Risk management is a portable skill. We can take it from job to job, company to company. Is it possible, though, that many professional risk managers leave their skills at their desks at the end of the work day, abandoning them in their personal lives? Do we tolerate risks in our personal lives that we would consider foolhardy during the nine-to-five routine? Examples abound of risk professionals who apply different standards of risk at work and in their personal lives.
Nancy Germond, a risk-management consultant in the Midwest, recently encountered a man in a parking lot who — knowing she was in insurance — told her he had millions in assets in various businesses such as waste management and real estate. He felt well covered by his broker on the business end. He was, though, concerned about his personal risks. In two minutes, Germond learned that his car's coverage was with a direct insurance writer. He had an 18 year-old son on his auto policy and — wait — he was not sure if he had umbrella liability coverage or not over his primary policies. In two more minutes, Germond scared him to death.
Here was an astute and sophisticated businessman who developed a blind spot about his own personal risks. Germond suggested that he go to his broker and obtain his declaration sheets, get him insured with an A-rated company, place the kid on his own policy with his own car and, in short, get his personal insurance in order.
Is Insurance the Answer?
Still others take issue with using insurance to address personal liabilities. This is a contrarian view but exists nonetheless. The argument goes something like this: Buying more insurance is like trying to kill bees with honey; it simply does not work. The result of the larger honey pot created by higher policy limits is to draw plaintiff "bears" to the pot! A "supply" (i.e., insurance) creates its own "demand" (i.e., claims).
Such thinking prompts some doctors to address the medical malpractice crisis by going bare and forgoing liability coverage. They reason that patients and lawyers will not sue if there is not liability insurance policy that backstops the doctor's practice. By extension, not having much insurance coverage minimizes your profile as a potential lawsuit magnet. One small problem is that most claimants who file a lawsuit have no idea if the defendant has insurance or how much coverage there is. Claimants assume that, in this day and age, most everyone and most everything has insurance. Only later in the discovery process might the clamant learn that there is no insurance. By this time, the suit is well underway, so the absence of insurance did not stop a claim from happening.
So, the renegade adviser embracing this view will not recommend higher liability insurance limits for clients but instead will always make sure the client knows that such limits are available. Instead of focusing on buying more insurance, the consultant may insist on clients implementing sound risk-management principles: Do not leave assets too vulnerable. Protect clients by legal preservation methods as much as possible.
Bill Ford, director of alternative risk with Pro Assurance in Atlanta, recalled an old sod farm owner who relayed a time-tested rule of risk. While many insurance people lock-step the industry line that more insurance limits are better, Ford says, the sod farmer countered that if $1 million in coverage did not handle claims from an event, then $2 million or more in insurance cover-age would not do it either; in such a circumstance, he would just turn the keys over to the court and leave.
Asset protection will make sure you leave the courtroom with something. The sod farmer urged Ford to get his clients to set aside funds allocated for achieving solvency rather than mindlessly lock-stepping with the insurance industry into higher policy limits. (Ford notes that excess and umbrella policies have exclusions, too, so remember that even higher limits have their limitations when catastrophe strikes.)
Risky Risk Professionals
Sadly, many risk managers leave their skill sets behind with the cleaning crew when they leave the office at 5 p.m. (or 6 p.m., or 7 p.m). Modern risk managers may be the proverbial cobbler's children who ran around barefoot. The irony smacks us in the face.
Bill Wilson directs the Virtual University for the Independent Insurance Agents and Brokers of America. He knows a smart and experienced loss control professional who recently had an accident with a circular saw, causing him to lose a third of his finger. No one is immune from accidents, no matter how much education and experience in safety, fire prevention, or anything else a person may have.
A case in point: Risk consultant Nancy Germond was hosting a husband-and-wife team of independent adjusters at her house. While she was cooking a cranberry ham glaze, her friends were upstairs getting ready for dinner. In the meantime, Nancy and her boyfriend had moved outside and were having an animated discussion in the backyard.
Germond's visiting friend was showering when smoke started coming through the bathroom vent. She finished and came downstairs to tell Germond that the glaze was burning. The smoke alarm was clanging loudly, the house was filled with smoke, and the glaze was burning.
Germond maintains that her boyfriend, a property claim manager, knew the glaze was cooking when he engaged her in a heated (no pun intended) discussion, so she blames him for almost burning down the house. He was planning to repaint but was reluctant to file a homeowner's claim. Now that's risk management in and of itself.
What's the point? Four risk professionals were in the house, possessing a combined 100 years of experience and yet things still happen. We leave risk-management skills back at the desk along with our inbox and computer docking station.
Nocturnal Frisbee and Personal Risk
Perhaps we should not be shocked when risk managers overlook risks in their personal lives. Other professions fail to practice what they preach. There are attorneys who have succumbed to legal trouble by driving under the influence, taking drugs, or involving themselves in money scandals. There are doctors who smoke, carry excessive weight, or have substance abuse problems. Risk managers are not unique in compartmentalizing their lives and seeing risk management as a nine-to-five skill.
Rick Betterley, Betterley Risk Consultants, reports that he recently lost a wheel off of his trailer while cruising down the New York State Thruway after he failed to tighten a lug-nut. No harm was done, except to his ego. It was a close call that might have otherwise had an unhappy ending due to a risk professional having a blind spot in his personal life.
Time for a true confession. Often, I fail to read a product's instructions and warnings ("Real men don't need directions!"). I've never used my lawn mower as a hedge trimmer but I've used chairs as makeshift stools. Years ago, I accidentally slammed my face into a tree trunk while sprinting full stride from playing toss-and-catch at night with a fluorescent Frisbee. Despite profuse facial bleeding and looking like an extra from a George Romero zombie flick, I declined a trip to the emergency room, lest I hear a diagnosis of Idiocy. (I wonder if the statute of limitations has expired on that Frisbee?) Here I was in the risk business — at the time a fledgling claim adjuster — doing dumb things.
We often associate risk management with things we use at work. Instead, we should view risk management not just as an occupational skill, but as a life skill. This does not mean we turn into Ben Stiller's character in the movie Along Came Polly. In that film, Stiller's character uses risk software to decide whether to return to his cheating but contrite wife or to pursue a relationship with the quirky but lovely Jennifer Aniston character. When the latter learns that he is so compulsive in risk managing his love life, she is offended. This gives personal risk management a bum rap.
In truth, we are as likely to use software to assess personal risks as we are likely to score with Jennifer Aniston. We need not suck spontaneity out of life. By applying risk-management skills to our personal lives, though, we can improve our health, our finances, and our cranberry ham glaze.
Kevin Quinley CPCU, AIC, ARM, is senior vice president of Medmarc Insurance Group in Chantilly, Va. He can be reached at kquinley@cox.net.
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