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Monthly Archives: June 2012

What do a drive in movie theater and Intellectual Property have in common?

 

Remember the days of drive in movies—those were some great memories! And so is the story of how the drive in movie idea began.

The first version of a drive in movie was started by Richard Hollingshead Jr. opened on a 10 acre backyard in Camden, New Jersey.  Richard was a sales manager in his father’s auto parts company and, as the story goes, had a mother that weighed 431 pounds and could not comfortably go to the movie theatres of the time.  Her son set up a make shift movie theatre by, using his car; a 1928 Kodak movie projector; and two sheets nailed between two trees for a screen

English: Carthage, MO Route 66 Drive-In Movie ...

. The idea caught on and became a popular way to enjoy a movie.

Eventually, he came up with a ramp in each parking space, so that patrons could elevate the front of their cars to see the screen without being blocked by other vehicles. Richard formed a company named Park It Theaters and charged 25 cents per person and 25 cents per automobile for a maximum of $1.00 per entry.

On August 6, 1932 the company applied for a patent on the idea and was granted a patent on May 16, 1933, patent #1,909,537. Hollingshead sold the theatre in 1935 and opened another one. Hollingshead licensed the “drive in movie” concept to Loews Drive-in Theatres, Inc. but from the beginning had trouble collecting the royalty payments from Lowes back in 1937.  Hollingshead sued Loews theatre for failure to pay royalties and patent infringement. After many years, actually in 1950, the patent was ruled invalid as it was alleged that Culver City, California theatre was really the first drive in theatre. (http://en.wikipedia.org/wiki/Richard_Hollingshead )

Putting this article into perspective, as relates to Intellectual Property, most people relate Intellectual Property to high-tech companies like Microsoft or drug companies like Johnson and Johnson.  We would not think that the “idea” of starting a drive in theater would be something that could be patented; or that liquid paper was patented; or the distinctive color of a Tiffany’s box is patented.  Intellectual Property goes further than just patents; it also covers copyrights; trademarks; trade dress; trade secrets and so much more. It is an exposure that many business customers have but is rarely identified and insured correctly.
In years gone by we looked to the CGL for some coverage on limited categories of IP but as the forms have changed the coverages have become more and more limited to the point that the coverage is close to non-existent.  As insurance professionals our job is to identify exposure and determine appropriate solutions.  There are a limited number of companies that have a real understanding of Intellectual Property and insurance policies with broad-based responses.  An important company to consider is IPISC who will be presenting the Insurance Community/University CE class this week.  For more information, the University will have an archived version of the class and a new checklist on IP will be loaded in the University this month.  You can also reach IPISC on their website at: www.patentinsurance.com.

 

Written By:
Laurie Infantino AFIS, CISC, CIC, CRIS, ACSR, CISR
President, Insurance Community Center, Insight Insurance Consulting

 

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Has the Insurance Industry Forgotten the Key Drivers of Success?

The sluggish organic growth the insurance brokerage industry is experiencing is certainly a consequence of the general economic downturn coupled with the continued soft insurance market.

However, for many firms this may be further exacerbated by a failure to understand the elements needed to achieve organic growth and a further failure to align their resources in support of progressively higher sales achievements by their production teams. This may have arisen from a lack of precision in measuring organic growth, the elements of which drive behavior and priority of resource allocation. Firms that do not correctly measure organic growth and distill from that definition pure organic growth and it’s implications to alignment of resources in support of producer sales achievement, will find it very challenging to solve the dilemma of sluggish sales.

This article will introduce the concept of ‘pure organic growth,’ and contrast it against traditional metrics and measurements of organic growth. We will demonstrate how measurements of organic growth can cause brokerages to stray from the focal point, or nucleus, of sales excellence, giving rise
to the adoption of ‘band‐aid’ approaches and short, quick fixes that do not generate sustainability in growth over time simply to maintain the perception of organic growth through what has now become a pervasive, and imprecise, definition within the industry. The effects of those short‐term approaches have, in my opinion, contributed significantly to the sluggish organic growth performance reported by the majority of firms in the industry.

