Monday, January 31, 2011

(No.135) Otto Dix: warped but wonderful

The first time I recall taking note of the art of Otto Dix was perhaps 20 years ago on a visit to the Art Gallery of Ontario in Toronto. The AGO had acquired a Dix painting they displayed as one of several works along a hallway down which we regularly walked. The painting was a striking, almost ghoulish 1920 portrait of a German clinical psychologist Dr. Heinrich Stadelmann. The style reflected the fact that it had been painted by a profoundly disillusioned German World War I veteran -- Otto Dix (1891-1969).

On virtually every subsequent visit Pat and I made to the AGO I made a point of looking, however briefly, at this Dix painting with its subject who appears to be mad, shining and bulging eyes prominent in the portrait, wing collar, thin wrists protruding from the sleeves of a formal frock coat.

The Stadelmann portrait was painted during Dix's 1920-22 sojourn in Dresden, a time when he saw himself as an artistic rebel. A friend recalled Dix saying at this time that "I just can't seem to make it, my paintings are unsaleable! Someday I'll either be famous or infamous!"

It has taken decades but Dix is now recognized fairly widely on both sides of the Atlantic. The Tate Gallery in London certainly helped the cause with its 1991 retrospective of Dix's work. Last year the Montreal Museum of Fine Arts and the Neue Galerie of New York co-organized the first main exhibit of Otto Dix's work in North America, presenting some 220 pieces in an impressively satisfying tribute. Given the treatment of his art by the Third Reich it is fortunate that as much of it survived as did. He was one of those artists the Nazis labelled a producer of "degenerate art".

Dix's paintings, especially the portraits, are unusual, striking, some even grotesque but impressively memorable. Sometimes these days referred to as an 'expressionist' painter, Dix was in fact the leading artist of the style known as Neue Sachlichkeit, the New Objectivity, which pervaded an entire period of post-war German art.

Dix was fascinated by all the different forms in which human life appeared, especially those that were extreme in nature. One art critic, Sabine Rewald, has noted that Otto Dix and other artists of the era were "injecting bile into their paintings as a way of coming back from the dead." I agree but it is hardly surprising. His paintings reflect the extraordinary grimness not only of his experiences in the trenches but also a post-war Germany with two million orphans, one million widows, a million invalids, mass unemployment, hyperinflation and street battles.

Those who have never seen a Dix painting should not conclude from what I have written that he was an angry, unskilled painter whose works are characterized by a talentless daubing of paint to produce paintings unrecognizable as representing much of anything. Later in his life Dix articulated his categorical rejection of abstract painting: "I base everything on the visible," he said in 1958. "I don't want to invent new themes and arrange them as Salvador Dali does."

Images of the beggars in the street, the prostitutes in the brothels, the drunks in the bars, these were also images Otto Dix painted. They are indeed "realistic" in the sense that they are recognizable as such but they have been painted , as I think of it, in a fashion several degrees off centre -- far enough off to make them appear unusual and sometimes warped. Dix is an acquired taste but he has become one of my favourite painters; Pat does share my enthusiasm for Dix.

Although Dix never visited Canada there is a Canadian connection. His first son Ursus immigrated to Canada and worked as a painting conservator in Vancouver. He was named in 1979 as the head of conservation at the National Gallery of Canada in Ottawa.

To view images of some of Otto Dix's paintings, the reader can visit:

1. The Online Otto Dix Project at www.ottodix.org/

2. Otto Dix reproductions at www.tendreams.org/dix.htm

3. Art by Otto Dix at www.museumsyndicate.com/artist.php?artist=72

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Alastair Rickard

RickardsRead.com

email: Alastair.Rickard@sympatico.ca

Tuesday, January 25, 2011

(No.134) more about Sun Life, Manulife & MGAs

There were some interesting emails in response to a couple of recent columns on RickardsRead.com: "The Globe looks at insurance distribution" (No. 131) and "Sun Life & Manulife: returns & departures" (No.132). I have selected several from which I have presented excerpts (below). As is my custom I do not identify the writers by name but do try to indicate background and basis of interest.

A Canadian life insurance executive noted, referring to my column on the Globe and Mail articles and managing general agents (MGAs), that "It would be easy to jump on the anti-MGA bandwagon and go down the road with the group extolling the virtues of career [agency] vs. MGA when in fact there are sufficient cracks in both forms of distribution. ... It is the carrier behind either distribution channel that should be held accountable regardless of the status of the licensed individual -- career or broker."

