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    The importance of regulatory outreach…

    In surveys and anecdotal discussions, fraternal leaders cite “political advocacy” as the most important benefit of Alliance membership. And most often those leaders will point to the Alliance’s work to promote, protect, and preserve fraternals’ federal tax-exempt status as the most important public policy issue for which we advocate.

    I don’t want to diminish for a moment the effort the Alliance puts into or the results we achieve on the tax exemption issue. Whether through meetings between key staff and Members of Congress (I have several of Capitol Hill visits scheduled for this week); the constant interaction between our advocacy firm with legislators and their staffs; our biennial “Day on the Hill” event where dozens of fraternal executives meet with lawmakers in Washington, D.C.; or broad-based grassroots campaigns, like the 2016 “Race to 100” program where employees, agents, and members are encouraged to help recruit co-sponsors for H.Con.Res. 19, the tax exemption issue is ALWAYS a priority for the Alliance.

    Illinois capitol

    But in recent years we’ve focused an increasing amount of time, energy and resources on state regulatory outreach – and it’s paying dividends for members. Here’s a brief look at two recent developments and one upcoming development in the state regulatory arena that I thought you should be aware of:

    • Ohio Department of Insurance – On January 27, the Alliance worked with the Ohio Department of Insurance (ODI) to schedule a special meeting for leaders from all of the state’s ten domiciled societies to review the legislative language and the proposed rules for the state’s Corporate Governance Disclosure law. Such corporate governance disclosure requirements will be mandated by every state within the next few years and will be applied to all insurers – publically-traded, mutual, privately-owned, reciprocal, and fraternals. The Ohio meeting provided fraternals the opportunity to review and discuss the specific requirements contained in the legislation, regulators’ expectations for compliance with the disclosure requirements, and the impact such requirements would have on regulatory examinations. Alliance member societies were not shy about asking questions of regulators and ODI officials were open and honest in their responses. When one member asked why regulators felt it was necessary to mandate such disclosure requirements in the first place, regulators responded by saying that “70 percent of regulatory interventions can be linked directly to poor governance issues.” ODI regulators cited instances of insurers outsourcing functions to third parties with very little oversight over those consultants’ actions, and non-participating and unqualified board members as the key problem areas. The regulators summed it up by stating, “We don’t want to run your companies, but we want to make sure that someone (i.e. the executive management team and the board of directors) is.” The bottom line is that this meeting helped build on what was already a solid working relationship between Ohio-domiciled societies and the agency responsible for their oversight. And when those types of relationships exist, many potential problems can be effectively worked out without regulatory confrontation or intervention.
    • Illinois Department of Insurance – Less than a week later, Alliance staff had the opportunity to meet with the newly-appointed Director of the Illinois Department of Insurance Anne Melissa Dowling, Deputy Insurance Director Jim Stephens, and several other key officials with the DOI. Illinois, like Ohio, is a state with a significant number of domiciled fraternals and, as such, regulatory actions taken in the Land of Lincoln can impact fraternal regulation in other states and at the NAIC level. Director Dowling was the former Deputy Director of Connecticut (the home state of the Knights of Columbus) and was more than a little aware of the fraternal model and the positive impact societies have in the communities they serve. She was impressed by the diversity of the fraternal community in Illinois and both she and Deputy Director Stephens were pleased to learn of the Alliance’s commitment to good governance and of our extensive corporate governance education programs. This meeting was an important first step in improving fraternals’ relationship with the Illinois DOI, a relationship that had its contentious moments over the past few years. However, by opening lines of transparent and honest communications and sharing our respective public policy priorities and objectives, we’re on much firmer ground with Illinois regulators. The next step would be to schedule a meeting with leaders from all the state’s domiciled societies to discuss regulatory matters – from governance to sustainability. Look for that to happen sometime later this year.
    • Pennsylvania Department of Insurance – Finally, I will be leading a small delegation of current and former Alliance Board members, as well as a representative of the Pennsylvania Fraternal Alliance, in a meeting with newly-appointed Pennsylvania Department of Insurance Deputy Director Joseph DiMemmo in Harrisburg, Penn., later this month. Mr. DiMemmo is taking over the reins from long-time Deputy Director Steve Johnson, who retired on December 21, 2015. I don’t have to tell you about the importance of a positive working relationship with Pennsylvania regulators. No state has more domiciled fraternals or a larger footprint on fraternal regulatory issues at the NAIC than the Keystone State. The significant turnover of key officials at the PA DOI in recent months makes building a relationship with Deputy Director and his team imperative for the Alliance. A larger meeting with Mr. DiMemmo and all Pennsylvania-domiciled fraternals will almost certainly take place in conjunction with the Pennsylvania Fraternal Alliance’s annual “Legislative Day” later this year.

