of their societies would never support such a drastic modernization of their organization’s decision-making process.

    I admire these executives’ awareness of the need to improve their societies’ governance and their willingness to consider a regulatory mandate to accomplish that goal. But at this stage of the game – given that so many Alliance members have made such significant progress on their own to upgrade their governance – I think reliance on regulatory intervention falls into the “be careful what you wish for” category. Once you defer to regulatory authority on the basic principle of how your society organizes itself and makes decisions, you no longer have a regulator-regulated relationship, you have a business partner.

    That said, there’s no excuse for fraternals to reject the mountain of evidence that demonstrates the value – to the society and its current and future members – of a modernized governance structure and to make progress (even if its incremental) toward implementing such changes on their own. If we fail to do so, any future fraternal financial instability will provide regulators the reason they need to intervene more drastically and establish specific governance standards that all societies must meet.

    OK, enough from me. This is a major issue for individual societies and for the Alliance as a whole.  Let’s hear your thoughts on the topic. Post them here or send them to me in an email at jannotti@fraternalalliance.org.


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