A Sun Life career agent observed, in connection with my column about the Globe articles, that it is "strange that nothing seems to change. It's all new to the next generation and like always they don't pay any attention to the past (I am guilty of this as well). ... You are right about a few things. It is "about selling stuff" and there will always be someone who tries to get ahead by cheating. It's the same in all businesses but especially so in a relationship sale."

A former London Life agency manager wrote that "I'm intrigued by the recent articles in the Globe and Mail on the life insurance distribution system in Canada and its attendant problems. No mention at all of the life companies that used to recruit and train new agents at huge expense, to say nothing of the abysmal 3 year agent retention rate .... It would appear that the reporters of 2010 are no better informed or equipped to report factually than their counterparts in the 70s."

A former life insurance company agency executive, now a consultant, thought my column about the Globe article was " a great piece -- thank you. I particularly like the kudos you gave the Globe for the amount of space and attention given to the subject [ of insurance distribution]."

A longtime Canadian MGA said his view is that "lifecos should hold MGAs to the same standard as they (in some cases) held [career agency system] branch managers in the days of single company representation. Offloading many administration and distribution expenses to the MGA does not/should not relieve insurers of their responsibilities for proper underwriting and appropriate sales/marketing practices on the part of agents from whom they accept business. ... Canada needs far fewer MGAs -- each of which should be subject to more stringent operating standards and oversight from insurers who choose to do business through this channel."

Another Sun Life agent of long experience emailed that "I've been waiting for your comments on the Globe articles. You have hit the nail on the head as usual. Career agents should take no comfort in these articles as the issues raised are just as applicable to career distribution as to brokerage."

Prompted by my column about Sun Life & Manulife and their senior managements, yet another Sun Life agent said, in part, that "I'm so glad you decided that you would blog ... too many good guys have taken up knitting . I don't know if you realize how talented you are. ... In all honesty don't stop writing, your insights are MUCH appreciated."

A former Canadian life insurance company executive said my column on Sun and Manulife was a "great article. Your evaluation of the importance of investing in rather than milking or constraining the career [agency distribution] system is on the money. One can only hope that [Sun Life executives] Vic [Kazazian], Kevin [Strain] and Kevin [Dougherty] will continue to get the support necessary to allow them to make investments in strengthening the one part of individual distribution that really works at adding long term value to [Sun Life]."

A former career agency manager, now a Sun Life agent wrote that the column was "as always a great article. When Sun sold its shares in CI Investments for $2.2 billion, as one of the "sales force" I did not think we'd get anything from it even thought the huge growth [in mutual fund sales] that CI experienced was because of the Sun Life sales force."

A longtime and very successful American MGA thought the column was "a superb piece of work. The field force can smell the bullshit of a phoney CEO a mile away. The problem is, here in the U.S. at least, that for every one K.R. MacGregor there are ten or even twenty D'Alessandros. .... I enjoy RickardsRead enormously."

During the course of an exchange of emails with a financial services analyst working for a bank securities firm: he said he thought my comments on Sun and Manu were "some very fair observations. ... You are so right with respect to agents and their BS detector meters! Have you ever wondered where OSFI [the Office of the Superintendent of Financial Institutions] was during the risk management hedging issue? Oh -- in risk management -- interesting isn't it that all the focus is on VAs and equity markets? But as acknowledged on an earnings call it is has been the drop in rates that has caused the biggest losses."

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Alastair Rickard

RickardsRead.com

email: Alastair.Rickard@sympatico.ca

Wednesday, January 19, 2011

(No.133) The Tucson shootings: farce follows tragedy

As I write this column the American media are still wallowing in the pathos and obsessively detailed coverage of the shooting in a Tucson Arizona parking lot of U.S. Congresswoman Gabrielle Giffords (13 other wounded and 6 dead) by a mentally unbalanced 22 year old named Jared Loughner. I have omitted the normal qualifier "accused" since his guilt as the shooter could not be less in doubt.

However I would not argue that there are, proportionately, fewer mentally ill persons walking Canadian streets than there are in the U.S. Consider just two relevant examples: Marc Lepine's massacre in 1989 or the Dawson College episode in 2006 -- both in Montreal.

To watch cable news even in Canada but especially on the American networks is to marvel at the overheated rhetoric from and about the political left and right in the U.S. as well as the smarmy sincerity of the television talking heads.