    Outreach to state regulators on such mundane issues as corporate governance and fraternal solvency may not be as glamorous as working the tax exemption issue on Capitol Hill. But it is an increasingly important component of the Alliance’s advocacy initiative – and the benefits of your membership in the organization – that should not be overlooked.

    Is it Ground Hog’s Day…again?

    Does this photo look familiar?  I’m posting it again for two reasons:young Joe

    • It seemed to inspire many of you to support my 2015 effort to raise money for the St. Baldrick’s Children’s Cancer Research Foundation by shaving my head bald last March.
    • To give those of you with 20-something children or grandchildren who look like this the hope that they may one day grow up to be responsible human beings despite their current appearance or behavior.

    Yes, that’s right, this March 18th I’m shaving my head for St. Baldrick’s, the children’s cancer research foundation that funds more pediatric cancer research grants than any institution other than the U.S. government.  Why? Because cancer is diabolical enough when diagnosed in adults, but when it strikes a child the impact is even more devastating and unfair.

    My friend and fellow association executive, Chuck Chamness’s son Joey was diagnosed with osteosarcoma in 2005.  Since that time nearly two million other kids have been diagnosed with cancer.  Of those, 20 percent have died, including each of Joey’s roommates during his stays at Memorial Sloan Kettering Cancer Center in New York.

    Fortunately, Joey is now counted as a “survivor” and is a 19-year-old freshman at Indiana University.  I’ve been supporting Chuck’s head shaving endeavors for years before finally taking the plunge myself in 2015.  It was one of the most rewarding experiences of my life thanks to the generous support of hundreds of readers of this blog and the members of the American Fraternal Alliance.  That’s why I’m asking for your support again this year.

    St. BaldricksSt. Baldrick’s raised $36 million last year.  About the need for funding research, Dr. Peter Adamson, chairman of the Children s Oncology Group, puts it this way:  We are entering an era of unbelievable scientific discovery.  But if we don’t turn these discoveries into cures, we will have failed another generation of children. You can count on your donation being used effectively and responsibly to fund research to find cures and give survivors long and healthy lives.   I have nothing but admiration for the way the organization’s scientific advisory council uses the peer review process to make recommendations on funding the most promising research.

    So that’s why I am again asking for your generous support on my soon-to-be-bald head. You can give directly here or by phone (888-899-BALD). Credit cards are the easiest way to give, or you can send a check payable to “St. Baldrick’s Foundation.”

    I’ll post a video of my head shaving experience on March 18th.  Whether you are a first-time contributor or one who has supported this cause for years, I truly appreciate your support. Thank you!

    12 Principles of Governance that Power Exceptional Boards…

    It seems governance issues are on everyone’s mind these days. The issue is evergreen, and it has been given even more importance as more and more states enact their version of the NAIC Corporate Governance Disclosure Model Act.

    I’ve devoted several of these posts to governance issues, and I’m almost certain to keep this issue on the front burner in 2016. Because for both the Alliance as a trade group, and its member fraternal life insurers good governance is critical to our mutual sustainability and relevance.


    Recently, I came across a pamphlet on governance published by BoardSource, an organization dedicated to helping not-for-profit groups improve all aspects of operations.  I’ve highlighted the 12 principles of good governance identified by BoardSource and will be happy to send you information on how you can access the entire booklet. I found it to be a valuable management tool that can not only stimulate conversation among board members but also spur real and measurable improvement in a board’s performance. Take a look and see whether your board displays these “exceptional” characteristics…

    1) Exceptional boards govern in constructive partnership with the CEO, recognizing that the effectiveness of the board and CEO are interdependent.

    2) Exceptional boards shape and uphold the mission, articulate a compelling vision, and ensure the congruence between decisions and core values.

    3) Exceptional boards allocate time to what matters most and continuously engage in strategic thinking to hone the organization’s direction.

    4) Exceptional boards institutionalize a culture of inquiry, mutual respect, and constructive debate that leads to sound and shared decision making.

    5) Exceptional boards are independent-minded. When making decisions, board members put the interests of the organization above all else.

