Monday, September 28, 2009

(No.55) Fear & loathing in U.S. health insurance reform

Since my last column about reaction from the U.S. to my Toronto Star op-ed piece about the health insurance reform debate in that country (see No. 51, RickardsRead.com) I have wondered about the apparent extent of citizen opposition not just to health care reform itself but specifically to a "public option" (i.e., government health insurance) as an alternative to insurance company health insurance in a 'reformed' American health insurance system.

It seems foolish to me (and I suspect to many Canadians following U.S. news) to oppose having available at least one alternative that does not involve health insurance companies with whose coverage, cost and claims practices so many Americans are dissatisfied.

Doubtless one could compile a long list of reasons for this but several seem to me to be major factors in how this debate is playing out.

1. Large, well-funded misinformation and anti-reform propaganda campaigns by various groups with vested financial interests in the outcome of all or specific aspects of proposed health care reform -- from the health insurance companies to the pharmaceutical companies into the medical establishment and over to the Republican Party and beyond on the political right.

2. Among Americans there are those who by tradition and belief tend to see ANY government involvement in a reformed health care system as dangerous and another step toward even bigger government and therefore greater government control of their lives. Health care reform, as much needed as it is by the 45 million uninsured and to address the rising cost of the existing unreformed health system, is inextricably bound up for many Americans with the ongoing ideological debate about the proper role of government, appropriate limitations on it and indeed about ethics and equity in U.S. society.

3. Fear of endangering or losing what they already have in the way of health care, especially since government subsidy will be required to provide those now uninsured with access to affordable health insurance.

Polls show this to be a particular concern among more than half of Americans 65 and older covered by Medicare because the President's reform includes the saving of $400 - $500 billion dollars (depending on whether it is the Senate or House version) in Medicare costs by lowering payments to private providers -- the Medicare "Advantage" program -- involving a quarter of those in Medicare AND reinvesting all of these savings in the U.S. health care system. This has been used by reform opponents to try (with some success) to frighten this important voter constituency. Hardly surprising action coming from supporters of the Bush administration's shameful surrender to the pharmaceutical companies that obliged the federal government NOT to negotiate for lower drug prices based on its status as a massive customer under Medicare.

4. The health care reform proposals are being negatively affected as more Americans become increasingly concerned, in the wake of Wall Street and auto company bailouts plus a giant economic stimulus package, that health care reform may be the financial straw that breaks the U.S. camel's back in terms of both the economy and the huge accumulation of $trillions of government debt. Such concerns are entirely understandable.

5. The facts of health care reform have been confusing for many if not most Americans. In a CBS poll in early Sept. 67% of respondents said they did not understand health care reform ideas because they found them to be too confusing. Not all of this confusion is the result of deliberate misinformation directed at the public by various special interests. In part it is because there has been too little during the debate in the way of firm detail about what the FINAL health care reform package will look like and what it will actually mean to currently insured Americans. It is a complex subject made more confusing by the absence of clear explanation as five different proposals were being developed and debated in the U.S. House and Senate.


In terms of the ongoing negative propaganda campaign being directed at the Canadian single payer government health care system by various anti-public option lobby groups in the U.S., there are several key indices which effectively refute this nonsense. For example:

-- life expectancy: U.S. 77.8 ; Canada 80.4

-- child mortality: U.S. 6.37 deaths per 1000 ; Canada 5.4 per 1000

-- % of GDP on health care: U.S. 16% ; Canada 10%

-- health care insurance company premiums as a % of U.S. GDP: 1970 1.5%; 2007 5.5%

-- number who were uninsured throughout 2008: U.S. 45.3 million ; Canada 0

Although one needs to be on guard against easy exaggeration, it must also be noted that an unknown (and unknowable) number of Americans -- encouraged by propagandists on the loony right -- are taking strong public positions against health insurance reform as camouflage for a visceral dislike of the Obama presidency.

It would be tragic if there were to be a repetition of the defeat of the Clinton health care proposals of the early 1990s, if the combined effect of fear and loathing robbed Americans of even a comparatively modest "public option" in this latest round on the very long road to effective and meaningful health care reform in the U.S.