One pointed comment about this state of affairs in the U.S. came from Globe and Mail (Toronto) columnist Margaret Wente on Jan 13. "The media," she wrote," are treating the shooting of a minor politician by a crazed gunman -- a tragedy to be sure, but not terribly significant in the course of world events -- as an existential moment in America's life."

Initially, after the shooting, some of the media (including even the New York Times) were in such a rush to report they not only stated that Ms Giffords was dead but tried to define a context for the event before the key facts were all available much less understood.

The slant taken almost immediately by some was that the shootings were somehow related to the negative and confrontational atmosphere promoted by the politically right wing talkers in the U.S. -- from Rush Limbaugh through the Fox News talking heads to Sarah Palin. There is indeed much that can be said about the unfortunate political atmosphere existing in the U.S. to which they (and others on the left and right) have contributed so substantially. However in terms of a causal connection with the apparently non-ideological, non-political but mentally unbalanced shooter -- it was an inappropriate link to suggest.

If it is not a matter of political rhetoric, then what is the practical issue going forward? I suggest the one most relevant to both cause and future remedy is not even insufficient access to mental health care available to Arizonans, specifically to the group to which Loughner likely belonged -- the 10% of schizophrenics prone to commit acts of violence.

Rather the issue arising from this tragedy that could be directly addressed with practical measures is the same one that arose after Virginia Tech and Columbine and the other major multiple victim shootings that occur with depressing regularity in the U.S.: meaningful gun control, i.e., measures addressing easy access to hand guns by not only the mentally disturbed but the American population generally.

To someone unfamiliar with American politics logic might well suggest that this tragedy in Tucson, one absorbing so much emotional attention from a public egged on by media coverage of the shootings and the aftermath, might actually prompt a majority of the U.S. Congress to take action and pass meaningful gun control measures. Sadly, it will not.

Congress did not take serious action after the shootings of John F. Kennedy, Martin Luther King, Robert Kennedy or Ronald Reagan, to cite just four prominent examples from the modern era in the U.S. each of which ought to have led to truly effective and lasting action on gun control. I do not count as lasting the so-called Brady Law that requires criminal record checks of buyers like Jared Loughner sellers (14 million FBA computer checks in 2009 but prosecutions are rare for transgressions) nor the expired as of 2004 and still unrenewed 1994 ban on assault weapons.

Thanks mainly to its very substantial political power and successful record of defeating proposed gun control measures as well as those elected office holders who support them, the National Rifle Association (4 million members), the most powerful lobby group in the United States, will ensure that any move to do anything that affects the freedom of Americans to buy and carry guns will fail. Gun control, no matter how minor the measure, is the third rail of American politics for most politicians, whether Republican or Democrat. Even President Obama is careful to avoid raising the issue of more gun control.

To most Canadians, including those (like me) who regard the long gun registry in this country as of questionable worth, the fact that no action on meaningful gun control will be taken in the U.S. in the wake of the Tucson shootings is, on several levels, inexplicable as well as incredible in the proper sense of that much misused word. Indeed I predict that even the single gun-related measure mentioned thus far in public discourse post-Tucson by politicians (i.e., the banning of the 33 shot clips for the Glock 19 pistol used by Loughner) will not succeed.

People around the world who watch what is happening in Arizona wonder how a civilized society like the U.S. continues, in terms of government action following major shooting tragedies such as Tucson, to ignore the facts of the ongoing challenge to civil society in America. I use the word major to distinguish this type of shooting from the 260+ shootings that occur in the U.S. annually in which at least 3 people are shot.

What are the facts to which I refer? Here's a sample:

-- Arizona, 71.6% of whose 400+ murders in a year (2008) are committed with firearms, has virtually no restrictions on carrying concealed weapons nor do a majority of American states.

-- The proportion of Americans who, according to a USA Today poll done post-Tucson shootings, believe that the tragedy would NOT have been prevented if Arizona had stricter gun laws: 72%

-- The U.S. has 85 guns per 100 of its people.

-- 80 people in the U.S. die from guns every day.

-- American children are 11 times more likely to die in a gun accident than are those in other developed countries.

-- Almost 100,000 people in the U.S. are shot each year, 30,000 of whom die of gunshot wounds (i.e., 10 times each year the number of those who died in the World Trade Centre towers on 9/11.)

Many Canadians, when asked to distinguish Canadian society from American, habitually mention first our health care system and gun control. They still can. The U.S. health care initiative led by President Obama is a major step forward but remains (for reasons I will not get into here) a long way from Canada's universal, government single payer system -- even with all its imperfections. As for guns and shootings and gun control, the gap grows steadily greater.