    6) Exceptional boards promote an ethos of transparency by ensuring that stakeholders have access to appropriate and accurate information regarding finances, operations, and results.

    7) Exceptional boards promote strong ethical values and disciplined compliance by establishing appropriate mechanisms for active oversight.

    8) Exceptional boards link bold visions and ambitious plans to financial support, expertise, and networks of influence.

    9) Exceptional boards are results-oriented. They measure the organization’s advancement towards mission and evaluate the performance of major programs and services.

    10) Exceptional boards intentionally structure themselves to fulfill essential governance duties and to support organizational priorities.

    11) Exceptional boards embrace the qualities of a continuous learning organization, evaluating their own performance and assess the value they add to the organization.

    12) Exceptional board energize themselves through planned turnover, thoughtful recruitment, and inclusiveness.

    Another opportunity to discuss all aspects of good governance with other fraternal leaders is at the Executive Summit, in Toronto, from May 11-13, 2016.

    “Race to 100” about to begin…

    We’re only days away from the start of the “Race to 100” – the Alliance’s 2016 grassroots campaign to secure 100 co-sponsors for House Congressional Resolution 19 (H.Con.Res. 19), the “Fraternal Resolution” that gives U.S. Representatives the chance to publically acknowledge the important contributions that fraternals make to the nation’s financial and social well-being.

    The Resolution was introduced in early 2015 and, thanks to the efforts of dozens of fraternal leaders who have asked their Representatives to sign-on to the measure and the Alliance’s staff and federal advocacy counsel who have called on numerous congressional offices, we’ve reached an all-time high of 70 co-sponsors. More importantly, many of those co-sponsors serve on the House Ways and Means Committee, the most important tax writing body in Congress. Check out the current co-sponsor list to see if your Representative has pledged his or her support.

    Now it’s time to broaden our outreach efforts and encourage everyone affiliated with your society – employees, local chapter leaders, field representatives, and rank-and-file members – to contact their Representative and ask them to jump on the fraternal bandwagon by co-sponsoring H.Con.Res. 19. And as with past grassroots campaigns, we’ve made participating in this effort as easy as possible for your society.

    First, we’ve developed this informative video that helps your members better understand the history and importance of the federal tax exemption, and the critical role they can play in helping to promote and protect it by contacting their elected leaders. Second, we’ve created a website where society board members, employees, agents, and members can send a personal email encouraging their U.S. Representative to become a co-sponsor of the Resolution with just a few mouse clicks. If their Representatives are already co-sponsors, the system will create a personal thank you email to them from your member constituent. And all your members’ personal information will remain strictly confidential.

    The congressional contact segment of the campaign will begin on February 15, 2016. You’ll be receiving much more information from the Alliance on this initiative in the coming weeks. If you haven’t already done so, I hope you’ll prime the pump by emailing the video and THIS SAMPLE MESSAGE to everyone on your society’s electronic distribution list.

    Why is this campaign important now, when significant reform of the Tax Code seems like a remote possibility? That’s easy. Tax reform is an evergreen issue. It is ALWAYS on the congressional agenda. And, depending on the outcome of the presidential election, a major overhaul of the system could become a top priority for federal lawmakers. Now is the time to secure as many supporters as possible for a debate that we know is coming – if not in 2016, then certainly in a future congressional session.

    Moreover, educating your employees, agents, and members on the importance of participating in Alliance-sponsored grassroots campaigns is absolutely critical to our ability to influence the outcome of these debates. Good teams sharpen their skills by practicing them over and over again. They don’t wait until the game is on the line to test a new play. The “Race to 100” will not only help us accomplish our short-term advocacy goal of securing 100 co-sponsors for the fraternal resolution, it will also help you identify ways to more effectively engage your members in a project that is important to your society’s future viability and the foundation of our democratic republic.

