Matt McClellan

Tuesday, 05 July 2011 17:12

How an executive MBA can work for you


As a thoracic and cardiovascular surgeon, Director of Women’s Cardiac Services at Saint John’s Medical Center, mother of two boys, wife of a liver transplant surgeon, philanthropist, author and businesswoman, 2006 graduate of UCLA Anderson’s executive MBA program Kathy E. Magliato is a skilled multitasker.

“Having five plates spinning in the air at once is something Anderson teaches you,” Magliato says. “The expectation at Anderson is that you will be able to maintain your personal and professional life while still being able to commit to the workload of the executive program. With this expectation, however, comes the full support of the UCLA faculty and your fellow classmates to ensure everyone’s success within the MBA program.”

Smart Business spoke with Magliato about how to fit an MBA into your busy life without sacrificing career or family, and how the experience will change you.

How did an executive MBA enable you to achieve your goals?

When people ask me that question, my answer is simple. The best way I could describe Anderson’s executive MBA program is that it was a springboard for my mind. I don’t mean that as a cliché; I mean that very honestly.

As a physician coming into the program with very little business experience, it broadened my horizons within the business community, but it also caused me to think a different way. I think differently; I approach problem-solving differently having the skill set I achieved with my MBA.

I remember floundering in one of my business classes when the dean took me aside and said, ‘Kathy, you don’t see this now, but you will leave here having learned and absorbed more than anyone else because you came here with the least amount of business knowledge.’

In general, whatever level of business experience you have when arriving at business school, you will definitely be at a much higher level when you leave. I came in at the ground level, but people coming in at the fourth floor will leave at the 10th floor.

How would you describe your executive MBA experience?

The Anderson community is a world-class institution. I sat across from some of the brightest minds to which I have ever been exposed. The people chosen through the admissions process are all at the top of their game. I learned as much from my fellow students as I did from the extraordinary professors. By using the Socratic method in class — which was completely different for me, as I was used to rote memorization in medical school — I was able to learn not just from the professor, but also from the students sitting next to me.

The professors were bright, insightful, unbelievable communicators. They have a passion that made you want to learn about what they were discussing. It was important to me to understand what they were talking about.

The curriculum was a balanced yet diversified portfolio of subject material. Since 2006, when I completed my executive MBA, the program has continued to grow and has become much more diverse and more multifaceted. As an example, the international business program focused either on China or France when I was at Anderson. Now, the sky is the limit in terms of international business exposure. That program has really blossomed. It’s a testament to Anderson’s continuous commitment to further develop and broaden the curriculum.

Why was this particular program a good choice for you?

I thrive on challenge and Anderson’s executive MBA program sets the bar very high. They drive you to be your best, but in a way that is completely supportive. There is this feeling it creates, a feeling which says ‘I am going to come into class and do my best today, and if I can’t get there, then help is available to get to that level.’

From the aspect of being a woman — it’s a gender-neutral program. I come from a very male-dominated profession, and I found it quite refreshing to be in a classroom setting where gender was not an issue. The women in the class thrive as much as the men.

Also, many women considering an executive MBA wonder ‘How can I fit this into my plans to have a family?’ Anderson was incredibly accommodating and supportive when I chose to have a child during the second year of school, which was unique.

How have you benefited from the UCLA Anderson alumni network?

The alumni network is very powerful and far-reaching. I would feel comfortable calling any alumni from Anderson and discussing business ventures with them. Personally, the alumni network has helped Michael Whitt, PhD, a fellow ’06 alum, and I develop a business centered around a medical device patent we put together at Anderson as part of a project for an entrepreneurial studies class.

What lessons learned in your executive MBA program have you been able to implement in your career?

One of the major lessons I took away from Anderson was the importance of branding. Each of us as individuals has a brand. You need to figure out what your brand is, and determine how to use that brand to its fullest.

It really took an MBA to figure out what my brand should be and how to best leverage it. After leaving Anderson, I wrote a book, ‘Heart Matters,’ which became a platform for me to leverage myself as a nationally recognized authority in heart disease in women. So now, no matter what I am doing — being a mom, running our medical device company, Cordex Systems LLC, raising money for venture capital and other startups, being a full-time heart surgeon or doing media events — I’m also constantly developing myself as a brand and aligning myself with that brand. That’s a life-long lesson I learned from Anderson.

KATHY E. MAGLIATO, M.D., MBA, FACS, is Director of Women’s Cardiac Services at Saint John’s Medical Center and President of the Greater Los Angeles County American Heart Association Board of Directors. Her book, “Heart Matters: A Memoir of a Female Heart Surgeon,” is currently available in paperback. Her website is

More and more companies are using network-based or cloud-based “virtual” solutions to lower cost and increase efficiency within their telecommunications environments.

“When you are dealing with limitations in hardware, software or staff, cloud-based virtual solutions can do in minutes what takes hardware and software solutions months and millions of dollars to pull off,” says Elan Crane, vice president of systems and virtual solutions at Simplify Inc. “The right team of engineers and integrators will strategize, design, prove concept, build, test and implement new systems or augment existing systems. Very few advisers in this space have been providing virtual solutions for more than a few months or years, and still fewer have ongoing innovation and strong support.”

Smart Business learned more from Crane about why virtual solutions are important, and in what situations they can help your business.