Though contemporary measurements have provided value in evaluating and communicating overall growth results, by their very nature they can often mislead organizations into false conclusions about their ability to generate new clients, thereby drawing efforts and resources away from the vital areas of their operations responsible for new client generation. By examining the elements commonly used to track internal growth, it should be easier to create a better metric, which we will define as “pure” organic growth.

With a definition of pure organic growth in hand, we will then examine it’s foundations and implications which may suggest to some readers the need for refocusing efforts and resources within their organizations. Using pure organic growth as a premise, we will then suggest areas brokerages can examine within their sales infrastructure, and questions they can ask, that may help reveal the solution they are looking for in remedying sluggish sales.

The Traditional Way of Measuring Organic Growth

Let us first examine the industry’s commonly held definition of organic growth: “Net topline revenues year over year” as measured by the following components:

1. New/New business: measures converting non‐clients into clients
2. Net/New business: measures converting non‐clients into clients and deducts lost business for a producer’s book
3. New/Existing: from writing new business on existing clients, also referred to as account rounding
4. Cross Sell: writing new business between a firm’s practice groups, such as a new employee benefits client being generated from a firm’s existing property casualty client
5. Change of Book: measures the growth or decline in a client’s business, e.g., in employee benefits, the rise or fall of employee counts which impact the revenue generated from that client, as well as rise or fall of costs of insuring businesses given hard or soft market conditions or related factors.
6. Book Migrations: measuring the revenue gain newly hired producers bring with them, or departing producers take with them to their new organization as a positive or negative factor towards organic growth.
7. Book Purchases: measuring the revenue generated from a book that was purchased as organic growth.
8. Contingents: the measurement of rise or falls in contingent commissions as organic growth. And so the traditional components used to measure organic growth can be expressed by the following formula:

Organic growth = Net/New + New/Existing + Cross Sell + Change of Book + Book Migrations + Book Purchases + Contingents

Three Implied Components to Traditional Organic Growth

The contemporary formula used to calculate organic growth has three implied components:
1) outcomes generated that are directly attributable to producer achievements
2) outcomes generated that are an ancillary byproduct of producer achievements
3) outcomes that are not directly attributable to producer achievements.

Through these implied components we can begin to see problems and ‘traps’ that can draw resources and efforts away from new client generation.

New business, account rounding and cross selling are all direct outcomes from producer achievements. These actions lie at the nucleus of organic growth around which other components may be congregated on an additive basis. This measurement is the beginning of the pure organic growth theory. Focusing efforts and resources to support outcomes directly generated by producers will contribute to sustainability in organic growth.

Contingents are in ancillary outcome from producer achievements. As producers generate new business, a by-product can be an increase in contingent commissions, though other factors such as change of book can contribute equally, if not more in certain instances depending upon market conditions. However, it is a fallacy to consider a re‐negotiation of contingents as organic growth as it was not predicated on an increase in new/new, new on existing or cross sell activity. Focusing efforts and resources to support outcomes generated that are an ancillary by‐product of producer achievements will have no impact to sustainability in organic growth.

Book migrations and book purchases are non‐producer generated outcomes and have no correlation to individual production achievements – they are predicated on a firm’s ability to attract and retain producers either through direct hire or by the capital resources to purchase blocks of business. A
firm using this formula which actively hires or purchases books of business can post phenomenal organic growth results, yet have a lethargic non‐performing base of existing producers. For organizations that have focused their efforts and resources towards book migrations from recruiting efforts, and counting small book purchases as organic growth, what happens as capital dries up for book purchases and/or available talent pools of veteran producers who can migrate books continue to diminish?

Change in book is perhaps the most challenging to categorize, and, recently, it has had dramatic impact upon the industry’s organic growth experience. Does the producer have any direct control over hard or soft markets? Does the producer have any control over the rise and fall of businesses at the micro level or over economic conditions at the macro level? Can a producer, through due diligence in researching approachable prospects, attempt to pursue firms occupying sectors of industry that appear to show promise for growth? Can retail insurance brokerages with enough mass and infrastructure to support research departments and training facilities attempt to identify upcoming growth sectors and direct sales efforts towards those sectors? Can they re‐train segments
of their producer force to shift specialty away from declining sectors and toward high growth potential sectors?

