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Succession Planning for Small Mutual Insurance Companies

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Title: Insurance Agent s Errors & Omissions Liability Author: Lenora Last modified by: Jody Created Date: 8/14/2000 4:39:25 PM Document presentation format – PowerPoint PPT presentation

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Title: Succession Planning for Small Mutual Insurance Companies


1
Succession Planning for Small Mutual Insurance
Companies
  • 2014 WAMIC
  • FMDC Courses

2
Managing Risk
  • Insurance people, be they Directors or managers,
    are, or should be, risk managers
  • Managing risk involves more than our customers
    risks
  • As businesses, we have our own risk to manage...

3
Succession Planning
  • Plan aheadNot having a successor for a key
    position is a risk a company cannot accept
  • Succession Planning is an ongoing process
  • It involves management and the Board

4
The Talent Pool
  • National surveys show that the number of farms
    are declining
  • While the average acreage per farm is increasing
  • And the average age of the farm owners is
    increasing
  • See the USDA Census of Agriculture, updated
    finally for the 2012 data

5
Farms in Wisconsin
  • 2007 to 2012 Wisconsin
  • Farms 78,463 down to 69,754
  • Acres 15,190,809 down to 14,568,926
  • Avg 197 up to 209

6
Talent Pool
  • What do these numbers mean to small insurers?
  • Fewer young people on farms
  • Fewer prospects for tomorrows Managers and
    Directors of small insurers
  • Is there a next generation to replace todays
    older farmers?

7
Succession Planning
  • Companies need to have plans in place to replace
    managers and Directors
  • At small companies, having staff to train for
    promotion may be a big problem
  • Think about other talent pools

8
Talent Pools
  • Agency Force?
  • Local Banks?
  • Other Mutuals?
  • Be very, very careful with this
  • Unrelated Businesses
  • Educators
  • Non-profits and volunteer groups

9
Manager Skills
  • What are you looking for in a new manager
  • Understand the business of Insurance
  • Ability to organize
  • Understand Financial issues
  • People person
  • Public face for the company

10
Manager Skills
  • Managers must be able to handle stress and crisis
  • Managers must be able to gain a working
    understanding of technical issues
  • Financial matters
  • State Regulations
  • Insurance Contracts
  • Claims Process

11
Manager Skills
  • COMMON SENSE
  • and a
  • SINCERE SMILE
  • go a long way
  • some days

12
Talent Pool
  • Similar issues for larger companies
  • Talent is likely in-house
  • Still may want to look outside
  • Financial abilities may be overriding issue
  • dont forget the Claims Department
  • People skills are still critical

13
Talent Pool
  • Gender cannot be a qualification for being a
    manager or Director
  • Even if the company is too small to fall within
    the jurisdiction of state or federal statutes,
    the publicity is not something you want to deal
    with...

14
Planning
  • A company should have a succession plan in mind
  • doesnt need to be in writing, but that may be a
    good thing
  • the plan needs to be flexible
  • the target might want to know
  • advantage you have a career here
  • disadvantage impatience, incentive

15
Planning
  • Letting people know
  • Advantages
  • You have a place here!
  • Desire to learn the business theyll take
    over one day
  • Understand that todays actions have consequence
    for the future
  • Develop management skills (PFMM programs)

16
Planning
  • Letting People know
  • Disadvantages
  • Complacency
  • Relations with other employees
  • Late arriving stars
  • Losing patience waiting for the change

17
Inside vs. Outside
  • Many companies like to promote from inside, and
    thats a good thing.
  • It probably doesnt hurt to at least look
    outside.
  • If going outside, be discreet
  • for the benefit of the inside folks
  • for the benefit of the outside folks

18
Inside Successors
  • Make sure they have necessary training
  • have them attend seminars
  • have them participate in process, when
    appropriate
  • at small companies, managers should not be in
    training for too long (you dont want to be
    poached)

19
Director Succession
  • Directors come (and some even go, eventually)
  • If you are bound by law to have a policy holder,
    be aware of who is an insured
  • more than just your friends
  • retirees
  • spouses

20
Director Succession
  • The Board and management need to work together on
    knowing who is in the pool
  • Look for specific talents to complement other
    Board members
  • Be mindful of personalities

21
Director Succession
  • Director Skills
  • Different Directors can fill different roles not
    everyone needs to be a financial whiz or
    insurance agent
  • All Directors need to know about financials and
    the insurance industry
  • Marketing, PR, HR, Computers, Administration are
    all valued skills

22
Director Skills
  • Director candidates must be able to work to
    consensus
  • Directors must be able to continue working
    together even after a contentious debate
  • They must have time
  • They must be able to read, or be trained to read,
    financial reports.

23
Director Skills
  • Directors must be more than a nice person
  • Directors must be able to think independently
  • While SOX will not apply directly, the standards
    for competence for larger corporations will begin
    to apply to small insurers

24
Director Skills
  • NEVER UNDERESTIMATE
  • THE
  • VALUE OF
  • COMMON SENSE!!!
  • A lot of being a Director is exercising common
    sense

25
Agents as Directors
  • Generally, not a good idea. We can talk

26
Succession by Merger
  • Succession by merger is usually to replace
    management
  • It needs to be carefully thought out
  • It can be a positive way to bring together two or
    more companies with strong histories but a need
    to be larger for the future

27
Succession by Merger
  • It probably blows up about as often as it
    succeeds
  • Merger means more than a shared manager
  • merged boards
  • merged reinsurance
  • merged computer systems
  • merged agency forces
  • merged employees

28
Succession by Merger
  • Most importantly, it is the merger of two groups
    of policyholders
  • Historical Ties
  • Company philosophies
  • Local Sensibilities
  • Local Institutional Support
  • These issues are NOT trivial some will mourn the
    loss of their company

29
Succession Planning
  • Things to keep in mind
  • Succession is what keeps the mutual going
  • Small companies face huge issues today
  • New blood needs to be up to the challenge
  • New experience and training is critical today

30
QUESTIONS??
31
Would You Like a Copy?
  • Contact Tim Sullivan
  • TSullivan_at_NAMIC.org
  • or call Tim
  • (800) 336-2642
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