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RIMS marches into New Orleans.

When thousands of risk and employee benefits managers marched into downtown New Orleans, they were greeted not only by a historic city of French Quarter architecture and Mississippi River paddleboats but a cosmopolitan business center of high-rises and state-of-the-art facilities. Like New Orleans, a city which is said to have its eye on the 21st century and its heart in the 19th century, attendees of the 29th Annual Risk Management and Employee Benefits Conference on April 28 to May 3 gathered not only to prepare for a more competitive future but to pay homage to the people and events that are a part of their past.

The plethora of sessions, exhibits, hospitality suites and demonstrations at this year's conference reflects the greater awareness of risk management all over the world. There were more than 8,000 attendees from the United States, Canada, Europe, Asia and Latin America. The 95 conference sessions and 44 industry sessions covered topics from loss control to benefits strategies, and for the second time conference sessions were conducted in foreign languages. In addition, the 289 service providers exhibiting at the conference (see story on page 62) reflected the scope and breadth of the risk management marketplace.

In effect, much of the activity mirrored the changes going on both in the risk management discipline as well as within RIMS itself. "The only thing permanent is change," said incoming RIMS President Robert Esenberg at the annual membership breakfast. "In a rapid, dynamic business environment, we too have to change as an organization."

This year's conference marked the end of Cheri Hawkins' term and the beginning of Mr. Esenberg's term as president of RIMS. In addition, the retirement of Ron Judd, RIMS executive director for 24 years, was marked with a special tribute (see story on page 96), which included the presentation of the Dorothy and Harry Goodell Award, recognizing achievement in furthering the goals of risk management.

RIMS members were officially greeted by Eugene Ricci, the society's new executive director, at the annual membership breakfast. "I look forward to the challenge of being the third executive director of RIMS," said Mr. Ricci. "My hope is to make a contribution to the continued growth of the society and its objectives."

Indeed, it was a jazzy early morning start at the annual membership breakfast, with strolling bands and the video presentation of "Risk Busters." Set to the tune of "Ghost Busters," "Risk Busters" pointed out that no matter what type of risk, no matter where, the risk manager can respond to the crisis or threat. Afterward, Ms. Hawkins announced that eight new chapters were formed last year: Ozarks, Mid-Illinois, Greater Quad Cities, Palm Beach, Toledo, Sacramento Valley, Southwest Florida and Florida North Central, bringing the total number of RIMS chapters to 88.

"Despite the downsizing and recession that marked this year," she said, "RIMS isn't just growing, it's thriving. It was a banner year."

Mr. Esenberg said that as North American companies are engaged in fierce competition on opposite shores, RIMS is committed to maintaining high standards of efficiency and a competitive edge. "Members of our organization must be as effective as possible, and we will continue to introduce members to the principle of total quality management-dedication to the full service of its customers," he said.

Mr. Esenberg also spoke about RIMS governmental and lobbying efforts during the past year. RIMS has taken an active role, he said, concentrating on fronting, Risk Retention Act amendments, punitive damage awards and insurer solvency.

In addition, Mr. Esenberg said, RIMS is taking an active role on the educational front by working to incorporate risk management into the core college curriculum. He also announced that RIMS has awarded eight scholarships to outstanding risk management students this year, in addition to sponsoring 14 students to attend the conference under the auspices of the student involvement program.

Ms. Hawkins said that during her tenure as president, risk management as a discipline has gained greater acceptance abroad. For instance, RIMS is assisting risk managers in Malaysia to start their first risk management organization and has formed a strong alliance with Japan in helping them advance the theory of risk management.

Over the past year, Mr. Esenberg said, RIMS gave official recognition to the Canadian Chapter Committee, and started an International Cooperation Committee whereby RIMS chapters can establish a friendship link to overseas chapters. RIMS has also made enhancements to RIMSNET with RIMSLINK, a service that facilitates contact between risk managers and service providers on a 24-hour basis.

Politics and Entertainment

Luncheon speakers attracted record numbers of attendees, filling the ballroom of the New Orleans Convention Center. William Safire, Pulitzer Prize-winning columnist for The New York Times and book author, spoke on current events and presidential politics and gave his picks, Gov. Mario Cuomo of New York and Sen. Lloyd Bentsen of Texas, for the 1992 Democratic presidential race.