Alastair Rickard

RickardsRead.com

email: Alastair.Rickard@sympatico.ca


Thursday, September 24, 2009

(No.54) More Crime Fiction

Like many readers of crime fiction, when I find an author new to me and if I like his or her work I look for other books by the same person, often a series of novels with the same lead characters. A particular favourite of mine, as I have indicated previously (RickardsRead.com No.53), is the series of 18 novels by the Scot, Ian Rankin, set in Edinburgh featuring Detective Inspector John Rebus.

I have listed below several of the crime fiction novelists whose work I have read in recent months and years and which I recommend although not all with equal enthusiasm. Some of these novels lean more to providing entertainment and less to making one think. Some do both with great success. All are available in soft cover editions.

-- David Liss is an American who lives and works in San Antonio Texas. I think he is one of the finest historical novelists writing today. Any of his 6 novels to date, all but one set in Europe, provide great reading based on solid historical research. His latest is The Devil's Company (2009) set in England of the 1720s.

-- Mark Billingham created a gritty London Detective Inspector named Tom Thorne several years ago. This series of novels feature plots and atmosphere distinctly darker than traditional police procedurals. Indeed they belong to a modern school of British crime fiction whose leader in my opinion is Ian Rankin. Thorne is the sort of detective who is light years away from, say, Dorothy L. Sayers' Lord Peter Wimsey or P.D. James' Adam Dalgleish or even Colin Dexter's D.C.I. Morse. Try out this series with The Burning Girl (2004).

-- Frank Tallis is an English psychologist and writer who has created one of the more interesting premises for a detective series. His novels are set in Vienna ca 1900 and the police detective is not the lead character. He is the one called on by the detective for assistance, Dr. Max Liebermann, a medical doctor and a disciple of one of Vienna's most intresting residents, Dr. Sigmund Freud. However the Freud character being Jewish (as is Liebermann) provides a plot avenue to explore the nature and depth of anti-semitism in the pre-World War One Austro-Hungarian Empire. Anyone who has visited Vienna will particularly enjoy some of the plots' references to the city. There are currently three novels in the series; try A Death in Vienna (2005).

-- When it comes to darkness and grit another member of the 'new' school of British crime fiction writers is Graham Hurley. His series of novels are on a par with Mark Billingham's when it comes to grit. They are set in the English naval port city of Portsmouth and their two leading characters are an upright detective inspector and a somewhat bent detective constable. There are nine novels so far in the series. Try the latest one: No Lovelier Death (2009).

-- Alex Gray, perhaps inspired by Ian Rankin's success with the Edinburgh policeman John Rebus, created a detective chief inspector in the Glasgow police dept. to solve crimes in that Scottish city. The series, begun in 2007, is interesting for its depiction of Glasgow's atmosphere and urban landscape. The writing and plots are not up to Rankin standards but they are acceptable. Try Pitch Black (2008).

T. Jefferson Parker is an American novelist who reminds me in his ability and plots of that old master of U.S. crime fiction -- Elmore Leonard. Parker has been writing crime novels for more than twenty years . His novels are usually set in southern California, Orange County and San Diego in particular. With the odd exception his police characters appear only in a single novel. He is a very good story teller whose plots are usually very successful at keeping the reader's interest at a high point. At least a few of his titles will normally be found on the shelves of most bookstores. Almost any of them are worth a look.

Iain Pears is an English journalist and art historian who has written several novels set mainly in Italy featuring an English art dealer/historian named Jonathan Argyll and his partner/lover/wife Flavia di Stefano of Rome's Art Theft Squad. If the reader is interested, as I am, in art and the art world as well as crime plots then these novels combine the two worlds in an elegant and interesting fashion. Try The Titian Committee (2000).