What telecommunications challenges are enterprises facing today?

At the end of the day, enterprises are faced with managing today’s processes and demands. They are doing more with less, listening to everyone else’s great ideas, then being left with the question,  ‘How do I even begin to stay competitive, grow functionality, ensure redundancy, and make my vision for a better company become a reality?’ Before most can even answer that question, a new fire  pulls  them away once again.

You need resources, you need budget, you need a proven trusted adviser to simply get your ideas for improvement properly vetted out so you will have the ability to say ‘Yes, we can do that for you.’ Of course you want to; so does everyone else.

There are three key components that give a company the ability to stay competitive and stimulate growth.

  • Resources
  • Budget
  • Ideas

A strong presence in each of these three components is essential to thrive in today’s environment. However, it seems that constraints on resources and budget create headaches so strong that new ideas get continually buried under the rubble of day-to-day operations, making solid initiatives seem more elusive.

What are some of these telecommunications headaches and how can companies avoid them?

Every company has its own set of unique headaches. Today’s technology executives must juggle:

  • Doing more with less
  • Ensuring best practice approaches
  • Cutting costs
  • Technology limitations
  • Accountability

The big question now is not ‘How can I create a headache-free environment?’ The real question companies should be asking is ‘How can I utilize existing resources to equip the company assets with the solutions that drive revenue while staying within budget, thus minimizing headaches?’ This is where virtual solutions really shine.

How can virtual solutions help alleviate some of these issues?

Things have changed in the world of telecommunications. I’m not saying put all your headaches in the ‘cloud,’ then everything will be better. Even the cloud, as good as it can be, has many thunderstorms in it. For example, if the network infrastructure reaching your cloud is not properly designed and deployed, customers will consistently suffer trying to reach your applications. It’s critical you have an accountable, trusted adviser for carrier services as well as to ensure the cloud solution, network and existing systems all work well together with appropriate business continuity.

It’s more than just creating a headache-free environment. It’s equipping company assets with resources to drive revenue without bloating your budget or head count. Virtual solutions help put you in control. What if you could whiteboard a list of solutions with proven expertise detailing your company’s pain points and opportunities? What if, after the team agrees on what’s best for your business, the group of experts created custom solutions to your problems within days? Imagine tools immediately providing results you thought impossible to purchase or build yourself.

Virtual solutions allow you to solve problems while complementing the elements in your existing infrastructure that still work well. They allow you to fill the technology gaps with someone else who takes responsibility, maintains accountability and creates those tools for you to control.

How do virtual solutions work?

Network-based, virtual solutions can replace the need for new hardware or costly hardware upgrades, offering immediate and long-term savings of capital expenses, operating expenses, equipment maintenance and education. A customized, ‘in-the-cloud’ solution allows you to quickly implement enhancements to your infrastructure, be it your voice communications network, your core servers/applications, or simply gaining control over outsourcing initiatives. A good virtual solutions team will take the time on the front end to listen, collaborate and understand your unique goals before providing you with a customized toolset that turns ideas into concrete reality.

For similar services, you could expect to be hit with hundreds of consulting hour charges that only yield a limited option set to almost meet your needs, leaving you with a large capital expense and increased operational expenses to accommodate the ongoing costs. At Simplify, our customers have been able to leverage their commodity costs to avoid the up-front charges most competitors just can’t get away from. While the buzz around cloud-based, virtual solutions is relatively new, they aren’t new to us. We have been providing highly scalable, on demand, unique virtual solutions for more than 10 years simply as a value add.

Elan Crane is vice president of systems and virtual solutions for Simplify Inc. Reach him at or (281) 465-6007.

Health plans and health care providers are always working to improve patient outcomes and, ultimately, reduce costs. And one of the latest ideas that is generating buzz is the Accountable Care Organization.

“The creation of ACOs would make providers jointly accountable for the health of their patients,” says Sally Stephens, president of Spectrum Health Services. “Health care providers will receive strong incentives to cooperate and reduce costs by avoiding unnecessary tests and procedures. If they successfully reduce costs while also meeting quality targets, they will be able to keep a portion of the savings.”

Smart Business spoke with Stephens about how ACOs work and what their eventual impact may be on employers, employees and the health care delivery system.

What is an ACO and how does it work?

According to the Centers for Medicare and Medicaid Services (CMS), an ACO is ‘an organization of health care providers that agrees to be accountable for the quality, cost and overall care of Medicare beneficiaries who are enrolled in the traditional fee-for-service program who are assigned to it.’

Under the new health care law, an ACO would agree to manage all health care needs of a minimum of 5,000 Medicare beneficiaries for at least three years. Unlike our current health care system, in which patients are getting each part of their health care separately, ACOs are designed to reduce costs and improve quality of care through cooperation and coordination among providers.

Why are ACOs becoming more prominent?

As part of the new health care law, many providers — mostly hospitals and physician groups — have embarked on a quest to quickly implement ACOs. And, as lawmakers search for ways to reduce the national deficit, Medicare has become a prime target. As baby boomers enter retirement age, the cost for programs for elderly and disabled Americans is expected to soar.

ACOs would make providers jointly accountable for the health of their patients, giving them strong incentives to cooperate and save money by avoiding unnecessary tests and procedures. For ACOs to work, they would have to cooperate and seamlessly share information. Those that save money, while also meeting quality targets, would keep a portion of the savings.