So the issue of change of book is certainly a gray and murky area, and by definition, out of the direct control of producers, but also by definition, within the ability of producers and organizations to influence results or mitigate damages from these externally generated circumstances. Nevertheless, change of book has been the unpredictable but always significant ‘x’ factor within the retail insurance industry’s organic growth results – especially recently.

The Foundation of Pure Organic Growth Extracting a Definition That Will Provide Guidance to Resurrecting Industry Growth

The foundation of pure organic growth lies with the three types of business embedded in the traditional organic growth formula: New/new, new/existing and cross sell. However, the definition must add an important element in order to enable progression of achievement in those areas by producers and contribute to the sustainability of overall growth results achieved by an organization.

We define pure organic growth as:

“The ability of an individual producer within a brokerage to demonstrate progressively higher sales achievements year over year in new/new business, new/existing business and cross sell business.”

The definition is complete, and contributes to sustainability in organic growth results,
because it combines the following:
1) producer ability,
2) progressively higher sales achievements being generated, and
3) an organizational focus toward outcomes directly attributable to individual producer achievement.

Pure organic growth must use more precise measurements than the broad sweeping measurements used to determine overall organic growth, requiring that we focus on the sales pipeline (i.e., a list of prospects and revenues that might be expected from the closing of each transaction identified by each stage of the sales process) as the primary tool:

1) An organizational focus upon increasing the total volume of potential sales in each producer’s new business pipeline
2) An organizational focus upon increasing the average size commission/fees per client in each producer’s new business pipeline
3) An organizational focus upon shortening the amount of time taken to consummate transactions from the beginning of each producer’s sales pipeline to the end
4) An organizational focus upon measuring and openly communicating the commissions/fees derived from ‘won’ cases during the course of a 12‐month period for each producer

Measuring a Producer’s Sales Efforts As You Would Measure a Retail Store Located in a Mall – What to Look For So You Can Align Support Correctly.

To put the above four measurements into perspective, imagine that you just purchased a retail store in a shopping mall. How do you make progressively more money each year with that same store?
Perhaps you would:
1) increase the flow of foot traffic into the store
2) increase the average size sale per customer
3) increase the speed of inventory turnover
4) measure the total sales year over year as the final benchmark. The same principles apply at the micro level to managing pure organic growth.
Now what would happen to same store sales (organic growth) if you chose to spend all your time negotiating deals from your suppliers and forgot to manage the store (contingents)? How about spending too much time travelling and purchasing new stores in other markets at the expense of managing the store (book purchases)? So for organic growth to thrive, focusing on pure organic growth must be the primary driver.

Identifying and Supporting Progression in Producer Achievement

How can organizations align themselves to support progressively higher producer sales achievements? It’s all about producer development and the reallocation of resources to support progressively higher producer achievements in new client generation:

1) Assess your producer’s skill sets against those of the top 5% of performing producers nationwide. Essentially those generating in excess of $200,000 of new business per year. How do your producers match up? What skill sets do they have and what activities do they perform that match, and what’s missing? Determine ‘developmental areas’ that need remedy so that they are ‘mission ready’ for competing and achieving top sales results.

2) Assess your sales management processes and supporting sales infrastructure to determine if you can support top performers and help others achieve that status within your organization. Identify areas of producer activity that are heavily reliant upon your organization’s support mechanisms, and identify ‘choke points’ within your organization that may be hindering producer achievements.

3) Provide standing 12‐month sales training curriculums that support your producers’ desires to increase their knowledge, improve upon their skills, and develop new techniques and processes that will help them compete and win new business. A standing curriculum will benefit developmental hires by providing a training platform, existing producers by allowing them to improve upon skills and performance, and provide an ‘onboarding’ (new hire integration) platform for veteran producers brought into your organization in order to help them integrate into your culture successfully.