Alastair Rickard

RickardsRead.com

email: Alastair.Rickard@sympatico.ca

Monday, September 21, 2009

(No.53) Crime Fiction

In a book review I read recently the writer argued that "the point of crime fiction is to make you think while entertaining you". I agree up to a point. I enjoy the crime fiction genre and its subsets, from police procedural all the way to historical suspense and many points in between, but it must be admitted even by its fans that too much of the crime fiction pouring forth in recent years not only does not make one think, it isn't all that entertaining.

In a previous column on RickardsRead.com (see No. 27) I referred to several crime fiction novelists. One of my favourites is the fine Scottish writer Ian Rankin. He had ended his long running series featuring the Edinburgh Detective Inspector John Rebus. Rankin's first post-Rebus novel, Two Trains Running was an interesting story revolving around stolen art in Edinburgh but it was not in the same class as the Rebus novels.

Rankin's latest novel I am pleased to say plays in the same league as Rebus. The Complaints (2009) features what I hope will be the first of a series involving Inspector Malcolm Fox of the Complaints & Conduct Department of the Lothian & Borders (Edinburgh) police. He investigates other police officers and, like the 'internal affairs' people so often featured in American cop shows, is loathed by his fellow police because of his role.

Unlike Rebus, who was himself the sort of cop who attracted the attention of the Complaints people, Fox is a reformed heavy drinker but like Rebus has problems relating to women and has a similar sort of persistent, irritating, and highly individualistic attitude to both authority and his job. Fox follows his own road through a plot nicely crafted by Rankin.

Fans of the 18 John Rebus novels (the first published in 1983) will enjoy The Complaints even if they do not entirely agree with me that Malcolm Fox bids fair to become as great a crime fiction character as the now retired John Rebus.

Very different from the novels of Ian Rankin are those of Susan Hill in her new series. Hill is a widely published English novelist, short listed for the Booker Prize, with a variety of books to her credit. In 2004 she created the first of four novels ( four thus far) featuring Detective Chief Inspector Simon Serrailler and various members of his extended family.

Set in contemporary small city/rural England the novels strike a rather different tone than that which predominates in crime fiction. They are well worth reading and for reasons of overlapping character development and continuing plot points they should be read in the order of their having been written. The first is The Various haunts of Men (2004) and the fourth and most recent is The Vows of Silence (2008). All are available in paperback.

Alastair Rickard

RickardsRead.com

email: Alastair.Rickard@sympatico.ca

Thursday, September 17, 2009

(No.52) Pt.2 - Sun Life: Comments on its performance

A recent column of RickardsRead.com (No.50) began this commentary on Sun Life's current performance, one written from the perspective of an insurance industry veteran and until my recent retirement an executive with Sun Life Financial's Canadian operation.

The column below continues a listing concerned with a variety of Sun Life challenges, especially involving sales and distribution in Canada. If readers wonder whether I expressed the views in these columns within Sun Life -- I did, frequently, in writing and verbally.

********************************************

-- A decline already evident in the morale of the Clarica Life career agency sales force was intensified after the takeover by Sun Life and its rate of growth accelerated when Sun Life corporate management in Toronto made a fundamental error by replacing an experienced Mutual/Clarica senior executive, popular and generally trusted by the sales force. He had continued to direct individual distribution for some time after the takeover but was replaced by leadership from elsewhere in the Sun empire without experience in career agency distribution. The background to this included the fact that Clarica agents were already uneasy post-takeover because they knew how Sun had gradually in the 1990s done away with its own career agency system in Canada.

The new leadership style was the opposite of positive or helpful and soon became anathema to many of Sun's Canadian career sales force. An absence of understanding of career agency distribution was soon communicating itself to the sales force along with a lack of empathy for the system and its practitioners. Actions, decisions and anecdotes illustrating this and confirming agent suspicions began circulating within the sales force.

Anecdotes as well as some 'official' statements (including an early and badly received speech to a national managers meeting) not only became oft-used currency in the sales force to illustrate what many perceived as an anti-career agent bias but also served to reinforce for many agents their belief (justified) that in the process of reviving Sun's brokerage system it received favoured treatment in comparison with and often at the expense of career agents (e.g., the shift and allocation of underwriting resources).