Idealism is becoming practical again, Mr. Safire said, citing examples of recent events such as the Kurdish uprising in Iraq and Chinese student protests. "Pragmatism isn't automatically winning out nowadays," he said.

Comedian Steve Allen proved to be an entertaining luncheon speaker, offering jokes and jazz music along with a sampling of the 4,000 songs he has written such as "This Could Be the Start of Something Big" and "South Rampart Street Parade." Mr. Allen also answered questions from the audience, and when queried "Where do you get your inspiration?" he answered: "Three consecutive weeks of unemployment."

Graduates of the 1990 Associate in Risk Management (ARM) and Canadian Risk Management programs were also honored at their annual luncheon, which was presided over by Norman Baglini, president of the Insurance Institute of America, and Ms. Hawkins. The 1990 Cristy Award, presented annually for scholastic achievement in the ARM designation, was given to Dellanie Fragnoli of Southern California Edison. Outgoing RIMS Vice President-Education Gerald Ciardelli presented the award, which honors former RIMS Vice PresidentEducation Jim Cristy.

The winner of the 1991 RIMS Research Award, announced by J.A. Yvon Menard, RIMS vice president-research, was Steve Taylor, safety administrator for the Atlanta-based Home Depot USA Inc. Mr. Taylor's paper, "Reduction of Workers' Compensation Costs Through the Use of a Formal Early Return to Work Program," was selected for its research on a timely issue with ramifications for a wide spectrum of corporate risk and benefits managers.

Energy + Money = Power

Ben Cohen, co-founder of Ben & Jerry's ice cream, spoke at a special session, "Corporate Stewardship: What Does Your Company Owe the Environment?" Mr. Cohen said Ben & jerry's defines corporate stewardship not only in terms of the environment but more broadly in terms of the welfare of the community. That is why, he said, 7.5 percent of Ben & Jerry's pre-tax profits are donated "back to the community." Ben & Jerry's, he said, defines business as, "human energy plus money equals power."

Mr. Cohen told the audience that the company started out as an ice cream parlor in Burlington, VT. He then described Ben & Jerry's two-part bottom line: how much money the company made and how much the company helped the community.

"We have our social audit next to our financial audit," he said. "Time and money are divided. We choose actions that have a positive effect on the community and profit and integrate this information day to day into the community." For instance, Mr. Cohen said, the company uses the space on the ice cream container to talk about social issues.

Mr. Cohen contends that as business is the most powerful force in society, "we are our most powerful as a business, and that is when we leave our hearts at the door," he said. "It would only take $20 billion to bring all children out of poverty, and our military budget is $300 million. If business can't help, then we are all part of the problem," he said.

Ben & Jerry's promotes the impoverished or weaker sectors of the economy, Mr. Cohen said, by using certain ingredients in its ice cream; for instance, buying coffee from a co-op in Mexico. The company is also selective as to where its bank accounts are kept, some of which are with credit unions and the Vermont National Bank's Socially Responsible Fund. One pilot project it has undertaken is a waste sewage treatment plant that uses a solar greenhouse to grow fish and flowers. In addition, as much as 60 percent of its office paper is recycled, reducing the volume of garbage carted to the dump by 30 percent.

Mr. Cohen said Ben & Jerry's also has a solar-powered voter registration van. When people register to vote, he said, they get a free ice cream cone.

Spencer Silent Auction

The Spencer Educational Foundation Inc., which awards scholarships to full-time risk management and insurance students, held its annual reception and silent auction, which raised more than $18,000, well over last year's $11,000. Items ranged from a cordless phone to an eight-night stay in Hawaii. Mr. Judd and Donald T. Browne were made director emeriti of the foundation, and Mr. Judd received an "Oscar" for his efforts in the foundation. The foundation also received a check for $98,830 in combined donations, presented by David Olsen, chairman, president and chief executive officer of Johnson & Higgins.