4) Perform sales planning and develop sales initiatives in accordance with the sales achievements your producers desire and reconcile them against your firm’s growth goals. This will ensure an alignment between efforts expended by producers with the desired results of your organization.

5) Re‐tool your supporting sales infrastructure constantly in order to accommodate upward shifts in desired achievements expressed by your producers each year. Structures designed for top producers not only tend to keep top producers, but also have a tendency to ‘pull up’ other producers towards that level of achievement.

A final note about pipelines…..I recognize that only a small percentage of producers update and manage their pipelines consistently! However the majority of the top 5% of the industry’s performers do! How can leadership drive the use of pipeline management into the lower ranks?

First, demonstrate that top performers swear by their pipelines. Second, bundle time management tools, research tools, Producer Sales Suites, Lead Relationship Management systems (LRM’s) and Client Relationship Management systems (CRM’s) to the pipeline making it more convenient and
useful to producers to research prospects and set up drip campaigns (or other forms of ongoing marketing or ‘client intimacy’ generating campaigns) and organize the tools they use when they transact their business. Third, tie the issue of leveraging organizational resources, human capital, training and development, etc., to the information the producer records in the pipeline. The pipeline must be established as the information ‘bridge’ between producers and their organizations. Such a bridge can identify and enable the procurement of additional resources to the producer. Once this is understood by producers, a pipeline will be used more frequently and pervasively throughout a production platform.

It’s About Enabling Progressively Higher Sales Achievements!

In summary, organizations that align themselves around increasing the individual producer’s ability to demonstrate progressively higher sales achievements year over year will win the organic growth game. Establishing producer training and development programs, combined with aligning organizational tools and resources to increase pipeline volume, transaction size and speed through the pipeline are the key elements to achieving pure organic growth.

Rainmaker Advisory LLC is a results oriented sales and operations consulting firm specializing in the retail insurance broking sector. Founded in 2008, Rainmaker has relationships with over 5,100 insurance agencies and brokerages nationwide in all practice specialties. Through offices in California, New York and Oregon, Rainmaker Advisory is a leading provider of the tools, resources and vendor partners necessary for successfully growing organizations on a sustainable basis.
For more information, visit www.rainmakeradvisory.com or info@rainmakeradvisory.com.

Written By:

David E. Estrada
Founder & Managing Director of Rainmaker Advisory LLC

 

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Intellectual Property is important to any effective Enterprise Risk Management Plan

It is crucial to any effective Enterprise Risk Management (ERM) plan that the right manager has a

Intellectual Property and YOU

comprehensive understanding of every significant exposure of the company, so these exposures are properly managed.

Insurance products covering companies’ obvious or perceived “popular risks” do not completely solve
companies’ potential risk issues. A proper ERM plan should ensure that a company is not taking on unnecessary, additional risk. Some companies choose to effectively manage risk; while others tend to expose themselves based upon a misconception of that risk, thus jeopardizing the company. One potentially costly exposure in particular is intellectual property (IP) infringement. If a company is sued for IP infringement, or is compelled to enforce their rights, such actions endanger its profitability and sustainability if it does not to have the funds to successfully litigate. As part of constructing an ERM plan, it is important to understand what the company’s IP portfolio looks like and address any concerns or potential exposures. IP is often a company’s most valuable asset, yet it is often seriously neglected during risk management reviews. Companies who knowingly or unknowingly self-insure their IP portfolios are potentially risking the future viability of the company. Patent lawsuits in particular average $2.8 million in litigation expenses alone, when the amount in controversy is $1 million – $25 million. Virtually every company has IP risk. Any company that is making, using, selling or offering for sale goods or services in commerce has IP risk. Likewise, many companies have established rights in patents, trademarks, copyrights or hold trade secrets, making IP risk management a critical part of constructing an effective ERM plan.
By following ERM’s five step process, IP risk can be identified, and a plan can be put into place that makes the most sense for the exposure. Identify the risk:

Companies must proactively identify any potential IP risk. It does no good to ignore or discount the costs and consequences surrounding IP litigation.