That perception continues today among some Sun career agents who take an ongoing interest in the infatuation certain senior executives have demonstrated for the chasing of a relatively few big premium life sales. What many do not yet see although some certainly do is that these same executives tend to see the career system as some sort of 'farm team' with Sun's non-proprietary MGA brokerage as a 'big league' to which successful career agents should aspire.

Such executive perceptions are the product of ignorance and self-deception since the Sun career agency distribution system in Canada is actually the sales power supporting Sun's competition for 'broker' life sales, an effort which relies heavily on under-priced and often unprofitable 'big premium cases' involving ( particularly) Sun's Universal Life policy, the under-pricing of which has long been determined by pursuit of sales in the brokerage market. [More about that in a future column.]

Even after several years of spending money on the courting of brokers (a process which for most life companies has always reminded me of a giant rugby scrum) the comparative importance of Sun's two Canadian distribution systems for individual sales can be judged by their new premium from life, critical illness and long term care insurance in 2008: brokerage approximately $25 million; career approximately $130 million. That leaves to one side the issue of profitability of the particular Sun life insurance products sold in the main by brokers on the one hand versus Sun's career agents on the other.

But I digress.

The actively negative influence of leadership on the attitudes of the Sun career agency sales force lasted three years before a change was made but its counter-productive impact on sales force morale and on what career system sales would otherwise have been was significant -- and that melody lingers on although some progress has been made under new leadership.

-- For a variety of reasons, to some of which I have already alluded, many agents in today's Sun career agency system do not have the kind of positive attiude (or loyalty or trust) that was typical in the career system of which it is the continuation, i.e., that of the Mutual Life of Canada which at its zenith (pre-Clarica) was the highest quality system in Canada and one of the top 3 or 4 in North America measured by indices of overall quality such as policy lapse rate and agent retention rate. [It still is today, relative to its competitors, a superior distribution system.]

The relationship between Mutual Life and its career sales force was so strong that the company was able in 1983 to discard successfully the industry's traditional heaped commission system (the industry standard then and still prevalent in the North American industry) and introduce its pioneering and the North American life industry's first genuine lifetime level commission system. Mutual Life did so in the face of an informal consensus among agency executives in its peer companies that if it did so Mutual would lose most of its career agents as a result.

It did not and a major reason was that it had the trust of most of its agents that the company would not act against them and would not sacrifice their interests; to use a phrase I often heard in those days, most Mutual agents believed the company would NOT screw them with the new commission system. I recall the comment of one leading agent who called me at home late one evening for my opinion while the change was under discussion: "I have real doubts about this new commission system but I'll stick with Mutual because any time the company's made changes before I ended up ok".

[In fact the lifetime level commission system was and remains the glue holding together the Mutual/Clarica/Sun career agency distribution system. However recent management decisions by Sun may sew the seeds of its destruction.]

The depth of company-agent relationship I have described no longer exists in the Sun version of the Mutual Life career system, nor anything close to it. I recently received a nice illustration of this in the words of an 'original ' Mutual Life agent who has remained with Sun [see my analysis of the Sun sales force in terms of the origins of its members in column (No.50)].

He wrote: "I know that for myself I have taken an attitude that Sun Life is the devil I know. Generally I now view myself as being truly in business for myself and it is my firm that counts. Sun is simply a manufacturer and as such I know they can change the rules whenever it suits them ... But they really need an education on what the sales force means to the company."

-- In a previous column (No.49 ) I referred to Sun Life manufacturing life insurance products for competing financial institutions in Canada, including Bank of Nova Scotia. These institutions in turn can use these insurance products to compete with the exclusive career agents in Sun's own proprietary career agency system. My years in the business have taught me that if a life insurance company's senior management desires loyalty from its career agents, they must understand that such loyalty is seen by agents as a two way street; too few executives understand this in any meaningful way and agents have long since recognized that reality.