If, as one hopes, Congresswoman Jeffords recovers from her terrible gunshot wound, an inevitable question occurs: will she become a political advocate for new even if modest gun control measures? I predict not. She was, like most Democratic politicians from areas other than the northeastern states, a firm opponent of stricter gun control and actually owned a Glock handgun.

While they pray for the recovery of Ms Jeffords and the other wounded, Arizonans have been busy. Handgun sales in the state on the Monday following the weekend shooting increased by 60%. On the next weekend after the shooting, 13 miles away, the "Crossroads of the West" gun show went ahead as scheduled in the Pima County Fairgrounds.

And why not? Gun shows are popular and frequent in the U.S. since even the very modest and quickly completed screening required before an American who buys a gun at a store gets his gun can be avoided when the purchase is made at a gun show, often referred to as "the gun show loophole". Some things are just too important to be forced to postpone them, even momentarily.

It is sad for me, a Canadian who has both American friends and an admiration of so much that is good about our neighbour, to see the political farce that is playing out in the wake of the Tucson tragedy and will again after the next such tragedy -- and of course there will be a next one.

Canadians should not feel at all smug in the wake of the Tucson tragedy. But there is no doubt today about the very much greater height of the regulatory bar over which any Canadian must pass in order to possess a handgun in comparison with the one over which Jared Loughner stepped easily and quickly in Tucson to purchase his Glock -- a purchase made notwithstanding his rejection in Dec.2008 as an applicant by the U.S. Army because of his history of drug abuse, his (at least) two run ins with the police (including a drug-related arrest in 2007) and his expulsion for his threatening behaviour in classes by his college unless he could provide satisfactory proof of his mental health.

Given all that has happened in American society over the decades relating to guns and gun control, as hard as I try it is impossible for me even to imagine what it would take to bring about any substantive change to the Alice-In-Wonderland environment in which apparently many if not a majority of Americans and their elected representatives think they have a constitutional right to own and easily access weapons which cause the death of 30,000 of their fellow citizens every year.

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Alastair Rickard

RickardsRead.com

email: Alastair.Rickard@sympatico.ca

Saturday, January 15, 2011

(No.132) Sun Life & Manulife: returns & departures

I have referred previously in RickardsRead.com to the benefit derived by the 3500+ member Sun Life career agency distribution system in Canada -- to its morale and therefore to its sales -- of having Kevin Dougherty return in Jan. of 2010 to the presidency of Sun Life Financial Canada, a role he had held 2004-7. Apart from his other qualifications as a senior executive he has understanding of and empathy for both career agents and the job of selling and, just as important, is seen by Sun's Canadian sales force to have these characteristics.

Agents have highly developed bullshit detectors and they can be a tough audience. Many an executive over the years has thought he could fake bonhomie with sales people and discovered he could not and that an insincere hail-fellow-well-met posture merely served to lose even more of what little credibility he had at the outset of his tenure. Nor is there any way to predict with any certainty who will enjoy sustained credibility with a sales force.

I have spoken and written of my high regard for former federal Supt. of Insurance K.R.MacGregor who became CEO of the Mutual Life of Canada. He was as fine a gentleman as I ever encountered in the business as well as being as unlikely an individual as one could imagine to strike a chord with a room full of agents but his modesty, integrity and quiet demeanour (among other qualities) somehow led agents to connect with him. I saw them give him standing ovations for little more than approaching a podium to say hello. He had both popularity and credibility with them by being himself.

Many years later I witnessed something reminiscent of that at an agent's convention in Whistler BC attended mainly by Mutual Life/Clarica Life agents. It was held not that long after the Sun takeover of their company. Sun Life CEO Donald Stewart who, as I have written previously, reminds me of K.R. MacGregor more than any other CEO I have known or known about over the years, was in attendance at the Whistler meeting. I had also been present when earlier that year he had received a far from friendly reception in Toronto from a ballroom full of Sun's 'independent' sales people who had been called to the meeting and invited to join the Mutual/Clarica career agency system, one of the major assets Sun had acquired with its purchase of Clarica Life (the demutualized Mutual Life).

At the Whistler convention Stewart received an ovation from the career agents when he was introduced. But I digress...

When they have been announced next month the 2010 results for Sun Life's Canadian individual operations, especially of Sun's career agency system, will in my opinion reflect in part the return of Dougherty to head Sun's most important profit centre -- its Canadian operation.

