Matt McClellan

If you have outstanding debt on a loan, you may be considering taking advantage of floating interest rates, which are at an all-time low.

While the potential reward is tempting, there is plenty of risk as well, according to Sue Zazon, president and CEO of FirstMerit Bank’s Columbus region.

“The concern is how long those low floating rates will last,” says Zazon. “When they go up, there is the potential for them to go up a lot.”

However, if you simply fix the interest rate on your debt, you may be paying much more in exchange for the peace of mind of a fixed rate.

Fortunately, you have more choices than just a floating or fixed rate.

Smart Business spoke to Zazon about how to have the best of both worlds when managing interest rate risk.

What are the dangers of interest rate risk in a rising rate environment?

The danger is getting caught when rates go up. If you have debt outstanding with a floating rate and you don’t do anything to fix those rates, you are at risk. When rates go up, you will be paying higher interest costs, which may affect all aspects of your business.

The potential for rates to drastically change is very real. We are now at all-time lows, and if you look back to when rates where close to these levels, you’ll find that they moved a lot in a short period of time.

For example, in 2004, floating rates increased 4 percent in a two-year period. People have a short memory and are surprised by how fast rates can move and how much they can move. The worry is, if you have a certain rate today, can you handle a rise that significant in so short a time? Most people would say no.

What can businesses do to protect themselves from rising rate risk?

The No. 1 solution is an interest rate swap. A swap is a product banks offer clients that allows them to fix rates on all or a portion of their debt.

Traditional fixed-rate loans have no flexibility from an interest rate risk management perspective. The rate is fixed for the entire loan balance. With swaps you have a lot of flexibility; you don’t have to fix the rate of all of the debt. With a swap you can really manage your interest rate risk.

How do interest rate swaps work?

Assume you have a $10 million floating rate term loan; you can manage it by putting a fixed rate on $5 million of it for five years, $3 million for four years, and leave the other part floating, providing you are comfortable having some floating rate debt. You can modify the interest rate characteristics of portions of your debt as well as the duration of those rates.

Managing interest rate risk is the big benefit of an interest rate swap. In today’s interest rate environment it may not make sense to have all of your debt fixed as you are not getting the benefit of the low floating ratings available today.

In the situation above, if rates go up you have protected yourself from rate increases by fixing a portion of the debt. If they don’t go up, at least you’ve protected yourself by taking advantage of the low floating rates.

Risk management helps people sleep better at night. Rather than force you at the outset to choose either a fixed or floating rate for the life of the loan, swaps allow you to take advantage of the historically low floating rates while protecting yourself in the event of a significant floating rate increase.

How can I decide how much risk is right for me?

People ask me all the time what they should do. ‘Should I fix all this? Float some of it?’ I tell them it’s not up to me; it’s up to you.

It depends on the company. If you want the debt but have enough cash on hand to pay it off, you can take a little more risk and float your rate.

On the other hand, if your company doesn’t have a lot of cash and can’t handle an interest rate increase, you might consider fixing all of your debt.

Then there are the companies in between. Each company’s needs are based on its specific risk tolerance and company profile.

There are also many other factors that may enter into the decision. The company’s debt may be from a piece of real estate. Is the company planning to sell it? Does it want the flexibility to pay it off early?

We can guide them and help them, but we need to learn about them to help them make an educated decision.

When doing an interest rate swap, what common pitfalls should companies avoid?

One caution for clients: Companies usually want to fix their rates when rates start to move. The problem there is your fixed rate at the time the loan was originated may be a lot higher at that time than in today’s rate environment.

For example, say we quoted a fixed rate today at 6 percent but you took a lower floating rate. However, in six months you get nervous about floating rates rising and you decide you want to fix your rate. By then I may be quoting you 7 or 7-and-a- half percent for a fixed rate. It is a process that requires some careful consideration. Your banker can help you make the best decision.

Rate swaps are not be-all and end-all solutions, but with today’s low rates, it’s a tool companies should consider using as a way to manage the risk of a potential rapid rise in their future interest expense.

SUE ZAZON is president and CEO of FirstMerit Bank’s Columbus region. Reach her at

Back injuries are the No. 1 cause of workplace injuries across the U.S. and the No. 1 cause of workers’ compensation claims. In fact, 80 percent of Americans will experience back pain at some point in their life.