After my column touching on the Sun/Scotia relationship was posted I received an email from a longtime career agent in the Sun sales force, one who is representative of the sort of agent attitude and morale issues Sun has yet to address effectively, at least in ways that go well beyond pro-career sales force rhetoric delivered to agent audiences.

The agent wrote: "As a member of the career sales force I look upon the Sun/Scotia distribution arrangement re individual product with a very dim view. I can accept the creditor group insurance arrangement but for Sun with its career channel to enter into this arrangement is shameful when I know how the career sales force is being squeezed and slashed. Then again some executives in Sun may view direct distribution and bank insurance distribution to be more attractive than having the boring old career agent who goes out day after day selling billions of $s of product while continuing to starve for new investment in the career system by Sun."

This agent's attitude (and that of many other Sun career agents) concerning the bank relationship is unlikely to improve since many of them and many of their clients are receiving direct mail offers from Scotia of Sun Life critical illness insurance. Moreover it is a CII policy with differences from the CII product with which they are equipped.

It is all the more irritating to those career agents who recall that it was the career sales force that gave Clarica and then (after the takeover) Sun Life a commanding lead in the CII market, likely still in the vicinity of 20-25% market share. They also know that Sun's CII sales through direct marketing by the Bank of Nova Scotia will be dwarfed by those made by its own career agents. And they have received yet another illustration of how loyalty can be a one way street.

One more body blow to the morale and attitudes of an exclusive career agency system.

TO BE CONTINUED

Alastair Rickard

RickardsRead.com

email: Alastair.Rickard@Sympatico.ca

Sunday, September 13, 2009

(No.51) American reaction to my Toronto Star 'op-ed' on health care reform

As a preface to my recent column (No.50) on RickardsRead.com I informed readers that "the Toronto Star, Canada's largest circulation newspaper, published on Sept.9, 2009 an 'op-ed' opinion article I wrote presenting a Canadian view of the U.S. heath care debate: 'A puzzled Canadian ponders surreal U.S. health-care debate' ."

The headline on my article as it appeared was the Star's creation. Actually I don't feel particularly puzzled by what's going on in the U.S. health care reform debate given the level of misinformation and propaganda circulating about the Canadian health care system, about the bad things that will happen if a "public option" (i.e., a government health insurance option as one alternative to the private insurers' plans) is made available to Americans, and all the way to nonsense about "death panels" to be created to "pull the plug" on the elderly in order to allow big government to reduce health care costs.

I anticipated reaction from the U.S. to my article and it was not long in coming. The column reappeared quickly on U.S. websites where it provoked predictable responses pro and con, including from among those Americans whose fears of "government run health insurance" appear routinely to overcome their understanding of the facts. The interest in my opinions in the world of internet websites ranged from those who want the U.S. to have a single payer health care system (HealthCare-Now) to business-oriented audiences (AllBusiness) to political blogs (Progressive Democrats of America).

In terms of emails sent directly to me by Americans, there was some hostility. Two themes predominated: a conspiratorial view ("why would you distort the facts other than to promote a false agenda for what purpose???????") and the 'fact' that "tons of critically ill Canadians" are forced to come to the U.S. every year to get health care. Such 'facts' are apparently meant to stand as irrefutable evidence that the Canadian health care system is a failure, that it is inferior to the U.S. system and therefore are evidence of why there should not be (further) U.S. government involvement in running health care.

I find it mildly amusing that in the debate in the U.S. most of the voices I hear raised against President Obama's proposed "public option" ignore, either because they don't realize it or are afraid of damage to their own argument, the fact that many millions of Americans are already in their government's version of a single payer, government health care system -- Medicare and Medicaid. Still the opinion polls currently indicate a declining level of public support for the President's health care approach. Fear and scepticism are growing.

The apparent susceptibility of many Americans to misinformation about health reform and the kind of anti-health reform propaganda churned out by Fox News and assorted lobby groups, while particularly discouraging since it is occurring in a country with 45-47 million people who have no health insurance, is perhaps not all that surprising. After all, enough lower and middle class Americans were persuaded to vote against their own economic interests to twice put George W. Bush in the White House.