Health and Human Services estimates that ACOs could save Medicare up to $960 million in the first three years. That’s far less than 1 percent of Medicare spending during that period; but if the program is successful, it can be expanded by the secretary of Health and Human Services.

How can ACOs affect employers, employees and the health care delivery system?

While the main focus is on the Medicare population, ACOs may also service private insurance as offered through employers. ACOs promise to provide a solution to the ‘serious gaps in quality and widespread waste’ within the health care system. The ACO model is designed to address the lack of financial incentives for reducing costs while improving quality, coordination and consistency of care.

What factors must be met for a health care provider to consolidate to an ACO model to satisfy reform legislation?

Requirements as outlined in the new health law state that ACOs:

n Must be willing to become accountable for the quality, cost and overall care of the Medicare fee-for-service beneficiaries assigned to it.

n Shall enter into an agreement with the secretary of Health and Human Services to participate in the program for not less than a three-year period.

n Shall have a formal legal structure that allows the organization to receive and distribute payments for shared savings to participating providers and suppliers.

n Must include a sufficient number of primary care professionals for the number of Medicare fee-for-service beneficiaries assigned to the ACO.

n Must, at a minimum, have at least 5,000 such beneficiaries assigned to it in order to be eligible to participate.

n Will provide the secretary with information on participating professionals as the secretary determines necessary to support the assignment of Medicare fee-for-service beneficiaries to an ACO, the implementation of quality and other reporting requirements and the determination of payments for shared savings.

n Shall have a leadership and management structure that includes clinical and administrative systems.

n Must define processes to promote evidence-based medicine and patient engagement, report on quality and cost measures, and coordinate care to remote patient monitoring.

n Shall demonstrate that it meets patient-centered criteria specified by the secretary.

What challenges does the ACO model face before becoming mainstream?

Because few ACOs exist, it is difficult to know how effective they will be. In theory, ACOs provide financial incentives to health care organizations to reduce costs and improve quality. Some skeptics feel that, given the complexity of the existing system, ACOs may fail because they will most likely exacerbate the very problems they set out to fix. Many health care economists fear that the race to form ACOs could have a significant downside in hospital mergers and provider consolidation.

As hospitals position themselves to become integrated systems, many are joining forces and purchasing physician practices, leaving fewer independent hospitals and doctors. Greater market share gives these health systems more leverage in negotiations with insurers, which can drive up health costs.

In the end, ACOs could suppress competition and entrepreneurship, which are so vital to innovation and job growth.

Sally Stephens is president of Spectrum Health Services. Reach her at (317) 573-7600 or

Strong business skills alone are not enough for business owners who want to grow their businesses. They must implement strategic plans to help them meet that goal. Sometimes owners get so focused on day-to-day operations, though, that they let the future take a back seat to the present — and what lies in between.

As hard as it may be to find the time to plan, they should develop measurable short-, mid- and long-term goals, link short-term goals with long-term outcomes, develop realistic budgets and financial forecasts, tie objectives to measurable actions and establish road maps for their strategic growth. That is strategic planning, the process of developing a methodology and making it the company’s way of life. How do they do that?

Smart Business spoke with Kenneth M. Haffey, CPA, CVA, a partner with Skoda Minotti, about strategic planning and how it can enhance a business’s chances of success, durability and growth.

Why is strategic planning important?

It gives business owners an idea of what they want the company to look like in the future and how they are going to get there in the most efficient, effective way. If they don’t engage in the process, they might find themselves losing ground to their competitors who do. They may not be nimble enough or quick enough to make changes within the organization or to match their competitors’ strategies as the market changes around them. They are left on the outside looking in as opportunities arise — and pass them by.

Is it an ongoing process?

Yes. One of the key things to remember about strategic planning is that it is a very fluid process. It provides a sanity check for owners to make sure that things are moving forward, rather than stagnating.

Business conditions change; owners have to change with them. If they don’t have a plan in place that can be executed quickly to help them adapt to changes, they will be ill prepared to function in a competitive market, let alone survive or grow. Owners have to establish regular touch points in their strategic plans to make sure that things happen in a timely fashion and that change can follow.


Does strategic planning involve both long- and short-term goals?

Definitely. Plans should go out for at least 24 to 36 months to address the fluidity in business cycles. They should also contain components that address the next six to 12 months. In any case, they should reduce the impact surprises can have on businesses when changes occur. After all, eliminating the adverse impact of surprises is one of the purposes of strategic planning.

Does it follow specific formats?

Not at all. It can be as simple as writing notes on a napkin or as formal as sitting with partners, managers and other key people to brainstorm, write down ideas and feed them to a software package designed specifically to create a strategic plan. The important thing is not how strategic planning is done; rather, it is that the process is performed on an ongoing basis with the company’s future in mind.

How do companies benefit from it?

In addition to growth, it results in improved operations, expanded market share and increased company value and it enhances the ability to take advantage of opportunities as they come along. A match between being strategic and opportunistic is the best place for business owners to be when running a company. The same holds true for managers of divisions, departments and other units within the company. And, it is important to note that strategic and opportunistic must complement each other.

Some people get caught up in the opportunistic part but don’t have strategies in place to take advantage of opportunities when they arise.