“About one in five work-related injuries involves the back,” says Jonathan Theders, president of Clark-Theders Insurance Agency Inc. “Helping employees take care of their backs is important for reducing costs and keeping employees safe.”

Creating a back injury prevention program can help a company reduce the cumulative effects of back injuries, as well as reduce the frequency with which they occur.

Smart Business spoke with Theders about how to keep employees from injuring their backs in the workplace.

Why should employers be concerned about back injuries in the workplace?

Back pain affects everything you do. Your quality of life in everything from work to home life to driving is greatly affected by the back. There is also a mental aspect to that pain that is quite powerful.

It doesn’t matter if you’re sitting at a computer all day, working on a factory line, driving a truck or cutting hair. Your back is potentially at risk regardless of your occupation, as back injuries affect everyone.

Helping employees take care of their backs is important because back injuries lead not only to workers’ compensation costs and potential disability, but they also affect morale, resulting in decreased productivity.

It certainly negatively affects the company’s bottom line.

What are some causes of back injuries in the workplace?

Three prominent causes of back injuries are employees who are tired, stressed or short of help. When they have more work to do, people tend to move faster or do things they’re not completely trained on. So if you take an employee out of the work force for any reason, the effect it could have on the next person could be dangerous. They will be more tired because they are doing more work, and they are more stressed because they are outside their comfort zone of what they normally do. Plus, because you’re short on help, they are cramming more and more into the same day.

A lot of back injuries involve surgery and/or months of therapy. Not only have you lost that employee’s productivity, but because somebody else is picking up the extra work that person is missing, there is additional stress. It causes a domino effect. That first work-related injury can lead to another and another because you’re compounding its effects across the spectrum of the business.

What can companies do to help prevent back injuries?

There are a couple of key issues that employers should talk about: posture, safe lifting and overall fitness.

Every employer should adopt a back injury prevention program. It doesn’t take a lot of time, but it’s something you really want to think through; it’s not just printing off a policy and sticking it in an employee handbook.

You need to think about the mechanics of the jobs at your workplace and what employees are encountering. Talk about stretching, training and understanding of how the back works.

It’s an education process that starts at the very top and becomes ingrained into the culture of the company.

Back injuries are typically cumulative. Something as simple as bending down to pick up a pen may have been the trigger, but it’s never really the cause of the injury. People think that one thing caused it, but it could have been years and years of not treating the back properly — picking up that pen was just the trigger.

What should be included in a workplace back injury prevention program?

A back injury prevention program should encompass four things: Procedures for identifying back injury hazards in the workplace, methods for preventing those injuries, employee training and recordkeeping procedures.

The first step is to target the back injury problems. Review claims from your OSHA logs or workers’ compensation claims, inspect the workplace and, most important, interview employees and supervisors. Then you’ll have a true understanding of what occurred and what could occur.

Next, go through workplace improvements. What can be done to make things easier? If employees are bending down and lifting things off the floor, you could have those things elevated or have a lift installed so they are working at a more appropriate level for their backs. You can also use simple techniques like bridging — if you are going to reach for something, you can use one arm to help support the angle of the back.

Another key component is to create a stretching or warm-up program. People think this will take too much time away from work, but it doesn’t take much time to have an effect. Even five minutes of stretching can help prevent injury.

Someone who stands a lot at work should do four main stretches: the hamstring stretch, the lower back stretch, side stretches and the quad stretch. Just hold those stretches for 12 to 15 seconds, two or three times — it’s less than five minutes, but these simple stretches can greatly reduce the chance of an accident.

Even someone sitting at a computer should be taught how to do neck and back stretches to prepare for the day. It’s a great morale booster for employees, and they feel a sense of appreciation and understanding.

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

Wellness programs continue to receive the spotlight as a way to counteract the rising costs of health insurance. But do they? Many experts see wellness programs not as a cure-all but an integral part of a new beginning.

“Promoting healthy lifestyles and positive behavior choices is always a good thing,” says Mark Mixer, vice president for Alliant Health Plans. “It is difficult for employers to realistically gauge the impact it will have on health insurance premiums. The smaller the employer, the more difficult it becomes.”

Smart Business spoke with Mixer about how to tell if a ‘feel-good’ solution makes fiscal sense for your company.

Why are wellness programs becoming prevalent?

The unceasing trend of double-digit increases has employers frustrated, and solutions are elusive at best. Professional insurance advisers are compelled to provide solutions, and many have become advocates of wellness programs. Even the new government mandated benefits will require a wellness component. Employers logically want ROI calculations that show substantially lower costs.