As a minor illustration of how creative opponents of health care reform can be, one correspondent informed me that the number I had used for uninsured Americans was wrong (I had used one of the three numbers consistently used by respectable American media, i.e., 45 or 46 or 47 million). The truth was, he declared, that it was really only a few million uninsured, the rest in any total of the uninsured being illegal immigrants. In fact the U.S. Census Bureau says there were 46.3 million people who said they lacked health insurance throughout 2008 and that the percent of adults ages 18 - 64 [Americans become eligible for Medicare coverage at 65] without health insurance increased from 17.2% in 1990 to 20.3% in 2008.

I choose not to waste my time replying to emails (anonymous or otherwise) from those among my American correspondents who apparently believe that I am some sort of shill for foreign 'socialized medicine' and at the same time are impervious to serious concerns about the health care system among their fellow citizens. There are a great many thoughtful Americans who have tried repeatedly in this health care reform discussion to underline that most germane of realities, one I cited in my op-ed in the Toronto Star: the U.S. has a health care system on which is spent far more per capita and as a share of GDP than any other country and for this excessive cost Americans have a health care system which produces inferior results for society as a whole.

Canadians who follow this debate in the U.S. understand that there are many millions of Americans who want substantive health care reform and many (admittedly a smaller proportion) who also want the U.S. to adopt a Canadian-style single payer health system. I heard from several. Happily, since this is my column, I enjoy both the freedom and the luxury of choosing to quote one such correspondent rather than focus exclusively on the opponents of U.S. health care reform:

from an American in Florida: "This group insurance professional thanks you for an accurate and pertinent piece on both our system and the Canadian system of health care."

For geographic balance here is a line from an email sent to me by an Ontario resident: "I read your op-ed in today's Toronto Star. I often work in the U.S. and for the first time someone summed up what I felt like to be Canadian."

President Obama's level of support, as reflected in the latest opinion polls, continues to weaken while political polarization increases. During the past 8 months or so the percentage of Americans who strongly disapprove of the way he's doing his job has increased from 6% to 35% while those who strongly approve has dropped from 41% to 24%. Doubtless the fierce misinformation campaigns against his health insurance reform initiative have played a major part in this change.

It appears likely that the President will not be able to get both the House and Senate to pass health care reform legislation if it contains even a modest "public option" but I think there will be many Canadians wishing him success with this very difficult, even Sisyphean political task. I believe the U.S. health care reform battle has served to remind many Canadians why they should be thankful for their own national health care system -- even with its imperfections.

I know that it has had that effect on me.


Alastair Rickard

RickardsRead.com

email: Alastair.Rickard@sympatico.ca



Thursday, September 10, 2009

(No.50) Pt.1 - Sun Life: Comments on its performance

A NOTE TO READERS

The Toronto Star, Canada's largest circulation newspaper, published on Sept.9, 2009 an 'op-ed' opinion article I wrote presenting a Canadian view of the U.S. health care reform debate: "A puzzled Canadian ponders surreal U.S. health-care debate". It offers opinions posted previously on RickardsRead.com

The article can be read on the Star's website: theStar.com.

***********************************************

I intended to offer before now some comments on Sun Life Financial's current performance but was distracted by other insurance industry matters (q.v., column Nos. 46-49 in RickardsRead.com).

Since Sun Life bought Clarica Life its Canadian operations have accounted for a large share of the company's total world-wide profits. Hence one might assume that it would be wise to properly fund those operations as well as to invest in their continued good health, especially Sun's distribution systems generating Canadian insurance and asset product sales. This has not been happening as I, among others, think it should have (see column Nos. 9 & 26 in RickardsRead.com).

While I do not intend to rehearse here what I have said and written elsewhere, I will offer several comments you have not been hearing from the financial services 'paparazzi' to whom I have referred in previous columns and whose views are rarely distinguished by deep understanding of the reality of life insurance distribution. [Jim Daw, the award-winning business columnist for the Toronto Star and in my experience the most knowledgeable Canadian journalist when it comes to the insurance business, is an exception that proves the rule.]