Opportunists without plans find themselves reacting rather than ‘proacting.’ That is not where they want to be. Strategic planning also enhances a company’s competitive position. The organizations with the best strategic plans tend to be those that react most quickly and most efficiently to market changes. They also tend to be the ones with leaders who focus on everyday operations and future opportunities simultaneously. Strategic planning allows them to do both.

Who should be involved in it?

The primary person is whoever is responsible for the operation of the business. Depending on the type of organization, others who should be involved include financial, operations, marketing and sales. Some companies might benefit from working with consultants to gain an external view of market forces and how they fit in to the overall competitive picture.

In short, the process should include the business leaders of the different departments and areas throughout the organization. The inclusion of these leaders enhances the chances that the result will be the organization’s plan, not the boss’s plan. In fact, that should be one of the goals of strategic planning.

Kenneth M. Haffey, CPA, CVA, is a partner with Skoda Minotti. Reach him at or (440) 449-6800.

In the past, the term “merchant services” essentially meant credit card processing. Today, it has evolved into much more than that. Check processing, mobile phone applications and remote capture technology are all part of the merchant services world, and all add value to a business’s bottom line.

“As technology expands, it becomes easier and more effective for companies to complete transactions, reduce costs and receive payment quickly,” says Michael R. Meola, Vice President of merchant sales for FirstMerit Bank Merchant Services. “It’s all about enhancing cash flow.”

Whether your business model is traditional retail, business-to-business or E-Commerce, there are benefits to talking with your bank about merchant service products.

Smart Business spoke with Meola about how changes in merchant service capabilities can create efficiencies, enhance customer service and potentially offer cost savings.

What are some of the latest advances in merchant services?

There have been major improvements to check processing. If you go to the bank and deposit a check, a ‘hold’ could be placed on the funds until the check clears — a process that could take two to ten days. With certain check products that exist in the merchant world, you have the ability to receive funding by the next business day, without actually taking the checks to the bank. The merchant terminal converts the check into an electronic item through a process called electronic check acceptance. A sales associate would hand the check back to the customer, who would then sign a credit card receipt. The check is then processed as an electronic item through the merchant’s credit card terminal. This process can offer a cost savings to the business by not having to send someone to the bank to make a deposit.

There are also check processing capabilities called remote deposit capture terminals. It’s not a credit card terminal, but a device which simply takes an image of a check, creates an electronic file and forwards it to the bank for processing. Again, no one has to physically go to the bank, potentially reducing expenses for the merchant or business.

How are mobile technologies impacting merchant services?

In retail sales, there are new iPhone and BlackBerry applications for which the device itself can be programmed to process credit cards. Imagine you’re in a store and an associate pulls out an iPhone and swipes your card right there. Customers can pay for transactions where they stand. That’s the environment we’re in. By the time they walk back to the register, the receipt is printing. It provides great customer convenience, and that service will hopefully bring customers back.

This technology assists businesses in non-traditional sales, such as residential and commercial contractors. These businesses would no longer have to generate an invoice and wait for payment. If you had an iPhone or BlackBerry with credit card processing capabilities you could get paid today. The invoice is paid on the spot, eliminating the wait for payment, and the resulting cash flow enhances the bottom line.

These capabilities can also help a company better manage its receivables. By accepting credit cards as payment, it eliminates the need to perform due diligence to determine if a customer is creditworthy.

How can these technologies assist companies who do business in an E-Commerce environment?

No longer does a business have to pay extensive overhead for a brick-and-mortar location. Many companies use the phone or the Web to drive business. The Web, in particular, has become very cost-effective, with companies using credit cards as the only source for payment. Credit card processing in an E-Commerce environment creates efficiencies and reduces operating costs while not having to maintain a storefront.

How do these efficiencies affect businesses?

Mobile technologies provide the merchant a lower fee structure, resulting in lower transaction costs. E-Commerce businesses are able to conduct business without having the expense of the traditional brick and mortar. The bottom line: these advances in technology drive customer satisfaction, offer added convenience and provide efficiencies and cost savings.

What are some of the features and benefits of FirstMerit Bank’s merchant services?

Some of the features include:

Community-based sales and service teams (unique).

No out-of-country or third-party call center.

Alternative product offerings, such as telecheck and gift cards.

Often next-day availability of funds.

Online access of credit card transaction processing information.

Competitive pricing alternatives.

Benefits include:

Relationship based — ongoing assistance when needed.

Assistance with PCI compliance.

Assistance with fraud and risk mitigation.

Training for optimal card processing practices.

MICHAEL R. MEOLA is Vice President of merchant sales for FirstMerit Bank Merchant Services. Reach him at (330) 996-8036 or

Self-insurance is an alternative rating plan offered by the Ohio Bureau of Workers’ Compensation (BWC) for large private and public employers that are in a position to take on the responsibility of paying all compensation and medical payments for their injured workers.

In return for taking on all that risk, self-insuring employers have more control over their program and can reduce their overall workers’ compensation costs.

“A self-insured employer can self-administer its own program or administer the program along with its third-party administrator, and can realize potential savings in comparison to state fund premiums paid directly to BWC,” says Bill Bradbury, vice president of Self-Insured Sales and Client Services for CompManagement, Inc.