Unfortunately, the excitement is short-lived once employers are told these programs come at an additional cost, above the insurance premium already being paid. Unless the end result of a wellness program will put an immediate and substantial dent in costs, it may be put off. The downside is unrealistic expectations on what wellness programs can truly provide and how they can benefit or enhance an employer’s benefit program.

Do wellness programs benefit employers?

To answer that question, we have to understand the core precept of insurance, which is ‘risk.’ Virtually all midsized to small employers are ‘fully insured,’ which means the premium payment they make effectively ‘transfers’ the risk of health care claims to the insurance company. Larger companies are typically ‘self-funded,’ with the employer paying the claims and assuming the risk (even though the employer may have an insurance company handling the transactions or taking the risk for the catastrophic claims on its behalf).

So here is the critical question: If a wellness program is beneficial, who benefits? In respect to premium costs the answer is the entity taking the risk. Why would an employer (fully insured) add additional costs of a wellness program when the risk — and thus the upside or benefit — is gained by the insurance company? Shouldn’t the company holding the risk pay for such programs, since they will reap much of the upside? Only the insurance company, or a large employer, has enough people to positively bend the cost-curve by employing wellness programs. It is virtually impossible to calculate the savings in a fully insured group (small to midsized company) with any accuracy.

Employers want the best for their employees, and for them to exercise, stop smoking and eat right. But there is a catch. Unless the insurance company is also invested in the results and can measure them, a realistic ROI is impossible to determine. If the carrier is not paying for these results, ask why. This is the logic we used to become the first health insurance company in Georgia to offer an incentive-based wellness program that is paid entirely by us — the insurance carrier — yet all parties have an opportunity to benefit.

What major mistakes do employers make when developing a benefits strategy?

Employers spend their time operating a business and minimal time on benefit planning. Not having a long-term, well-structured benefit strategy is the most common mistake. Another common mistake is not working with an experienced benefit adviser.

Failing to ask employees what they really want is a very common oversight. There is little to no collaboration with the very people employers are trying to retain. Unfortunately, this can’t be done one meeting 30 or even 60 days before the benefit plan’s renewal. For many employees, and employers for that matter, health insurance is perceived as a hassle. Oftentimes this is a result of not providing adequate choices based on employee needs and budgets. For instance, employers might be surprised to find that employees would be happier if they had a less rich, and less costly, medical plan if they gained access to a vision or a long-term disability benefit.

What can employers do to combat rising costs?

Gone forever are the quick fixes that instantly generate substantial savings. The fixes available today are incremental and must be thoughtfully combined. A professional agent or adviser can provide insight on various plan and contribution strategies that you may not have considered. These strategies can help to properly align your benefit goals.

There is much more to employee benefits than health insurance — and unless the company is promoting a wellness ‘culture,’ wellness programs probably won’t have much impact. Yes, we should all promote healthy behavior, but gaining measurable savings on health insurance premium costs needs to be more than negligible.

Our innovative wellness program is entirely incentive-based. This allows us to laser in on behaviors that drive costs down for our whole population and provide our employer clients with positive and rewarding messages for their employees. These incentives act as a motivational tool that keeps employees engaged, and it doesn’t add to costs.

Employee benefit programs are supposed to help employers recruit and retain quality employees. Every decision surrounding benefit planning should accomplish one or both of those objectives. For most employers, health insurance is one of their largest expenses, after payroll. If it doesn’t help you recruit or retain employees, then why spend the time and money? Think of health insurance as the final piece of a larger puzzle and wellness programs as the thread that weaves its way through all the pieces.

Mark Mixer is a vice president for Alliant Health Plans. Reach him at (800) 664-8480 x271 or

Business income insurance pays for the loss of profits and the continuing expenses that an organization experiences after it suffers damage from a fire or other insured loss to its facilities.

After suffering a loss, with no revenue coming in, ongoing expenses can cripple your business, says Gloria D. Forbes, executive vice president with ECBM Insurance Brokers and Consultants.

“In many cases, it is the lack of, or inadequacy of, business income insurance that puts someone out of business after a fire or other interruption — more than from any other cause,” says Forbes.

Smart Business spoke with Forbes about why companies need business income insurance and how to determine how much your company needs to survive a crisis.

What size and type of companies need business income insurance?