Determine the projected impact of the risk:
Bottom line – determine if the company can, in fact, afford to self-insure an IP lawsuit if it is sued for infringement or forced to pursue an infringer.

Proper risk evaluation:
Intellectual Property risk can be a significant threat to a company’s survival. The lack of properly evaluating and
mitigating IP risk through specific IP insurance products could lead to the company losing its IP rights, incurring
burdensome royalty payments under licensing agreements, being forced to settle or going out of business.

Steps to mitigating IP risk:
Get an IP plan together by determining which IP insurance policies are right for the company. If the company has patents, trademarks or copyrights, they should consider an IP Enforcement insurance policy. All companies have the potential to be sued for IP infringement. A company is vulnerable if it is simply making, using or selling a product and/or service, especially if it holds sought-after technology on products and/or processes. These risks can be managed through the IP Defense insurance policy. As part of IP risk mitigation, companies must plan for the unexpected event of the loss of an insured IP lawsuit. If that lawsuit is lost, companies must already know if there are additional funds available to make it whole again through a Multi-Peril Insurance policy.

Take the time to monitor the plan:
Take the time to ensure the plan is constantly meeting the needs of the company. Be cognizant of the fact that as the company evolves, so too will the plan potentially need to be altered to fit the company’s current situation.
It is crucial to any effective ERM plan to have a comprehensive understanding of every exposure to the company, as well as the certainty that these exposures are properly managed through appropriate risk management products. Properly evaluating risk by including IP in the company’s ERM plan ensures the resources will be available to fund the high cost and consequences of IP litigation.

~IPObserver

 

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Understanding Coverages and the Insurance Sales Process

I recently attended a seminar where the speaker before me was speaking on Sales and Increasing Your Bottom Line.

He went through several charts of what was important to the client and important for the selling broker/agent to understand to make the sale and create the long-term relationship. The presenter put up the chart that contained several “bubbles” of what might be important. When he pointed to the “bubble” with “knowledge of the insurance products” he asked the audience how important this was to their potential or current client. A boisterous “not important” rang out from the first two rows. The presenter then put an X through the bubble and moved on.

In all my years of sales, which dates back to the early 1970’s that bubble was the one that had a big red check mark on it . Back in the “olden” days when I started there were not nearly as many schools and methods to really learn insurance. I was blessed with a mentor that not only was a true student of insurance but also a CPA so he brought the technical and financial piece into a cohesive sale. This is not to discount the importance of all of the “sales” training that we all need to know how to get our foot in the door, close the door to the sale and maintain it year after year. But without knowledge of the product and the ability to communicate that to the customer we become just sales people and not business partners with our insureds.

We know that any sale begins with getting “your foot in the door” and that is difficult enough but only affords you the opportunity to present your qualifications and convince the prospect that you are the best person/firm to handle their account. This is a very difficult first step but each of you in the insurance industry want the opportunity of working with the more sophisticated and higher paying premium account.

Many of you in the community know Marjorie Segale. She is a partner (co-creator) of the Insurance Community Center/University LLC and the President of Segale Consulting. Part of her consulting practice is to work with larger insurance buyers in choosing the appropriate broker to handle their account. She may work with them directly or with their risk manager. She goes through an extensive vetting process in matching up the right agent/broker with the account. Marjorie has given the community permission to include her “Criterion for Selecting Your Insurance Agent/Broker.

P. S. from Marjorie
I built my agency on the basis of insurance technical skill. There will always be price shoppers. There is no law that says you have to be just a price seller. Those buyers will still line up to sue you if a loss is not covered because no one is ever grateful for that cheap policy that doesn’t cover their claim.

Click Here to View the Criterion Checklist
http://www.insurancecommunitycenter.com/samples-checklists/Hiring-an-Agent-Broker-Qualification-Form.docx

Written by:
Laurie Infantino AFIS, CISC, CIC, CRIS, ACSR, CISR
President, Insurance Community Center
With Checklist by:
Marjorie Segale AFIS, CISC, CIC, RPLU, CRIS, ACSR, CISR
Director of Education, Insurance Community Center & President, Segale Consulting Services, LLC

 

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