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    Thanksgiving Choices

    Many people consider Thanksgiving to be their favorite holiday: no presents to buy, no outdoor decorations to hang in the frigid weather, no indoor greenery shedding needles that will continue to be vacuumed out of the carpet eight months later, no mandatory staying up late, and no noisy fireworks that drive the dog crazy. Truth be told, these probably aren’t the same people who are expecting 17 at their 12 person-maximum dining table, complete with Aunt Gertrude who always has an opinion and is not afraid to express it.

    Thankgiving Choices

    In a way, it’s another celebration of freedom of choice. Now, this may mean choosing what kind of stuffing (dressing?) to make, to brine or not to brine, sweet potatoes in addition to regular mashed? Do we really need rolls with all the other carbs we’re going to consume?

    But we were thinking more of this being a day of choosing to spend time with family and friends, in spite of all we know about them. Choosing to ignore petty differences in order to make familial memories that will last for years to come (Aunt Gertrude!). Choosing to celebrate the good given us and vowing to do more to show our gratitude in response.

    This makes it a pretty unique holiday. The idea has spread and has been embraced by many in the British Isles where “American Thanksgiving” has become a “thing.” The historical irony is not lost on us.

    This Thursday will probably feel like a Busman’s Holiday for so many of you. Feeding people? Check. Working to make lives better? Check. Knowing that a small act of fate separates us from that person in the homeless shelter? Check and check. How fortunate we are in the fraternal system to work with people in organizations where we get to celebrate the spirit of Thanksgiving every day.

    On behalf of the staff of the American Fraternal Alliance, we are proud to work for you and wish you and yours a truly blessed holiday!

     

    An Early Thanksgiving Gift

    Last week, I spent an afternoon with the Sons of Norway Board of Directors as part of a two-day orientation session for the organization’s incoming board members. My segment of the program covered two of the four modules in the Alliance’s Board Boot Camp – “The Role and Responsibilities of Fraternal Board Members” and “Hands On, Fingers Off.” Other components of the orientation session included presentations on legal, actuarial, and operational issues, as well as remarks from Harald Borrmann, President and CEO of Catholic United Financial and Chair of the Alliance’s Board of Directors.

    Sons of Norway web(O)

    The session was intended to provide incoming Sons of Norway board members with a firm foundation for their new roles and responsibilities, as well as a solid grounding in the principles of good corporate governance and a history of the fraternal system. For those continuing on the board, it provided a good refresher course on these key issues, and established a baseline for the newly constituted board to move forward with its duties. I’m sure at times it seemed to both the new and current board members that they were drinking from a fire hose — there was quite a bit of information given to them in a very short period of time — but based on the enthusiasm with which they approached the training session and the very positive comments they made about the program, it appeared to be well worth the effort for them as individuals and as a board.

    As I led the board members through the modules, I was impressed by their desire to stop and discuss how the points and principles about governance “best practices” could be applied to their society. They were duly proud of those areas in which Sons of Norway has improved its governance structure in recent years, but were not interested in sitting around and patting each other on the back over their victories; they were much more interested in talking about how they, as a board, could continue to enhance the society’s governance and contribute to further financial and fraternal successes.

    boot camp

    As I told the board at the end of our session, I was quite sure that I got as much, or more, out of the discussion as they did. It was incredibly rewarding to share time with a group of dedicated, qualified, and talented individuals who are tackling tough issues in a meaningful way. It was even more gratifying to know that the Board Boot Camp program that the Alliance has worked so hard to develop and improve over the last few years is genuinely valuable and appreciated by the members.

    These resources are available to all Alliance member societies.  Check out the Boot Camp offerings or send me an email if you’re interested in some board education, jannotti@fraternalalliance.org.

    Spotlight on Member Societies

    I’ve spent the last few weeks writing about politics, legislation, and regulation – everyone’s favorite subjects. This week I’d like to turn it over to the members and share a few stories with you about how they are affecting their environment, serving their members, and enhancing the quality of life in communities across the country…