-- The operating budget for Sun's Canadian career agency distribution system which accounts for 80+% of its sales of individual insurance premium in Canada has been effectively flat over the past 4-5 years, which means a de facto reduction in budget given the effect of rising costs and inflation on the operation of a proprietary agency system. Nor should one ignore the budget slashing imposed by Sun early this year on business units' 2009 operating budgets across the company (the likely impact on an already squeezed Canadian agency operation budget: my estimate -- as much as $15 million).

-- In terms of Sun's 2009 sales of new individual life and critical illness premium in Canada, I think it more likely than not they will end the year at least 10% behind 2009 plan, if not more. If they are off plan by more than 10% then 2009 sales are apt to be below actual sales in 2008. There are several reasons for this continuing pattern but an important one involves years of squeezing the resources supporting the career agency distribution system, a pattern which began before Sun took over Mutual/Clarica but one that continued thereafter.

-- Sun's proprietary career agency system in Canada, an immensely valuable asset and a key competitive advantage, has been the victim of a prolonged period of inadequate support by the company, a process which began in earnest when the senior management and board of the Mutual Life of Canada decided (unwisely in my view) to demutualize Canada's oldest and finest mutual life insurance company. This process then accelerated as Clarica Life ( its stock company successor) sought to impress the market and the financial services paparazzi with its financial performance as a 'new' stock company.

The momentum increased in order to stay in step with 'integration targets' arising from Sun's takeover of Clarica. Since then Sun seems to have been, however unintentionally (as indeed the Power crowd did for for awhile in their handling of the London Life career sales force) on a course of depreciating the value of the career sales force asset which it badly needed to compete more effectively in the Canadian individual insurance market-place.

In the post-takeover years it seems to me that several of Sun's senior management embraced the patently ridiculous assumption that a career sales force can, year after year, be expected to produce more and more based on less and less.

The reality is that Sun's proprietary, exclusive, career agency distribution system is for the company a significant if not the most significant competitive edge it has in both the individual insurance and asset product markets in Canada. It is an asset deserving of receiving from company coffers even a small fraction of the barrels of 'investment' dollars Sun has been putting annually in (to take just one example) its China operation -- one in which its ownership share is now even smaller. The odds of Sun achieving a 15% ROE on this investment ( if the calculations include all the relevant numbers over time) before, say, the passage of 15 years are only slightly better than the Queen appointing me Archbishop of Canterbury.

-- For a variety of reasons (insufficient Sun 'investment' in its Canadian career system is but one) the morale of Sun's exclusive career agents in Canada has been in decline. Such a decline affects agent loyalty to the company (and productivity for Sun) and their willingness to trust both what it says to them and the actions it takes or fails to take that agents regard as central to their interests and those of their clients. This pattern has even been reflected in certain annual media surveys of financial services sales intermediaries ( caution: I have long regarded these as flawed in survey methodology; however it must be admitted that the results are consistent in indicating lagging Sun sales force attitudes).

-- The current Sun career agency sales force of agents and managers in Canada is an organization of considerable complexity. Any career agency system is a challenging type of organization to operate successfully but especially so in Sun's case because of the diverse origins of those in its career agency system.

Its membership is comprised of agents and field managers who were recruited into and formerly belonged to the career agency systems of:

1. Mutual Life of Canada, the developer in Canada over decades beginning ca 1910 of the branch office, managerial, exclusive, inexperienced recruits financed and trained, career agency distribution system,

2. Prudential of England's Canadian career agency system (acquired by Mutual Life),

3. Metropolitan Life's Canadian career agency system (also acquired by Mutual Life),

4. the new agents recruited into the Clarica Life sales force (post-demutualization of Mutual Life),

5. the 300+ 'original' Sun Life agents ( mostly former members of the Sun Life Canadian career agency system before its gradual disintegration occurred in the 1990s) who, after the acquisition of Clarica by Sun, took up the offer to leave a non-exclusive relationship with Sun in order to join the exclusive, lifetime level commission system of the 'new' Sun career
agency system (i.e., the Mutual/Clarica career system Sun had just purchased, and finally

6. the new agents recruited into the current iteration of the Mutual/Clarica/Sun career agency system.