I expect Sun's Canadian new individual life insurance premium in 2010 to have increased substantially year over year with a significant net gain for the year in the size of the career agency sales force. Sun's brokerage operation (still selling a significant amount of the old, low rate of return Sun universal life policy designed to attract brokerage business) plus its manufacture of products for other financial institutions will likely account for less than a quarter of the total on the individual side.

If so then the leadership of Dougherty plus Kevin Strain and Vic Kazazian in the Individual operation will deserve considerable credit for having made it, as any wise agency leadership team must, a bit easier and more encouraging for agents to make sales -- and then at least trying to get the company out of the way of their doing so.

For the Sun Life Canadian career agency improved performance to continue in the direction of what the Mutual/Clarica system once was, Sun Life Corporate management needs to allow Dougherty sufficient funds and management freedom to continue improving the morale and sales productivity of the Canadian operation.

By this I mean (for example) eliminate or at least minimize stupid, morale harming, expensive, money losing, resource diverting 'initiatives' -- such as last year's to try to sell term insurance directly to consumers in a pathetic but morale deflating competition with Sun's own agents, i.e, with those people on whose efforts the company mainly depends at the end of the day to generate profitable individual business in Canada.

I do not believe for a second that Dougherty would have taken this step in 2010 if not directed or pressured to do so as part of Sun Corporate's delusional commitment, in order presumably to demonstrate 'vision' (always important to executive career management), to 'direct marketing' -- to hell with losing some agent sales.

As I have argued in RickardsRead.com (and formerly in person within the company as a member of Sun management) Sun needs to divert annually to the enhancement of its Canadian career agency distribution system just a sliver of the mega-millions of dollars it pours year after year into its low or no return Asian operations. In any business environment continually in touch with its own reality, e.g., that Sun's business is about 'selling enough stuff' and doing it profitably, such a diversion should be regarded as an investment in its Canadian agency operation, which in turn provides so much of the motive power for its Canadian golden goose's annual laying of profitable eggs.

Finally I would not be surprised if Kevin Dougherty leads the Canadian individual operation to an impressive $200 million mark for new premium in a year -- and sooner rather than later -- provided he is not handicapped in doing so by Sun Corporate. That requirement may not be an easy sell, especially if those to whom the sale must be made persist in misunderstanding the nature and quality of the Sun career agency system in Canada in comparison with the nominal career systems in Asia of which Sun is a partial owner. In fact, by the usual indices of quality the latter more closely resemble, say, the Met Life debit system ca.1950 than Sun Life's own Canadian career agency system in 2011.

While on the subject of Sun Life I note that Donald Stewart, the CEO of Sun Life Financial, received full year 2009 earnings of $3,836,334. By comparison Donald Guloien, who became CEO of Manulife in May 2009, earned $9,658,433. In a rational business world there could be no justification for that differential in their compensation. [Remember: the Globe and Mail's Report on Business did not even descend from the mountain with its tablet pronouncing that Manulife had arrived at a "reversal of fortune" until Jan 6, 2011. One assumes this may have been less than soothing psychological balm for those in Manulife senior management given the company's mid-Dec 2010 rating downgrade by S & P and Moody's, the third decrease since early 2009.]

Clearly the Manulife board of directors still lives in the same parallel universe it called home when it lavished millions in special bonus money on departing CEO Dominic D'Alessandro after Manulife had ended up in a very deep financial ditch. If the Globe or the market analysts whose opinions it can be relied on to solicit and quote about Manulife's prospects think that Manulife's increased but far from complete hedging of its variable business financial risk is indicative of a "reversal of fortune" then there is also a future in creative writing.

As a footnote in this connection: Ottawa Citizen columnist Dan Gardner wrote a couple of interesting columns in December highlighting the failure of economists and related species of 'experts' as the authors of publicized but inaccurate predictions with which they are too rarely confronted after the prediction fails.

I particularly enjoyed a comment from one analyst cited in the Globe: Manulife, he said, was "reducing their earnings sensitivity, which is a number derived from their actuarial models. So it is the actuarial tail wagging the economic dog."

In fact it is more than unfortunate that back in 2004 Manulife's "actuarial tail" was not permitted by its senior management to wag the corporate dog when a decision-making point arrived and D'Alessandro decided, in the cause of further enhancing company profit, to cease hedging its financial risk on the $billions of variable risk policies it was writing. If competent, conservative and stick-in-the-mud Canadian actuaries had actually been in a position to make that key decision, it is a fairly safe bet that the magnitude of Manulife's financial disaster would have been avoided.