The size of a company is irrelevant. Regardless of your company size, an interruption in your business will result in the cessation of all revenue.

There are various ways to customize coverage and a number of forms available that can help you tailor your insurance to your organization’s specific needs. For example, if there were a fire at an engineering or law office, those facilities would need the insurance proceeds to resume operations immediately following the loss. These needs would include money for additional rental space, computers, equipment — anything that would create a facility where people can get right back to work servicing their customers and generating revenue.

A manufacturing company with processes performed over multiple locations might need to spread a single insurance limit over all of those locations.

Often, organizations such as nonprofits mistakenly believe that they do not have an exposure because they don’t have a loss of profits after an interruption, but they do have continuing expenses and the inability to raise funds. There is a need of some sort for all organizations.

What are the factors to consider when purchasing business income insurance?

One of the most important factors to consider is the length of time you may be unable to conduct your business in the event that there is a major loss to the facility.

In addition to calculating the estimated expected profit, you must consider what expenses are likely to continue during the downtime. People often forget that there are many expenses, such as mortgages, loan payments, utilities and salaries that continue during the time that the business is not operating.

Another factor to consider is whether, when you open your doors again, your business will immediately return to the same level it was at prior to the loss. In some cases, it will take some time to regain customers once you are back in business.

How does business income insurance help in those instances when it takes some time for customers to return?

The standard coverage stops the moment the business is able to start producing again and opens its doors to the public. Unfortunately, especially in retail operations such as restaurants and clothing stores — businesses that are dependent upon generating a stream of customers — while the business was shut down, those people may have started to go to another organization to satisfy their needs.

So when your business opens its doors again, it may take time to get those people to come back to buying from you.

A business income policy or coverage can be extended to provide for that time period when you are back in business but not at the same level you were before the interruption.

Are there unique circumstances that can affect the amount of insurance you should purchase?

All too often, a business or organization will complete a worksheet to estimate what its annual loss is going to be and then underestimate other factors that leave it without the proper coverage.

There are several pitfalls people don’t consider when they answer the question, ‘How long will it take me to get back into operation?’ If they own their building, they often shortchange the amount of time it takes to reconstruct the premise. They forget about the planning stages and cleanup, and estimate that it would take six months to rebuild the building when, in actuality, it will take 10 months.

A second factor to consider is whether the business is seasonal. If there are wide fluctuations from season to season in the amount of revenue that is produced, a loss at the wrong time of year could result in having inadequate coverage in the event of a fire or other loss.

A third factor that could impact the restoration period is whether or not a company uses special equipment that would take a long time to replace. Often, people will focus on the length of time needed to replace the building but do not consider the length of time it might take to replace very specialized or customized equipment.

If your business process includes any kind of aging process in your production, a fire could result in a loss of revenue that continues for two or three years.

A professional risk management adviser will be able to identify the right type of coverage for you.

Gloria D. Forbes is executive vice president with ECBM Insurance Brokers and Consultants. Reach her at (610) 668-7100 or

Tuesday, 23 February 2010 19:00

Nonprofits need it, too

Although directors and officers liability insurance is sometimes perceived to only be necessary for leaders of large public corporations, all organizations can benefit from it — even nonprofits.

“Statistically, more than a third of all companies can expect a claim against an officer or director,” says Shane Moran, vice president of ECBM Insurance Brokers and Consultants. “The risk is pretty high that you’re going to see a claim.”

Smart Business spoke with Moran about how directors and officers liability insurance can protect the board members of nonprofit organizations.

Why do nonprofit organizations need to invest in D&O insurance?

A comprehensive D&O policy is essential for nonprofit organizations for several reasons. It’s a necessary tool in order to attract qualified individuals to sit on the board, as well as to act in the capacity of an officer or director. As a board member, you can be held personally liable for claims that arise out of the running of the organization.

While many states have enacted charitable immunity for people serving as an officer, director, or trustee of a nonprofit, those laws can vary by state, as well as who might be entitled to protection under that statute. Whether or not a board member is compensated in that capacity can determine whether that person has protection under that statute. However, there is no liability protection under any state statute for violation of a federal statute. For example, if you violate the Americans with Disabilities Act or Civil Rights Act, there is no protection under state law.

Another reason is cost. It is relatively inexpensive to purchase a liability policy to protect not only the officers and directors, but also the entity itself when compared to the cost of hiring an attorney to defend an allegation, let alone a judgment against the organization. Most nonprofits don’t have in-house counsel with the expertise to address these claims.