The conference hit a high note when singer Dionne Warwick entertained a large audience at an event co-sponsored by RIMS and CIGNA, singing such favorites as "Walk on By" and "Do You Know the Way to San Jose?" With all the flutter of activity that went on in New Orleans, the conference will no doubt be tough to beat next year when RIMS moves on to Anaheim, CA. Slower legislative progress on insurance issues will be made this year in Congress than in the last eight years, said Michelle Varnhagen, legislative aide to Sen. Howard Metzenbaum, D-OH, because members of Congress and their staffs are taking time to scrutinize issues, problems and solutions.

According to Ms. Varnhagen, health care reform is increasingly seen as the predominant issue in Congress. Specifically, the issue of full access for every American to appropriate health care cuts across party affiliations and neutralizes contrasting ideologies. "Both Republicans and Democrats believe all Americans should have access to appropriate health care, however, the parties can't seem to forge a consensus on exactly how to provide such a benefit," she said.

"How are you going to pay for a health care entitlement program that guarantees 100 percent access for every American?" queried Alexander Polinsky, legislative director to Sen. Dave Durenberger, R-MN. "The federal government would have to chip in $15 billion to $35 billion. State governments are going bankrupt. And how much would employers have to contribute?"

According to Marjorie Kulash, director of legislative research, The Wyatt Co., the pay-as-you-go budgetary philosophy currently pervading Capitol Hill would effectively quash any funding proposals that increased the federal deficit. "Any such bill would need offsetting revenues found in the same category," she said.

However, in an era of escalating health care costs, exactly where those offsetting revenues will come from remains open to conjecture.

"Business spent $175 billion last year on health care, which is equivalent to all after-tax business profits or 12 percent of the gross national product," Mr. Polinsky said. "Does business want to keep providing insurance in an era when you can't control costs? When our country is spending that much on health care and not on research and development, how can we compete?"

Preventive care as a way to cut health care costs is increasingly viewed as a necessity. "We also must come up with ways of paying for expanding access, including applying caps on what is deductible for health insurance," Mr. Polinsky said. "However, flat dollar caps do not make sense because insurers skew the markets and don't spread risk."

Change in the Air

"Change is in the air that will affect how insurance is regulated in the future," said Barbara Haugen, director of federal affairs of the National Association of Insurance Brokers. Ms. Haugen was referring to the McCarran-Ferguson Act, which has exempted insurers from federal antitrust laws for the past 46 years and is now being challenged.

"For the first time, insurance industry groups are assessing what they can and cannot live with, and they are willing to negotiate on certain points," she said.

Another topic on the legislative agenda this year, Ms. Haugen said, is the federal regulation of insurer solvency. Rep. John Dingell, D-MI, is pushing for a federal role that would grant authority to a federal agency to certify companies for solvency. In addition, the National Association of Insurance Commissioners is looking to improve solvency regulations.

Why all the legislative activity now? Ms. Haugen said "the savings and loan crisis has been a tremendous political nightmare for legislators. They now see that if there's something like this down the road, they are willing to fix it." Despite the sentiment in Congress, in the statehouses and among some industry officials, the president of the National Association of Insurance Commissioners does not believe there is an insurer solvency crisis. Jim Long, North Carolina's insurance commissioner, made this and other notable remarks during a session chock-full of questions from the audience.

Since 1871, when the NAIC was founded, the organization "has been at this solvency thing," said Mr. Long, but now the media and Congress are suddeningly focusing on the issue. "Everybody in Congress is now a solvency expert," he said.

"Has there been a solvency crisis?" questioned Mr. Long. "I don't think so." During the last five years, he explained, only 184 insurers were declared insolvent, compared to more than 1,000 commercial bank and 880 savings and loan failures. "Only one-half of 1 percent of 6,000 insurance companies become insolvent each year," he added.

"Are insurance company insolvencies a problem?" he then asked. "Yes they are," particularly for affected policyholders, their brokers and the staffs of insurance departments, he said.

The perceived solvency problem has prompted a good deal of discussion of potential federal regulation of the insurance industry, which Mr. Long insisted is not forthcoming. "Congressman [John] Dingell [DMI, who has investigated the industry's problems and has proposed solutions] is not saying federal regulation of insurance. He wants to enhance the current system," he said.

"It is extremely frustrating for us to see the great' job the federal government has done with banks and savings and loans" and hear the talk about federal insurance regulation, added an angry Hawaiian Insurance Commissioner Robin Campaniano.