    • Sons of Norway – This society is embracing the Alliance’s “Adopt-a-Member-of-Congress” program like no other. Check out the link to President Eivind Heiberg’s blogs to learn more about Rep. Erik Paulsen’s recent visit to Sons of Norway headquarters and see how one society can make an enormous difference in the debate over the future of the fraternal tax exemption. Thanks to Eivind and the entire Sons of Norway staff for this terrific effort!
    • Degree of Honor – Of all the member societies that attended “We Day” in 2014, Degree of Honor employees were the most enthusiastic about the potential for working with this group to improve the quality and quantity of the society’s fraternal outreach programs. DOH staff will be active participants in the 2014 “We Day” on November 12 in St. Paul, MN, and will be celebrating the fact that the society’s youth group, “Power of We,” earned admission to the event through their volunteer activities in the community. Take a look at this bulletin to learn more about how DOH is working with the “We Day” folks and whether such a partnership may make sense for your organization. I’m looking forward to hearing from Michelle Alberg later this week to hear how things went.
    • Modern Woodmen of America – This society took a headline (“When does 1 equal 76?”) from my blog posting on the study of fraternals’ economic and social impact in the U.S. done by Professor Phil Swagel of the University of Maryland and incorporated it into their congressional outreach program. Check out the cover letter that Modern Woodmen representatives sent to members of Congress with a significant number of society members in their districts. They supplemented the letter with state-specific information on Modern Woodmen fraternal and community service activities in the state, as well as with the executive summary of the Swagel study. Hats off to Jill Weaver for coordinating the extraordinary grassroots outreach campaign.

    Doing something you think others in the fraternal system should know about? Tell me about it by posting a comment here, on the Alliance’s Facebook page, or by sending an email to jannotti@fraternalalliance.org.

     

     

    Risk-focused exams – and their corresponding costs – are the “new normal” for all insurers

    I’m sure I’ve said this before, but if there is a model for how the relationship between insurers and regulators should work, it exists in Pennsylvania. It’s not always a love-fest – nor should it be – but insurers know exactly where they stand and what to expect from regulators in the Keystone State. This is particularly true – and important – for fraternals, because Pennsylvania has more domiciled societies than any other state.

    And the primary reason why the relationship works so well there is simple: Deputy Insurance  Commissioner Steve Johnson and the CEOs of the fraternals headquartered there work at it. If you’ve ever heard Steve speak –

    Pennsylvania Deputy Insurance Commissioner Stephen Johnson

    Pennsylvania Deputy Insurance Commissioner Stephen Johnson

    whether delivering formal remarks at an industry event or sitting next to you at dinner – you know he’s bombastic, opinionated and, as a result, first encounters with him can be a little frightening. But it doesn’t take long to get past that sometimes gruff exterior and realize that he possesses the characteristics that define an effective regulator: he’s fair; he’s honest; and he’s transparent – there are no secrets or hidden agendas.The Pennsylvania Fraternal Alliance invites Steve and his equally effective regulatory colleague, Annette Szady, to address its meeting each fall. You’d think this annual regulatory review would get old after a while, but it never does. In fact, it’s one of the more enlightening components of the Pennsylvania Fraternal Alliance meeting and I would highly recommend that every other state fraternal alliance schedule similar presentations with their state regulators.

    This year, Steve and Annette focused on the “new normal” of risk-focused exams – the much more thorough and much more expensive replacements for the every-five-year financial examinations conducted by state insurance departments. The Alliance has received more than a few comments and complaints about these exams from member societies in Pennsylvania and across the country – mostly focused on the fact that the exams are considerably more expensive (100% increases over previous exams are the average), take much longer to complete (months versus weeks), and seem to have few controls or incentives in place for regulators and/or out-sourced examiners to limit these time and cost factors.

    Because of the relationship that exists between fraternals and regulators in Pennsylvania, fraternal CEOs could raise these issues with Steve and Annette in a public forum without fear of “regulatory retribution.” That’s not always the case in other states. And while the answers they provided were not always what Alliance member society leaders wanted to hear, we all walked away with a better understanding of why risk-focused exams are necessary, as well as a commitment from regulators to work with insurers – commercial and fraternal – to do everything possible to limit unwarranted price escalation in the future.

    Here are a few of my most significant takeaways from Steve’s presentation:

    • Risk-focused exams are much more detailed and require much more work by the examiner. Comparing them to the old-style financial exam is “apples to oranges” in that risk-focused exams are “operational” and provide a look ahead at the future of the entire organization, while financial exams provide only a snapshot of the insurer’s fiscal health at a moment in the past. The resulting “look ahead” should be beneficial to both the society leadership AND regulators.
    • The Pennsylvania Insurance Department’s objective is not to play “cops and robbers” with insurers; it’s to foster an exchange of ideas that results in best practices that will lead to a sustainable business model so that fraternals can continue to provide benefits to their members and the communities they serve. Solid, solvent, and profitable insurance operations are essential to achieving that goal.
    • Fraternal leaders should take a close look at the NAIC’s risk-focused exam procedure before the examination process begins – you can access it on the NAIC’s web site. By familiarizing yourself with the process, you will have a better understanding of what’s expected from you and your board and will be able to reduce the time – and potentially the cost – of the exam.
    • Fraternal leaders should understand that “once you’re down, it’s hard to get back up.” The key to prolonged success is slow and steady growth, combined with reduced (or at least controlled) expenses. If you can’t realistically make those things happen – and a risk-focused exam will go a long way to providing answers to those questions – it’s time to consider other options, including mergers.