What does D&O insurance cover?

The basic D&O policy form is meant to cover directors, officers and board members for wrongful acts while they are acting in that capacity. The amount of coverage you ultimately purchase varies by each entity and its potential exposure. In the for-profit world, you have the risk of shareholders making a claim against the operations and running of the company. In nonprofits, you typically do not have claims from shareholders but may see claims from guardians of people that the organization serves, past officers and board members, as well as from its employees.

The nonprofit D&O policy has evolved to include claims against the officers as well as claims for employment practices liability. Another area of coverage that may be included is fiduciary liability. Most of the D&O claims that we see stem from wrongful termination, discrimination and sexual harassment.

What are the consequences of leaving an organization unprotected?

As a board member, you can be held personally liable. Your personal assets are potentially at stake if there is no coverage. If you’re going to sit on a board without day-to-day oversight of the company, putting your personal assets out there is a gamble that most people are not willing to accept. Most people asked to sit on a board consult with an attorney about potential ramifications. The first question that attorney will ask is, ‘Does the organization carry directors and officers insurance?’

From the organization’s perspective, the consequences of not carrying this policy can be fatal. The average cost to defend an allegation can be in the tens of thousands of dollars. That’s a cost most nonprofits can’t afford, nor do they have access to a specialized attorney to properly defend themselves. In the end, the organization may have to close its doors.

How can the fiduciary responsibility of board members lead to a claim?

The charters or bylaws of most nonprofit organizations require the board members to protect the assets of the nonprofit, as well as to expand and grow the funding forces. An example might be if an officer or board member decided to use certain funds within an agency on a risky new program, and that risk proves to be a bad investment and the overall agency suffers financially. Then, you could conceivably see a third-party or fellow board member claiming that the future of that organization could be in jeopardy because its endowment or funding has been diminished significantly by the choices of that officer or board member. You could see claims coming from the choices the officers made in connection with the organization’s 403(b) or 401(k) plan. Most nonprofit D&O policies have the ability to address this fiduciary liability now, and many organizations address this exposure with a standalone fiduciary liability policy.

How can you avoid situations that lead to claims?

With D&O policies, the devil is in the details. A comprehensive review of the policy language is essential to understanding what you do and do not have coverage for. Does the policy contain an insured versus insured inclusion? If the policy is providing coverage for employment practices liability as well as fiduciary liability, is the limit of insurance a shared limit, or does each agreement have a separate limit of liability? Is the cost of defense included within the limit of liability? What is the retention amount? Using a broker that specializes in the nonprofit sector can be a great source of information as to the differences between policies and insurance arms.

When completing the application it is important that you fully disclose accurate information, as misstatements can void coverage. The application becomes part of the policy and is a warranty statement. Organizations should also emphasize any loss control and risk management policies used to help minimize any potential losses. By giving more information to an underwriter to help that person become comfortable, you will be able to negotiate better pricing and broader coverage.

Shane Moran is a vice president at ECBM. Reach him at (610) 668-7100 x1237 or

Tuesday, 23 February 2010 19:00

Recovering losses

If your company lost profits because of another company’s actions, you may be able to recoup some, if not all, of that loss.

“Most civil lawsuits arise out of a plaintiff’s belief they have been monetarily damaged due to actions of the defendant,” says Richard Squar, Tax & Litigation Support director at Glenn M. Gelman & Associates, CPAs and Business Consultants. “If damages exist, the plaintiff’s reward is recovering money to be made whole as if the losses did not occur.”

It’s a complicated process, and both sides will have to work with a financial expert to estimate the damages.

Smart Business spoke with Squar about how the recovery process works.

When are damages due to lost profits recoverable?

There are three requirements that must be met for these damages to be recoverable:

  • The defendant is proven to be at fault.
  • It’s found that the defendant could foresee that his actions would cause damages when he was at fault.
  • Damages can be calculated with reasonable and acceptable certainty, not just through speculation.

What is the role of a financial expert in the recovery process?

First, he or she must come up with an opinion on the damages — how much should be paid if the defendant is found to be at fault. Second, he or she should be an adviser to the lawyers, judges and juries. The expert should use clear language without getting too technical.

An often-used phrase is ‘But for the fact that the damage happened, what would have happened?’ This refers to an estimate of what would have happened if the damages did not occur, less what happened, less what the plaintiff did to try to minimize those damages (mitigation).