The attitudes and experience of the agents and managers in each of these segments are different to varying degrees as have been their expectations. In terms of the 'culture' of the Mutual/Clarica/Sun agency system some agents and managers have mixed about as well as oil does with water but stayed on anyway. Many others have left for various reasons.

TO BE CONTINUED IN THE NEXT COLUMN

Alastair Rickard

RickardsRead.com

email: Alastair.Rickard@sympatico.ca

Wednesday, September 2, 2009

(No.49) Executive ignorance,arrogance & self-interest

In a recent column (RickardsRead.com No. 46) I referred to those I call the financial services 'paparazzi' in the rating agencies, the securities firms and financial journalism and their mainly unimpressive progress at producing useful and informed insights into the life insurance business. I went on to discuss (Nos. 47 & 48) the tendency to swallow whole the misleading spin put by the banks themselves on the subject of banks selling life insurance.

In fairness it must be noted that many, perhaps a majority of senior life insurance executives have as flawed an understanding of banks selling individual life insurance and indeed of the reality of agency distribution in its several forms as many in the financial services paparazzi -- and with far less excuse.

What is too often missed or ignored among those in both groups is the fact that 'selling stuff' successfully is what the business is about. Again and again I watched lousy distribution system decisions in companies for which I worked (Mutual Life, Clarica Life, Sun Life) as well as in other life insurance companies into which I maintained good sight lines as an industry insider and former journalist -- decisions made for uninformed, misinformed or career management reasons.

It often seemed to me as if it was thought that 'selling stuff' was somehow only marginally relevant to the conduct of a prosperous life insurance business. The fact is that the decline of the active (i.e., prospecting and selling) agency system in its variations in North America owes much to the ignorance, arrogance and self-interest of many among senior life insurance company executives especially those unburdened by agency knowledge or experience.

Whether speaking to insurance studies students at the University of Alabama or to a life company's board of directors, based on my experience in the business my message refers to refer to important realities of the life insurance business. Selling and distribution are a cornerstone of the business yet one apparently invisible to many executives who should know better. In terms of meeting the needs of agency distribution, the foundation on which the individual business continues to sit, the sales results within too many lfe insurance companies have been analogous to the educational outcomes one could expect if one had illiterates direct the teaching of English composition.

For the bulk of the Canadian life insurance business success in the actual selling of profitable individual insurance products in appropriate quantities is not at root about such evergreen senior management favourites as:

-- the junk science results derived from focus groups, or
-- the hiring of consultants who know even less about agency distribution than the company executives handing them fat contracts, or
-- call centres the sales value of which in the larger sense is marginal at best and now even less than formerly because of the 'do-not-call list' regime, or
-- big spending on brand awareness ( London Life, a company uniquely well known to the public for its longtime Freedom 55 advertising slogan still requires a fine sales force of 2000+ licensed people to sell its products), or
-- filigree work on nothing such as trendy head office "marketing" prattle masquerading as retail strategy about building 'holistic relationships' with would-be clients,
-- nor is it even about pretending that there isn't a straight line connecting this core product to death and its financial implications (a reality which in turn requires involvement by a selling agent or broker to make it into something for the company).

I conclude this screed by citing another characteristic shared by too many among both financial services paparazzi and life insurance company executives: when it comes to distribution issues and agency system problems there is too often a tendency to focus not on causes but on symptoms. Indeed it is not uncommon for senior management teams to fixate on unrealistic company sales goals, unrealistic because these same teams have been studiously ignoring or denying the centrality to sales difficulties of inadequate company investment in the support and enhancement of the distribution systems on which the increasing of sales depends.

And finally let us not omit a core industry problem: the real but publicly unacknowledged and far too widely held executive belief that a company can have a superior distribution system for the price of an inferior one.

Alastair Rickard

RickardsRead.com

email: Alastair.Rickard@sympatico.ca