As for the predictions of relevant 'experts' I invite readers to search post-2004 for any substantive warnings from them about the real risk involved with Manulife's 2004 decision or indeed (quite apart from the foolishness of not continuing to hedge its investment risk) with the type of corporately foolish guaranteed variable contracts with the sale of which -- by the truckload -- the company's most senior management had become so enamoured.

You will search in vain.

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Alastair Rickard

RickardsRead.com

email: Alastair.Rickard@sympatico.ca

Monday, January 10, 2011

(No.131) The Globe looks at insurance distribution [Pt.1]

On Dec.18, 2010 the Globe and Mail newspaper (Toronto) began a series of articles by Tara Perkins and and Grant Robertson billed as "Unprotected: Inside Canada's Insurance Industry". The first part "Through the loophole: How an industry outgrew its regulators" purports to identify "a new distribution channel that is beyond the regulators' grasp ...."

The channel in question is the Managing General Agent (MGA) part of brokerage, MGA being the U.S. coined usage.[ MGA distribution is a long way from being new in Canada and the inhabitants of the MGA system are not unlicensed.] A second article in this series, also with a focus on life insurance agency distribution," What your broker doesn't want you to know", followed on Dec.22.

These Globe articles touched on several of the issues including career compared to brokerage distribution about which I editorialized many times beginning three decades ago in my own Canadian Journal of Life Insurance, in columns I did for other publications and in speeches to industry audiences across Canada and in the U.S. I was not surprised therefore that before I had even begun to look at the newspapers of Dec.18 I received an email from a former colleague in the life insurance industry directing my attention to the Globe article and calling it "a real vindication of everything you tried to tell them for years ...."

Well, yes and no.

This was soon followed by a minor flood of emails from life insurance industry people calling for/predicting a commentary from me on the Globe articles and an addressing of the articles' errors of omission and commission as well as the absence of that ever present agency reality: shades of grey.

I am flattered by the expectations but also somewhat reluctant since it would take as much space as in the articles and more for me to really address what could be said in the cause of improving understanding.

If I have learned anything during my time working in and writing about the life insurance business it is this: the least understood aspect of it in the media and analyst communities as well as among too many life insurance company executives is agency distribution in its various forms even though -- as I never tire of pointing out -- at the end of the day the business is about 'selling stuff'.

Some of the shortcomings and problems the series of articles identifies are in fact an unfortunate but inevitable minor risk from having distribution by licensed sales persons of ANY financial product and, absent a compliance officer at every sales person's shoulder, a risk that will continue to exist. Also they are not new risks nor are they peculiar to the MGA system. The risk is unavoidable in ANY distribution system where a (licensed) sales person deals with a client one to one in the privacy of the client's home or office or indeed the sales person's office.

In the context of the defrauding of the insurance consumer, the sort of case used anecdotally as evidence for the MGA system problem in the first Globe article is part of a reality:

there is always in agency distribution a risk that a sales person may act wrongly and convince a client that he or she can get a higher rate of return on their money by having the sales person 'invest' it somewhere other than in a financial product of the institution with which the client understands the sales person to be exclusively or primarily associated. It is the Bernie Madoff syndrome writ small. The outright defrauding of clients, relatively infrequent, can and has occurred involving licensed life insurance intermediaries in ALL parts of the active agency system, including the best managed and supervised career agency systems of the very best life insurance companies -- as I know as a matter of first hand knowledge.

The MGA distribution system per se identified by the article as "unregulated" is no more formally unregulated than the career agency sector of the active agency system or the segment featuring individual broker/independent agents who place business directly with a life company. It is the positioning of the MGA between the life company and the licensed sales intermediary that provides a natural focus of attention.

That having been said there are important questions here. For example:
  • what ought to be the accountabilities of the MGA as a conduit through which some individual agents/brokers choose to place new business with issuing companies? and
  • what should be done about the MGA role serving as a cover behind which some life companies like to hide from an appropriate level of accountability for what goes on in the marketplace involving the sale of their financial products by licensed intermediaries?
In my experience (which includes many years as the chair of the standing Committee on Distribution and Intermediaries of the Canadian Life & Health Insurance Association [CLHIA]) the provincial insurance regulator who had the earliest and most thoughtful interest in the role of the MGA vis-a-vis insurance regulation is Gerry Matier, the Executive Director of the Insurance Council of British Columbia. Matier is a very sharp, experienced and energetic regulator and he, more than any other, was the driving factor behind the current regulatory look that embraces MGAs among other matters.