Although they do not anticipate federal regulation, the regulators explained various steps the NAIC has taken to reduce its likelihood. Among the major moves is last year's implementation of an accreditation program for state insurance regulatory bodies. "It seems to me that if its not effective in 1994, some federal intervention will be a self-fulfilling prophecy," said Bruce Smith, Colorado's deputy insurance commissioner. "The expectation is that it's a very minimum standard that states will go beyond."

The commissioners also discussed other issues, including: * Insurance Fraud. Mr. Long said the NAIC recently proposed legislation on insurance fraud, making it a federal offense to steal from any insurance company or to file a false claim. * Junk Bonds. "When this thing started it was all the rage. And there is still a very strong notion that some of that is still OK," said Mr. Smith. Consequently, the NAIC intends to call for a cap on the percentage of junk bonds that make up an insurer's investment portfolio. Mr. Smith hopes to see a standard set in the next six months. * Fronting. For the most part, "it is illegal and immoral," said Mr. Long. However, he and Mr. Campaniano said regulators were not trying to do away with it totally. "We will carve out things that will protect legitimate fronting activities," said Mr. Campaniano. * Workers' Compensation. "Workers' compensation has so many imbedded special issues it is difficult to talk about," said Mr. Smith. However, "there is little we can do as insurance regulators." Containing medical costs, which drive up the system's price tag much more than wage loss, is the solution, he added. * Elected vs. Appointed Commissioners. It makes no difference if an insurance commissioner is appointed or elected, according to the speakers. Adequate funding, laws and staffing enhance an insurance department's quality, not whether a chief regulator is elected or appointed, said Mr. Long. "We all achieve the same status of being an advocate for the consumer," added Mr.

Campaniano. There can never be a perfect insurer rating system as long as rating organizations rely on information supplied from insurers, according to William Pringle of the National Association of Insurance Brokers and president and executive vice president of Frank B. Hall & Co. of New York. "But we have to come as close to a perfect system as possible," he said.

Paul Wish, vice president of A.M. Best, agreed that his company is not perfect. "Best is far from a fail-safe method," he said. However, he added, Best bases its ratings on other, non-insurer-supplied, criteria as well, including state audit reports and independent actuary reports. "We even get letters from whistle-blowers, including agents, about things they notice about insurers. Sometimes we get them from insurance company employees themselves."

According to William McCartney, Nebraska's insurance director, the National Association of Insurance Commissioners' Insurance Regulatory Information Service (IRIS) is a "good start to a perfect system. We have a group working to make the IRIS ratios better, but they really do a pretty good job already."

In addition, he said the NAIC is "getting a better handle on potentially troubled insurers" by upgrading state insurance departments to pass its certification process. "Two states have already been certified (New York and Florida) and 40 have this legislation before them," he said.

The federal government intends to use its authority to "fill in the gaps" left by the NAIC and independent rating organizations, said John Chesson, counsel with the U.S. House Subcommittee on Oversight and Investigations. This will include establishing adequate minimum standards for insurer capital requirements and management practices; monitoring insurers more effectively; forming a tight regulatory grip on offshore insurers and reinsurers; and making white-collar insurance fraud a federal crime.

What can insurers expect in the future? According to Mr. Chesson, more investigation hearings will be set, the life insurance industry will be looked into more closely and the insurance industry should expect more legislation.

In a related session, Brian Murphy, chief executive officer of Internatonal Risk Management Group, recommended that risk managers not rely on any one system or organization to evaluate insurer solvency. Rather, he said, they should use all the "tools of the trade," including regulator-generated reports and audits, rating agency data, the insurance industry's surplus and solvency data, statutory filings and news and consumer reports.

"As you develop your system, you will become aware of developing trends within the industry in general and your insurer in particular," he said.
COPYRIGHT 1991 Risk Management Society Publishing, Inc.
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Title Annotation:29th Annual Risk Management and Employee Benefits Conference and also includes related articles
Author:Oshins, Alice H.; Johnson, Tom; Schussel, Mark L.; McCabe, Monica
Publication:Risk Management
Date:Jun 1, 1991
Previous Article:Who is to blame for the P/C quagmire?
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