    Feel free to add your comments below or contact me with any questions.

    Nov. 4 Elections: More at Stake for Fraternals than “Balance of Power”

    election 2

    Most of the national media coverage surrounding the upcoming elections has been focused on U.S. Senate races and the possibility of a power shift in that chamber from Democrat to Republican. And while balance of power in the Senate is a significant issue – not least because should the GOP take over the chamber, the leadership and composition of the Senate Finance Committee (where the bulk of any tax reform debate will take place in 2015) will change dramatically – it’s not the only potential outcome that the Alliance’s advocacy team is tracking. Here is an overview of the key ways the November 4 elections could impact the fraternals:

    • U.S. Senate – As noted above, GOP control of the Senate would impact the roster of the Senate Finance Committee and the tone of the tax reform debate likely to take place next year. Moreover, a more conservative Senate may also be less receptive to efforts to expand federal regulation of the insurance industry. It’s important to note, however, that even if Republicans win all of the six key races “in play,” the party’s control of the Senate will be by the narrowest of margins.  Prospects for a break in the partisan stalemate in that chamber are still slim.
    • U.S. House of Representatives – No power shifts are predicted in the House, but term limits for committee chairs will have a significant effect on the tax reform debate. Current Ways & Means Committee Chairman David Camp (R-Mich.) is term-limited out at the end of the year and it appears that the new Chair will be Rep. Paul Ryan (R-Wis.). The Alliance and several individual member societies have worked hard to build strong relationships with each of these lawmakers, and both are well aware of the value and viability of fraternals in their communities and across the U.S. Nonetheless, Rep. Ryan has said that if he becomes Ways & Means Chair, “everything is on the table” for the debate over an overhaul of the U.S. Tax Code. We can’t expect to get a free pass and we’ll have to continue our advocacy efforts with the members of this Committee and the entire U.S. House of Representatives – especially the incoming crop of freshman legislators – to make sure we’re at the tax reform table, but not on the menu.
    • Gubernatorial Elections – These elections could have the most profound impact on fraternals because in most states governors appoint insurance commissioners. There are 32 governor’s seats up for grabs next week, with as many as a dozen incumbent governors being challenged in races that are too close to call or where polling shows the incumbent far behind in the polls. These include Illinois, Pennsylvania, Wisconsin, Louisiana, and Michigan. The Alliance will be keeping close tabs on the outcome of these races – and the impact they may have on appointed commissioners – and will schedule meetings with any newly appointed regulators early in 2015. As always, member societies doing business in those states will be invited to participate in such meetings.
    • Fraternalists’ May Decide the Winners – Take a look at this column by Gerald Seib from Tuesday’s Wall Street Journal. Seib is one of my favorite political analysts and his piece on who is likely to cast votes in the November 4 election is thought-provoking. Seib is predicting that races in many states will be decided by voters who fit a decidedly fraternal demographic. Let’s see if his crystal ball is accurate.

    Want to get a preview of the outcome of the elections and the impact they could have on your society and its members? The Alliance is conducting a free Election Preview Teleconference featuring political analysts from McBee Strategic Consulting, our federal advocacy firm, on Friday, October 31, from 11:00 – 11:30 a.m. CDT. Click here for more information about the teleconference and plan to join us later this week.

     

    BOGO (or “What fraternals can learn from retailers”)

    My wife works for one of America’s largest retailers. And over the years I’ve learned a good bit from her about the retail industry and the challenges it faces. Think we’re in a tough business? Check out these daily obstacles to success:

    • Cut throat competition
    • High employee turnover
    • Significant losses due to internal and external theft and fraud
    • Razor thin profit margins
    • Cyber liability

    And the list goes on. Retailers have to constantly keep current customers coming back while bringing new ones in the door in order to survive. And there is one marketing tactic that many companies use to both retain and attract customers. It’s beautiful in its simplicity and it’s called BOGO – “buy one, get one.” Everyone can understand the concept. You purchase one item and you get another for “free.” And while most of us inherently understand that nothing is ever free, BOGOs still make us feel like we’re getting a great deal.

    bogo1

    That got me to thinking… Why can’t fraternals apply a twist on the same tactic to their marketing campaigns?  I’m not suggesting that when an individual purchases a fraternal insurance certificate the society provides them a second one at no charge. I’m quite certain that this would violate basic actuarial and anti-rebating principles and result in widespread bankruptcies. (Not to mention jail terms.)