The Globe article draws a comparison unfavourable to the MGA system with the supervisory relationship of a career company with its agents; MGAs in the main do not exercise the same level of interest/compliance supervision as do those life companies with their own career agents. That is valid in terms of some companies and some MGAs but it is not universally the case and is subject to individual assessment.

The reality is that even the best companies operating career agency distribution systems are no more subject to a provincial regulatory regime specific to them and the operation of their career systems than are MGAs. Managing General Agents operate in a world of licensed sales people. But is there a specific regime applicable to MGAs beyond what is required of them as licensees? No. Have many life insurance companies fallen in love with distribution involving MGAs as an easier and less costly avenue of distribution? Yes.

Nothing that can be said to approximate a regulatory regime peculiar to career agency systems in Canada has existed since the removal long since of the agent single company representation rule and required life company sponsorship of licenses for life insurance agents for as long as they were selling. However that is no reason NOT to consider whether requirements specific to the role of the MGA and to the companies using them would be helpful to the consumer and to the marketplace.

Most of the 'news' delivered by the Globe articles (for example: brokerage life companies compete for the attention, affiliation and new business of licensed agents using compensation as a major tool) has been a commonplace among provincial insurance regulators for decades. If it has remained unknown to or little understood by the financial media and analyst communities (the group I have dubbed in these columns 'the financial services paparazzi') it is because they failed to do minimal homework to educate themselves on the reality of life insurance distribution generally and the agency system in particular.

However let me state this clearly: the Globe and Mail deserves very considerable credit for devoting serious and extensive attention to life insurance agency distribution in Canada and related issues. I cannot recall a single article in any Canadian daily newspaper presenting such an extensive look at life insurance agency distribution in this country. The articles, regardless of their shortcomings, are welcome and long overdue in the mainstream media.

Regardless of the bumps on the road along which the Globe reporters travelled in their examination of the MGA distribution system in Canada today, it is the right road. A superior career agency system, one managed by a life insurance company that is willing to assume -- not try to dodge -- its logical and appropriate accountability for those who sell its products in the marketplace is, as I have long preached, the best distribution system overall for life insurance consumers for a range of reasons.

Another part of my oft-delivered sermon has been this: life insurance companies should not be allowed to shelter from accountability to clients for deficient actions by those who sell their products behind a wall (legal and/or regulatory) comprised of those who facilitate the sale of the company's financial products. That is so whether those sales persons are MGAs, individual agents placing business directly with a brokerage company or via an MGA or a company's career agent.

Finally, in this same connection, Jim Rogers -- the former head of Advocis and MDRT as well as a successful Vancouver insurance and mutual fund brokerage operation -- made an essential point in his Dec. 21 letter to the editor of the Globe prompted by the first article in the insurance series: "Product manufacturers (i.e., insurance companies) should be held [vicariously] liable for the actions of both their Managing General Agents and the agents who put their business through these MGAs." [The Globe removed the word vicariously from his letter as published.]

There is much more that can and likely should be said in response to these articles and the issues they raise. I shall return to them in a future column.

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Alastair Rickard

RickardsRead.com

email: Alastair.Rickard@sympatico.ca


Monday, January 3, 2011

(No.130) Do rocking-horses excrete? [more gritty British crime fiction]

In my previous column on RickardsRead.com: (No.129) " Nasty times in America", I reviewed some recent crime/private detective novels by several American writers plus an Englishman living in the U.S. writing about Americans as well as an Israeli.

This column is about the latest novels by some of my favourite practitioners of this genre on the other side of the Atlantic. Those readers who, like me, look forward to each new novel by a writer whose work they enjoy will appreciate my ongoing interest in the work of these British novelists.

Since the days of aristocratic amateur detectives like Dorothy L. Sayers' Lord Peter Wimsey and village busybodies like Agatha Christie's Miss Marple, there has been a sea change in British 'crime' fiction, a style also very different from that of certain of today's contemporaries like P.D. James' Commander Adam Dalgleish. Much of the style and content to which I refer is very gritty indeed, a style I enjoy.