    Alliance Governance Survey Results Show Signs of Progress…

    The results of the 2015 Alliance Governance Survey are in and show that many member societies have made significant improvements in their corporate governance structure over the past three years.  Fifty-five Alliance member societies completed the extensive survey questionnaire (all of the responses are anonymous and confidential) and the composite results and corresponding analysis by our panel of governance experts make the finished report one of the most valuable management tools available to fraternal executives and board members.  Members who participated in the survey can purchase the report for $249 by clicking on this link.  (You may need to go to the home page to log in, then return to Shop.) Other members and associate members can obtain a copy for $449.
    Fraternal Governance Survey Cover

    With many states likely to enact the NAIC’s Corporate Governance Disclosure Model Act in the next two years, improving your society’s corporate governance structure is not just a good idea, it’s imperative.  While there is nothing in the Model Act that requires insurers to have a specific type of corporate governance, the extensive disclosure requirements provide more than a hint of what regulators will be looking for during your next examination.  Insurers – fraternal or commercial – with obvious flaws in their governance structures will no doubt merit additional scrutiny from regulators who have established a clear connection between good governance and organizational sustainability.

    The survey highlights some very promising corporate governance improvements that Alliance members have made in the last few years.  More and more societies are moving away from electing their executive team and instead implementing a system where the board is elected by the members or delegates and, in turn, hires a CEO to run the organization.  Other societies are establishing their boards – rather than their conventions – as the supreme governing body.  And an increasing larger number of societies are putting greater emphasis on the development and oversight of realistic strategic plans for their societies.  As one respondent noted: “A goal without a plan is a wish.  And wishes make for poor strategic plans.”

    Nonetheless, there are some corporate governance problems that continue to vex fraternal leaders – and will no doubt cause consternation among regulators.  These include:

    • The continued high cost and low return of society conventions.  While a few fraternals are dramatically cutting back on these events, or trying to transform into educational programs, smaller societies – those that can least afford it – seem to spend have higher convention expenses than larger ones.  These events could be perceived as junkets or perks for a few society members and not something that delivers any real benefit to the society.
    • I was shocked by how many society boards fail to conduct a thorough self-assessment.  How can you improve performance and enhance accountability without taking a hard look at yourself in the mirror? There are several excellent tools to help boards conduct these self-evaluations, including the Alliance’s own product designed especially for fraternal boards.
    • Likewise, I was stunned by how many boards fail to conduct performance reviews on the society’s CEO.  This seems to me to be a serious breach of fiduciary responsibility.  And it’s SO easy to correct!
    • While more societies are hiring CEOs – and allowing that individual to hire his or her own management team – others persist in electing not only the CEO but the other executives that ostensibly “report” to the CEO.  This is a seriously flawed structure.  CEOs should report to the board – period.  He or she should be the board’s one and only employee.  Other executives should report to the CEO.  Elected executives may be more concerned about getting re-elected than serving the organization or its CEO.  ‘Nuf said.

    Corporate governance…time to take it seriously.

    2016 is off and running…

    The holiday season – and those five extra pounds – are both behind us, and I can’t think of a better way to burn off those Christmas calories than by hitting the ground running in 2016.  Here are a few highlights of the TJAlliance’s 2016 Strategic Plan to give you a glimpse of what you can expect from your trade association this year.  As Robbie Robertson said on “Rock of Ages,” The Band’s landmark live album, “We’re going to try something that we’ve never done before.”  This year, the Alliance’s Strategic Plan is full of those kinds of goals:

    • Race to 100 – The Alliance will pull out all the stops in an effort to secure 100 co-sponsors for House Congressional Resolution 19 (the “Fraternal Resolution”).  Thanks to the hard work of Alliance member society executives who participated in our 2015 “Day on the Hill” event and the tireless work of our retained advocacy counsel, 70 U.S. Representatives have already signed-on as Resolution co-sponsors.  But to reach our goal of 100, we’ll need every member society to engage their employees, local chapter leaders, field representatives, and rank-and-file members in an on-line grassroots campaign that will kick-off in mid-February.  Look for lots of additional information on how your society can participate in this important advocacy initiative in the coming weeks.  With a little luck, we’ll be celebrating our achievement at the 2016 Annual Meeting this September.
    • Meetings with Meaning – And speaking of meetings, the Alliance’s 2016 conferences match up with any insurance industry trade group in terms of value and impact.  The Advisory Councils for the Mid-Year Meetings – Executive Summit (May 11-13, Toronto, Ontario), Fraternal Communications (April 13-15, Ft. Lauderdale, FL), Fraternal Compliance Day (April 26, Chicago, IL) Investment (June 9-10, Naperville, IL), and Actuaries (June 6-7, Oak Brook, IL) – are putting the finishing touches on some of the most impressive programs in recent memory.  And we’ve got a few new features for the Annual Meeting (September 7-9, Nashville, TN), that will improve your overall experience and allow you to bring more of your society’s leaders to the meeting.  We’ve set the membership satisfaction bar high for all of these events, so mark your calendars today and look for registration materials soon.
    • Building a Brand – As you know, the Alliance has made a significant investment in consumer research over the past several years, in an effort to find an effective way to explain the beauty, value, and importance of the fraternal model to consumers, policymakers, and the media.  In 2016 we’ll take the next step in this process by developing a unified fraternal brand that all member societies can use in their marketing and communications programs.  It’s an enormous undertaking – another one of those “never been done before” projects – but the Alliance Board of Directors feels strongly that the time is right for such an initiative.  Members will be briefed on the progress and the promise of the program at the 2016 Executive Summit.
    • The PBR Exemption – After years of effort by larger life insurers, Principles-Based Reserving regulations will likely be approved by a majority of state legislatures by the end of 2016.  The new PBR rules will take effect on January 1, 2020, after a three-year phase-in period.  While the NAIC’s PBR proposal contains an exemption for insurers with less than $300 million in annual life insurance premium, the current version also contains a provision that requires these “small” insurers to maintain an RBC ratio of 450%.  This RBC provision could put many of these insurers – including many fraternals – at a competitive disadvantage.  The situation is exacerbated by the potential changes in the evaluation of insurers’ investments now being considered by the NAIC that could result in a 12-25% reduction in current RBC ratios.  That’s why the Alliance is working with key state regulators and the NAIC to amend the current PBR exemption language so that all small insurers – fraternal and commercial – with less than $50 million in annual life insurance premium and an RBC ratio above 300% can apply for an exemption.  We’ll keep you posted on the results of our efforts as they occur.

    Of course, we’ll be working on many other initiatives throughout the year.  As always, we’ll be running a tight fiscal ship to make sure that your dues dollars are spent wisely and deliver an excellent return on your membership investment.  We’ll also be looking for ways to enhance the value of your membership by expanding participation in current affinity programs (like our terrific professional liability insurance programs for fraternal boards of directors and your society’s field representatives) and developing new ones.  And we’ll be cleaning off our crystal ball in an effort to determine how the Alliance can continue to be a full-service trade association – providing members advocacy, education, information, and products and services – on a sustainable basis for years to come.

    That’s a tall order.  But we’re excited by the challenge.  I hope you’ll take advantage of all the Alliance has to offer your society – and be an active participant in our “Race to 100” grassroots advocacy campaign.

    A trade association is only as effective as its members make it.  Let’s join forces to make 2016 the breakout year for fraternals and “try something we’ve never done before!”


    This is my final 2015 posting.  I look forward to working with you to promote the values and value of the fraternal system in 2016.

    I grew up on a horse ranch a few miles outside of the small town of Hollister, California.  The hard pan soil in the field that fronted the road made it impossible to grow anything, but it did afford an incredible view of the Gabilan Mountains that separated our little valley from the coast.  From the house you could see the sun set over Fremont Peak and watch the fog roll in from Monterey Bay, about 30 miles to the west.

    Nativity 2Every December for as long as I can remember we set up a sweeping nativity scene in that field.  It was one of my family’s most cherished traditions.  One year during the day-long construction project one of my sisters was standing directly in front of one of the wise men, blocking the view of the figure from the road.  It was at that precise moment that my aunt and cousin drove by the front of the ranch.  When my sister waived at them my cousin thought it was the wise man and was convinced she had experienced a miracle.  We still laugh about that every year.

    My father was dying of cancer in December 1982.  Despite the sadness that enveloped my family, my mother was determined to set up that nativity scene.  So, of course, we built the most elaborate version ever.  The local newspaper – the Evening Free Lance – ran a picture of the illuminated nativity on the front page of the paper.  In subsequent days there were a number of letters to the editor commenting on the display.

    One of those letters came from an individual we didn’t know (which is pretty remarkable given Hollister’s small size) and whose name I have forgotten.  But she wrote that Christmas wouldn’t be Christmas without that nativity scene set-up in the front field of the ranch, and thanked us for putting it up despite the sorrow she knew our family was experiencing.

    Our family later sold the ranch and my mom moved to a smaller house, but she continued to set up the nativity scene every year without fail.  When she passed away in 2006, I brought some of the figures home to Chicago and continue that tradition to this day – because it wouldn’t be Christmas without it.

    Here’s hoping that whatever holiday you and your family celebrate is filled with peace, joy, and cherished traditions.


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