Smart Business spoke with Bradbury about how to determine whether self-insurance is the right choice for your company.

What are the requirements in Ohio for becoming self-insured?

To be able to self-insure, BWC requires that an employer have a minimum of 500 employees within Ohio, pay premiums within the Ohio state fund for at least two years, show the ability to administer a workers’ compensation program, and demonstrate strong financial stability. Financial requirements differ between public and private employers for self-insurance qualification in Ohio.

What should an employer consider in regards to self-insuring?

First and foremost, an employer should contact its third-party administrator to request a ‘feasibility study.’ This study will identify both the savings and costs of becoming self-insured in order to help the employer make a sound financial determination.

An employer needs to consider if it is set up to handle a self-insured program and is able to meet all of the responsibilities required by BWC and also if it is comfortable with the liability assumed with paying benefits directly. Employers should understand that self-insurance is not an immediate quick fix to reducing their annual premium, but can be a long-term benefit towards reducing overall workers’ compensation costs.

What are the advantages of self-insurance?

Self-insurance as an option has a number of advantages for an employer such as:

n More control of your program, immediate payment of medical and compensation, and employee recognition on the delivery of benefits by your organization versus BWC.

n Cash flow and budget control: pay claims as they occur versus a premium paid every six months based on payroll and claim experience; reserve on claims can be established and managed with the same philosophy of the employer along with input from its TPA versus the state-funded MIRA system; and the ability to budget based on actual claim experience.

n Medical management: review claims for appropriateness of treatment, utilization of preferred provider organization (PPO) networks and control of medical provider requiring justification of treatment in writing; utilization of effective prescription program; and claim and nurse case management develop timely expectations on return to work and treatment plan.

n Analysis of expense: reports can be generated immediately with accurate analysis; and flexibility in reporting losses by employer, department, shift, causation codes, etc.

What are the disadvantages of self-insurance?

Employers should be cognizant of three areas when approaching self-insurance:

n Financial stability: employer has unlimited claims liability (without purchase of excess insurance) as there is no maximum value of a loss as there is within the Ohio state fund system; responsibility of payment of claim expenses (including allocated expenses); and payment of excess insurance premiums and BWC self-insured assessments.

n Loss of State Fund Benefits: an employer no longer receives managed care organization services or BWC Safety & Hygiene services that are covered by its annual premium; in addition an employer can no longer receive handicap reimbursements and rehabilitation funds, and is no longer able to participate in premium discount programs offered to state fund employers.

n Responsibilities: all self-insured employers are expected to make timely payments of compensation and medical benefits, have an internal claims administrator, have a consistent date stamping process and ability to maintain claim files in an orderly manner, and will be audited by the BWC to ensure compliance with all program requirements.

How do I know if my organization is a good candidate for self-insurance?

An employer can get started by performing a simple financial measurement comparing its premium paid to the BWC for the past four years to its actual claim losses (as shown on its Experience Report provided annually by BWC). If premiums paid are higher than actual claim losses and it is a sizable employer, then a ‘feasibility study’ that can typically be prepared by any full-service third-party administrator should be completed. That study will compare an employer’s estimated state fund costs to the estimated costs of a self-insured program within a projected five-year period.

Be sure that all costs are captured in the feasibility study including those for BWC assessments, the self-insured guaranty fund, excess insurance and claims management administration fees. Investment earnings should also be accounted for.

In the end, if the savings projected outweigh the costs associated with participating in the state fund at a risk tolerance level acceptable to your organization, self-insurance may be a good option to affect your overall bottom line operational costs.

Bill Bradbury is the vice president of Self-Insured Sales and Client Services for CompManagement, Inc. Reach him at (800) 825-6755, ext. 2407, or

The average American drives 12,000 miles each year and has a one in 15 chance of being in an accident.

Other statistics: Drivers using cell phones are four times more likely to be involved in accidents serious enough to injure themselves. Every 10 seconds an injury occurs in an automobile. Every 12 minutes someone dies in a motor vehicle crash.

“Every mile you drive, you are testing statistics,” says Jonathan Theders, president of Clark-Theders Insurance Agency Inc. “The U.S. Bureau of Labor Statistics showed that 41 percent of all work-related fatalities involve a motor vehicle, and vehicular accidents are by far the leading cause of death among employees.”

Smart Business spoke with Theders about how providing driver training to your employees can protect you in case of an accident, and how to get your employees on board.

Why is driver safety an employer responsibility?

Motor vehicle crashes cost employers $60 billion annually in medical costs, legal expenses, property damage and lost productivity. OSHA just released new guidelines for employers to help reduce motor vehicle crashes with 10 steps to create an effective driver safety program in the workplace (

These are guidelines, not regulations, so you can’t be fined for not using them. But employers need to know these guidelines, because the attorneys that get involved following an accident will know. It could be the future of what you have to do.

How can employers address this topic?

When an employer talks about driver education, employees tend to roll their eyes because it’s kind of boring and they think they already know everything. They’re thinking, ‘I’ve been driving since I turned 16. Do you really think you’re going to refresh my memory on how to drive?’ Because of this, most employers don’t address it or they tip-toe around it. But when you see those statistics, they force you to have that conversation.