Among British crime novelists writing these days my favourite has long been Ian Rankin, the Scottish creator of Detective Inspector John Rebus, the Edinburgh policeman (see RickardsRead.com column No.82 "A sleuth for every taste"). In my iconography of 'crime' novelists Rankin, whose novels have been dubbed 'tartan noir', is followed closely by Graham Hurley [more about him later in this column]. Also up there among the leaders of gritty fiction is Mark Billingham whose creation, London's Detective Inspector Tom Thorne, is endlessly interesting, in part because he has trouble fitting in anywhere whether at work or in his personal relationships.

Bloodline (2009) is the 8th Thorne novel and a beautifully written and plotted combination of police procedural and suspense. A taste of Thorne's world and attitude provided by Billingham: " Any day when a case moved in the right direction was a good one, but they were few and far between, and the really good days, when an arrest -- the right arrest -- was made, gave hen's teeth and rocking-horse shit a run for their money. Even then, of course, the possibility of a great day lay with the courts."

The latest of Billingham's Thorne novels is From The Dead (2010). It involves one ten year old case which was assumed to have been solved and resolved with the conviction of a man (but was not) and a currrent case which sees the jury acquit a defendant Thorne is certain is guilty. The setting for the novel ends up involving both England and the Malaga area of Spain.

I will not spoil what is a very interesting story by going any further.

Another English police detective series, one about which I have not previously written, is by Stuart Pawson. It is not as dark in its tone as Billingham's but its central character is also a Detective Inspector. Also, like Thorne, D.I. Charlie Priest has been around for quite a few years and -- like Thorne -- does not want to advance to Detective Chief Inspector and thereby become (in the British policing rank structure) more of an administrator than a detective. However Priest is different in his locale: he works in the fictional Yorkshire town of Heckley.

The 13th of Pawson's novels featuring the likeable Charlie Priest is A Very Private Murder (2010). The book has a clever plot involving shopping mall graffiti which connects with the girlfriend of a member of the Royal Family and the murder of a prominent citizen who has an unsavoury past as well as a link with a long ago race horse scam.

If this plot sounds busy-- it is, but it works well. The D.I. Priest character carries personal and professional baggage from previous novels that make him even more absorbing as a character. This latest Pawson novel is better than ever.

Quintin Jardine is a successful creator of crime fiction with a couple of series in his portfolio. The one I prefer has featured over some years the adventures and progression of members of a team of Edinburgh policemen and women led by (at this point in the series) the new Chief Constable Bob Skinner. The 20th novel in the Skinner series is A Rush of Blood (2010) and it is a good one.

This story is the latest in which the central characters' personal and professional lives move chronologically and feature references to events in previous novels. There is a suicide involving a local shady character which is the puzzle that kicks off the story and energizes its plot and drives it to a surprising conclusion.

I have read a number of the Jardine novels featuring Bob Skinner and A Rush of Blood is one of the better ones. This is not intended to damn with faint praise. The book is enjoyable and easy reading but a warning to devotees of crime stories set in Edinburgh: do not expect writing on a par with that of Ian Rankin, that Scottish master of crime fiction in whose Rebus novels the leading character is also in the Border and Lothians Police. [The last Rebus novel, the 17th of the series was Exit Music (2007) in which Rebus finally hit CID retirement age.]

Beyond Reach (2010) is the 10th in Graham Hurley's series set in Portsmouth England. It features D.I. Joe Faraday and Paul Winter, an ex-cop (low ranking) who now works for a local crime lord.

There is a great deal to enhance and inform the reader's enjoyment of this latest novel in what previous novels of the series relate of the central characters' personal and professional lives; the novels move chronologically. In Beyond Reach Farraday's investigation of the murder of a local bully intersects with Winter's assignment from his boss to sort out problems involving his daughter.

Graham Hurley is an excellent teller of what are, on the whole, rather dark stories. Today's Portsmouth (called Pompey by the locals) is summarized this way by Hurley's Joe Farraday in Beyond Reach:
" ... the message in the Pompey stick of rock was a deep undercurrent of violence, the kind of violence that suddenly erupted in wild spasms of bloodletting; ungovernable, reckless and often fatal. The tariff, Farraday thought, was going up all the time...

" A generation ago differences would have been settled with fists. There was an intent to hurt ... but far fewer brawls ended in the mortuary. Nowadays, though, that restraint, that respect for some sort of unspoken code, had gone. When people fought, for whatever reason, they really meant it. Welcome to the world of the one-punch homicide."

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Alastair Rickard

RickardsRead.com

email: Alastair.Rickard@sympatico.ca