    What I’m thinking is a “Buy One, Give One” campaign that highlights the community service aspect of our unique business model. That’s right, for every certificate purchased a fraternal could make a contribution to a specific charity. Better yet, the society could provide a list of organizations that it supports to the member and let the member direct where the contribution will be made.  This accomplishes several objectives (at least from my simplistic perspective):

    • It establishes a direct link between the financial and fraternal sectors of the organization – one that agents can effectively market and one in which members (both current and new) can feel good about.
    • It can give members a much more “hands-on” ability to direct where the fraternal’s financial contributions are made.
    • It can open the door to additional volunteerism by opening the eyes of members to the connection between the society’s financial services and community services activities.
    • It provides “immediate gratification” for new (and younger!) members, allowing them to make a difference in their community as soon as they join.

    I suspect that some of you must already be doing something like this. If so, I’d love to hear about it (and I suspect other readers would, too). So tell me if and how your society is borrowing a page from retailers’ playbook and implementing the “Buy One, Give One” concept in your society’s marketing campaign by posting a comment here…

    Effective Advocacy in the U.S. and Canada

    Just back from a week of vacation and a quick trip to Atlantic City for the New Jersey/New York State Fraternal Alliance meeting.  My brain is in one time zone and my body is in another.  Hopefully, the two will get synchronized soon because being hungry for dinner at 9:00 a.m. and falling asleep at 2:00 a.m. just doesn’t work as well as it used to back in the day.

    I wanted to pass on two excellent examples of Alliance member society advocacy efforts that came across my desk while I was away.  These initiatives demonstrate just how effective and important the involvement of one society can be when it comes to communicating the value and viability of fraternals to public policy makers in the U.S. and Canada.

    Walberg2

    Rep. Tim Walberg (R-Mich.)

    Several months ago, Kevin Marti, president and CEO of Gleaner Life Insurance Association and an incoming member of the Alliance Board of Directors, invited the U.S. Representative from Gleaner’s congressional district – Rep. Tim Walberg (R-Mich.) – to visit the Gleaner home office in Adrian, Michigan.  Rep. Walberg and his district office director took Kevin up on his offer last week and met with the society’s executives and management team.  Kevin took the opportunity to not only discuss the good work Gleaner does in both the financial services and community service arenas, he also made sure that Rep. Walberg understood that Gleaner was just one of 70 members of the American Fraternal Alliance, and that each of those societies fulfill similar missions in virtually every state and town in the U.S.  Kevin happily reported that Rep. Walberg reiterated his full support for the continuation of the fraternal tax exemption in any future tax reform debate.  Kevin also reminded Rep. Walberg that Alliance CEOs will be coming to Washington, D.C., in April 2015, and that he looks forward to leading a delegation of Michigan fraternal representatives in a meeting with the Congressman in his Capitol Hill office.

    Ever thought about inviting the Representative from your society’s congressional district to visit your office?  It’s not difficult, and the Alliance home office staff and our lobbying team at McBee Strategic can help you arrange such an event.  Interested?  Send me an email at jannotti@fraternalalliance.org and we’ll help you get started.

    Peter Braid

    Parliament Insurance Caucus Chair Peter Braid

    Not to be outdone, Doug Baker, president and CEO of Teacher’s Life, an Alliance member domiciled in Toronto, Ontario, met with officials from the Canadian Parliament’s Insurance Caucus last week in a significant first step in enhancing the awareness of fraternals’ impact on the Canadian economy.  Doug reported that Caucus Chair Peter Braid expressed his thanks for sharing the fraternal story and their contributions to Canadian society.  Mike Wallace, a Member of Parliament from Burlington, Ontario, told Doug that he didn’t know fraternals existed before the meeting, but that he was very impressed with the concept of a cooperative business model for life insurance.

    Ever thought about reaching out to the Insurance Committees of your state senate or assembly?  Even though the tax reform debate will take place almost exclusively on the federal level, members of Congress often seek input on issues from state legislators in their home districts before deciding on an issue.  Making sure state lawmakers are aware of who we are and what we do – either as an individual society or through your state fraternal alliance – is an excellent way to build a network of fraternal “champions” among policymakers at all levels.  Interested?  Send me an email at jannotti@fraternalalliance.org and we’ll help you get started. 

    Please join me in thanking Kevin and Doug for taking the lead on these two important advocacy projects, and for setting a shining example for other Alliance member societies to follow.

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