I compare driver education to professional basketball. Michael Jordan consistently practiced shooting lay-ups. The lay-up is one of the easiest shots to make, but even the best player still needed to practice it, because it’s fundamental. Defensive driving and driver training are practicing the fundamentals. It may not be the most exciting thing to learn, but it’s going to produce a good driver.

Statistics show employers that don’t provide training have more vehicle accidents, have a much higher liability and are looked upon less favorably by the courts than those who do provide regular driver training as good stewards for society.

The courts and juries realize we are all taking risks. But if companies do not provide training, heavier punishment is likely. Conversely, if an employer had been taking steps to improve driver safety, a more favorable settlement is possible.

What areas should a safety program focus on?

The key to defensive driving is the cushion of safety. That is the space around your vehicle and what you do to keep people away from your vehicle. The space in front of your vehicle is the most critical in terms of your liability, because you have control of it. You have less control of drivers coming up alongside or behind you.

For cars, the typical following distance for the cushion of safety is two to three seconds. When you see the car in front of you pass a fixed object, like a road sign, count three seconds. The front of your bumper should not cross that fixed object before you finish counting. That is under ideal weather conditions. Rain, snow, and night driving slow your ability to react, so you should add time in those situations.

If you are driving a cargo van or a vehicle with more weight, you will need four seconds or more. If you notice people tailgating in front of you, give yourself more time, because that person will not necessarily have the stopping distance they need if an accident happens. Your perception of the distance between cars, your reaction time and the time your car needs to brake all need to be factored into your stopping distance. Drivers should pay attention and adjust accordingly.

What else can be done to improve driver safety?

Know where all your controls are before you begin driving. When you rent a car, don’t be embarrassed to ask how the turn signals or wiper blades work. Normally, when you get in a rental car you are in such a hurry that you just grab the keys and run. Take the time to familiarize yourself with the vehicle’s controls.

Also, secure loose objects such as water bottles, purses or paperwork. If you have to abruptly brake and objects shift, your natural tendency is to take your hand off the wheel and grab the object. You can’t plan for that, but you can secure items to try to prevent that from occurring.

What can be done to improve distracted driving?

Distracted driving focuses on cell phone use and texting. Those are the main issues, but distracted driving is anything that takes your eyes off the road, your hands off the steering wheel or interrupts your concentration.

Twenty-eight states have banned texting while driving. The federal government has banned texting in commercial vehicles. But it’s difficult to determine if someone is texting or dialing a phone.

In Kentucky, it is illegal to text while driving and cell phone use for under-18 drivers is illegal. In Ohio, other than the federal ban on texting in commercial vehicles, many municipalities have passed restrictions. There is no statewide ban yet, but it is coming.

Some states have banned cell phone use unless using a ‘hands-free’ setup. However, a study from the Insurance Institute for Highway Safety proved that hands-free has very little impact on your ability to be less distracted. State regulated or not, it is critical that employees understand and practice company policy when it comes to cell phone use and driving.

Jonathan Theders is president of Clark-Theders Insurance Agency Inc. Reach him at (513) 779-2800 or

The U.S. economy has traditionally been product based, with companies increasing revenue by selling more products. However, as technology has expanded, the emphasis has shifted, says Kevin P. Kalinich, Co-National Managing Director of Aon Risk Solutions’ financial services group.

“There has been an evolution and transformation in the economy from product based to service based, and an increasing reliance on electronic data,” says Kalinich. “These two changes apply to all companies, both product and service oriented. As a result, analysis has determined that more than 75 percent of an entity’s value is in its information assets.”

Smart Business spoke with Kalinich and with Martha Jacobs, a Senior Vice President with Aon’s Financial Services Group, about how to protect your company’s valuable information from cyber threats.

What is cyber liability?

Cyber liability is the potential exposure of losing, destroying, or unauthorized disclosures of that goldmine of data. The data can be trade secrets, customer lists, or third-party data, such as customers’ personally identifiable information, credit card, Social Security or bank account numbers.

The unique exposure issue with cyber liability is that it is not based on the size of your company. If you look at directors’ and officers’, property insurance or general liability, the biggest factors are the capitalization of the company, revenue or amount of property. Analyzing these factors is how you evaluate exposure. With cyber liability, a small or medium-sized company could have catastrophic amounts of data.

What are the most common cyber threats?

The highest profile threats are hacking attacks. Third-party hacker attacks are getting the most attention now that the federal government created a cyber protection policy and is promoting an international strategy for cyber space. The larger exposure is social engineering, which is the negligence of entities in dealing with their data and mistakes people make apart from any IT security issues.

Both types of exposure can be addressed. To combat third-party hackers, entities must understand the best methods for risk mitigation. Companies can also ensure they have the best IT standards implemented.

For insider or negligence exposures, training and implementation of those practices is still important, but so is human behavioral engineering. When your HR department employees interview someone, are they trained on what they should or shouldn’t be doing? Do you have annual usage monitoring of employee computers? Do employees take an updated training course every year and click a box stating they understand the company’s data protection policy? While third-party hacking is more about IT security and encryption, there are more policies, procedures and guidelines involved in avoiding negligence.

How can employers fight these threats?

The first steps are identifying critical information and classifying the data. Critical information could involve credit card numbers for a business, patient information for a medical organization, or student information for an educational institution. You should classify critical data versus not-as-critical data, such as e-mail addresses or addresses without personal information. Once you classify that data, treat it differently. Different people might have access or there might be different protections; for example, critical data may have 100 percent encryption.

Why is it important to classify lower-priority data as less critical?

Because of cost and efficiency. You can paralyze yourself if key employees don’t have access to the data they need to do their jobs efficiently without being burdened. There is also a greater cost involved to implement more stringent IT procedures. It’s just not practical for everything to be 100 percent encrypted.

How can cyber threats hurt your company?

You can have third-party liability for the breach, in which you must pay defense costs and indemnity for individuals who have been harmed. You can have a loss of reputation. Also, there could be fines and penalties from government authorities, HIPAA, or credit card companies. Data exposures introduce a number of potential lawsuits.

How can companies determine if they need cyber liability insurance?

There are a few issues to handle before considering insurance. Most entities have outsourced information and you have to make sure that third-party vendors are in compliance with your IT security protections. You need a representation and warranty from the vendor stating that its company is up to standard and will hold harmless and indemnify you, because it has your critical data.

Contractual allocational liability is a critical component of the risk transfer, because cyber insurance is based on how much exposure the entity has versus how much is outsourced to third parties and how liability is allocated.

The next step is drafting and implementing a data breach response plan that identifies what to do in the event of a breach. The plan should identify a legal expert to assist with the breach, a forensics expert to determine the extent of the breach and how to stop it, and whether an auditing investigation or credit monitoring is necessary. Also, explore your existing insurance. Look at your general liability, property, crime and D&O policies. You may already have coverage for breaches of data, data loss and media, copyright and trademark issues.

What should companies do if they find gaps in those areas?

If you’ve identified gaps, then consider cyber insurance, which is intended to address the gaps in privacy and security exposures in current policies. Begin to address it and continually evolve. You can use data and technology as a tool to differentiate and enhance your company, instead of it being used as a weapon against you.

Kevin P. Kalinich is Co-National Managing Director of Aon Risk Solutions’ Financial Services Group. Reach him at Martha Jacobs is a Senior Vice President with Aon’s Financial Services Group. Reach her at (412) 594-7535 or

After eight years in a soft insurance market, a change may be coming. In hard markets, premiums increase dramatically. In soft markets, premiums decrease, creating more competition for businesses.

“There are always going to be highs and lows,” says Richard B. Hite, CEO of SeibertKeck Insurance Agency. “One thing you can count on is that the cycle will persist. There will be a time where prices increase, and you can’t control it, and there will be a time when prices decrease and you can’t control it. The question is ‘How can you position your business to benefit from the market conditions?’”

Smart Business spoke with Hite about the insurance market cycle changes, and what to expect from those changes.

How do market cycles affect pricing?

At the end of a hard market cycle when premiums are high, insurance companies are also making their highest profits. They want to increase their market share at that level, so they start slowly decreasing premiums to gain market share.

So premiums decrease over time until pricing is at a point where the insurance companies start losing money because insurance premiums don’t cover underwriting and claims expense.

Once premiums reach that level, investment returns become important. When investment return is good, pricing is aggressive, pushing past the break-even point.

Where are we in that cycle?

Right now, we are somewhere near the end of the soft market, where premiums are decreasing. Steady premium decreases have pushed many property and casualty companies past their break-even point.

Insurance companies invest conservatively, which equates to low-single-digit returns. This reduces their ability to absorb significant losses. When the markets were flying high in the 1990s with double-digit investment returns, they could withstand higher losses.

We are nearing the point where higher losses coupled with the lower investment returns may alter the softer market conditions, causing premiums to increase.  It may not change today or for another year or two, but it will happen. Unfortunately, once they hit that critical level, premiums can increase much more quickly than they come down.

How will this change the way employers consider insurance?

When economic times are good, and returns in the marketplace are good, insurance companies can decrease premiums. That is great for businesses. Everyone appreciates lower premiums but they are not as critical when businesses are doing well. Conversely, rates tend to go up when the economic environment is difficult, so when businesses are struggling it is difficult to hear that premiums are increasing 20 percent for no apparent reason. Employers have to keep in mind that the insurance industry is counter-intuitive. When the business environment is going well, insurance premiums are typically low. When the business environment is struggling, premiums are typically increasing rapidly.

How can companies prepare for changes in the insurance market?

Request market information from your agent or broker during your pre-renewal meeting. Businesses need to be aware of any radical changes in the marketplace that may trigger a change in premiums or coverages. The last time premiums changed dramatically, we were deep into a soft market — then the 9/11 tragedy hit. Investment returns changed dramatically. Already soft insurance premiums increased significantly and stricter underwriting guidelines were applied. Whether premiums are low or high, it is important to make your risk look as attractive as possible to underwriters. That is your most effective strategy for keeping costs down.

What events can trigger changes?

In the last year, the tsunami in Japan and earthquakes in New Zealand and Australia have caused losses that, believe it or not, will flow back to businesses in Ohio. The entire insurance industry is connected by the underpinning of reinsurance. Every insurance company buys reinsurance on its insurance policies. That is why it’s important to keep an eye on catastrophic situations throughout the world, because those significant losses make reinsurers less profitable. As large losses mount, reinsurers must increase premiums to insurance companies to maintain their returns, which eventually trickle down to the consumer.

Even small, local insurance companies buy reinsurance from companies that were hurt by the Japanese tsunami loss. Catastrophic tornadoes in Alabama and Missouri, while not hitting Ohio, affect the entire pool. As losses increase in the pool, pressure to increase premiums is passed through to everyone.

What can companies do to improve their risk profile?

There are five key things companies can do:

Be aware of the environment around your insurance program, both in the investment community and in catastrophic losses around the world, whether it be tornadoes in Alabama and Missouri, earthquakes in Japan or hurricanes in Florida.

Know your loss experience and understand how your loss experience may affect your future premiums.

Secure a multi-year policy with rate guarantees. A few insurance companies still offer a multi-year policy that can be an attractive strategy to stabilizing premiums.

Maintain loss prevention procedures. Most insurance companies provide this service at no additional cost.

Maintain good lines of communication with your insurance professional. This will be very important in these uncertain times.

RICHARD B. HITE is the CEO of SeibertKeck Insurance Agency. Reach him at (330) 865-6573 or

Do employers want to stop offering health insurance? Most employers provide health insurance for the same reasons today as they will in the future: it’s an employee benefit that hopefully sets them apart from their competition to obtain and retain qualified personnel.

Health care reform may change the buying process drastically. Employers will not be required by law to offer health insurance, but they face financial penalties if they decline to do so.

“There will be difficult decisions ahead,” says Albert Ertel, COO of Alliant Health Plans. “That decision-making process needs to be a team effort between the employer and their professional insurance agent or consultant. It’s an integral part of the value provided. Who else will have the employer’s back during this time of transition?”

Smart Business spoke with Ertel about why professional insurance agents are a vital part of the new health care landscape.

Why are insurance agents important?

Health care reform may force a dramatic change in how health insurance is to be purchased. One facet being discussed is the health insurance exchange: national or state exchanges. If the Supreme Court ultimately decides on the insurance mandate, every individual will be required to obtain his or her own coverage. Employer-sponsored plans qualify. But to collect any subsidies, individuals must purchase coverage through an exchange. Can this be done effectively over the Internet without assistance?

Consider some examples. You want to travel from A to B. Purchasing airline tickets is a single, simple transaction. You can purchase car insurance the same way. It is simple and a single transaction. You want to insure your car against damage. It’s easy until you have a claim. Even though most folks don’t have a claim but once every 10 years, an agent is the preferable source of purchase and service.

When shifting the discussion to health insurance, transactions multiply. It gets complicated: premium, plan design, provider network, etc.; claims from doctors, hospitals, labs, etc. So many transactions must be paid. What is the responsibility of the patient versus that of the insurance company? Getting answers can be rough. Much of a health insurance agent’s work starts after a policy has been implemented and the insured has received care.

What does the role of agent entail?

A typical approach to the human resources department used to be ‘I believe I can bring you a better benefit program at a lower cost than you have today.’ The agent would conduct a survey of the current program that is in place: benefits, rates, claims experience, known health issues, location of employees. Are employees all in Georgia, or scattered throughout the country? Are you fully insured and large enough to consider self-insuring?

Today it is different. A longer-term approach must be considered. Employers are looking for wellness, disease management and additional ways to hold down costs. Employers need to review their contribution strategies. How much is appropriate for employees to share in the costs? Should they increase the deductibles and/or co-pays? What about health-saving accounts (HSA) or health reimbursement accounts (HRA)? An agent can offer a cost/benefit analysis for numerous options being considered. The value proposition gets started once he has the information. Once a game plan has been set in place, it’s time to ‘shop,’ which means requesting programs from different insurance companies and producing an analysis to determine the best product.

Service cannot be taken for granted. A trusted agent could also assist with educating employees and dependents.

Why is that education necessary?

HR departments take on many roles and health insurance can be a drain on employees. Working with a professional agent may provide additional resources without increasing staff. Agents offer dedicated expertise and assistance without increasing payroll. They have a role and responsibility to assist employees’ understanding of the health coverages offered at the company.

Employees receive an ID card and a certificate of coverage or summary of benefits. Most people do not read the certificate until after they have sought and received care or treatment. So many employees/patients work the system backwards. A physician order does not guarantee the service is covered under the plan. Insurance is a contract for specific benefits at specified levels of coverage. It’s meant to provide financial support after illness or injury. Today, plans must include preventive care and wellness. It adds new costs intent on getting people to their physician sooner rather than later, because prevention tends to be less expensive over the long haul. Creating a complete message is important; prevention, wellness, diet and exercise can be offered through the employer with the right help.

How are these agents compensated?

Health care reform is creating static. A great misnomer among congressional delegates is that health insurance agents are paid 15 to 20 percent of premiums collected. That is such a fallacy. Agents can be, and many are, a tremendous resource and compensation needs to be fair and reasonable. Health care reform may make it very tough for carriers to compensate agents. New rules will require insurance carriers to pay out 80 or 85 cents of every premium dollar for medical costs. After administrative costs, taxes and a small margin it leaves a very small amount to compensate or pay for agent services. As noted previously, exchanges will be an option for the purchase of health insurance. Every employer should have the option of professional expertise without added costs. Health insurance isn’t just a financial decision. Its impact goes home to the family.

Albert Ertel is COO of Alliant Health Plans. Reach him at (706) 629-8848 or