How are monetary damages from lost profits calculated?

It doesn’t have to be an exact calculation of the damages. Estimates are OK, just as long as they aren’t speculative. ‘Speculative’ is a term that the opposing counsel will use to try to discredit the expert’s testimony. If the expert isn’t provided with enough information and tries to make a conclusion from limited data, the other side may say he or she is just speculating as to what the number would be.

The expert has to be using some kind of tested techniques and theories that are generally accepted by peers in order to withstand the scrutiny of the opposing counsel.

What methods are used?

The ‘before-and-after’ method deals with the internal data and financial trends. For example, you might look at a company’s past three years and determine an average percentage of growth that occurred. From there, use that percentage to go forward from the day the damage occurred.

If the expert determines that the past trend has been that sales were increasing by 6 percent each year, then he or she might estimate what would have happened after the date the damages occurred to be a 6 percent annual increase. That gives you your projected revenues. Then you calculate your costs associated with those revenues and that tells you what would have happened but for the fact that there were damages. You then subtract the actual sales and associated costs that occurred with the damages and that gives you your lost profits and damages.

The ‘yardstick’ method uses some kind of benchmark or standard figure. For example, the expert looks at what type of growth trends have occurred in similar businesses and looks for comparisons. If you’re a widget manufacturer, then he or she finds another company that makes something similar and finds out what that competitor’s growth has been. The expert then uses that as an estimate of growth and to come up with lost profits. Your benchmark is that other growth from similar businesses in similar situations.

How can a company ensure the financial expert has everything needed to arrive at a conclusion?

The ideal situation is when the company itself has done a summary of what it believes the damages are. It supplies any and all documentation that supports what happened compared to what would have happened. Companies can provide their budgets or any projections they’ve done or are continuing to do. They should make sure they identify for the expert exactly what revenue was lost. For example, if you have five product lines and one line that was damaged, you want to identify that one line along with bulk revenue numbers.

You want the expert to be working with the best available information within the context of the case. The expert usually doesn’t just go in and have total access to any and all information. He or she should have access to information that is produced in the strategy of the case.

Certainly, a company can still make sure the description of the company and its history is made available to the expert. You want to make sure the expert has a very good idea of who you are as a company, so that when the expert makes assumptions or does projections, he or she can do it with a greater feel for what makes sense.

Richard Squar is the Tax & Litigation Support director at Glenn M. Gelman & Associates, CPAs and Business Consultants. Reach him at (714) 667-2600 x254 or

Tuesday, 23 February 2010 19:00

Insurance as an investment

Often, employers view their health benefit program simply as a cost, without considering the potential benefits that come with a quality program.

“Many employers think of health plans as a necessary evil,” says Greg Mercer, vice president of sales, marketing and business development for Kaiser Permanente.

However, it can be valuable to take a fresh look at the benefits as well as the costs. Instead of merely calculating what you’re spending, look at what you’re getting back. Good benefits help attract and keep high-performing workers. Employees consistently rate health insurance among the highest-valued job-based benefits. Turnover is costly, and competition for qualified workers can be stiff.

“Many employers recognize that in order to be competitive at attracting talent, they need to have a health plan that provides reasonable benefits to a happier work force,” says Mercer.

Health insurance can also enhance productivity. Improved health means reduced absences and higher-capacity performance while on the job. Benefits help boost employee satisfaction and morale, which contribute to productivity as well as loyalty.

Finally, health benefits improve your staff’s quality of life. Simply put, offering benefits that contribute to better health is a good thing to do. By showing that it cares about its employees, the company builds its image as a good corporate citizen.

With these benefits in mind, consider a well-designed benefits package an investment in your staff and your company.

Smart Business spoke with Mercer about how to select a high-performance health plan that meets your company’s needs.

What should employers look for in a health plan?

An employer should be looking for more than a spreadsheet, which is frequently all that they get. A broker or consultant will come to them and say, ‘This is what’s covered and this is the cost.’

However, there’s a lot more to it than that. Not only should employers make sure that the financial protection is there, but they also ought to care about how the care is going to be delivered and what sort of support is provided to help employees stay healthier.

Whether you hire a benefits consultant or investigate on your own, use these tips to guide you through the process of creating a partnership that works:

  • Make quality a priority. Quality-conscious carriers will have processes in place for measuring and encouraging performance improvements like increasing the use of appropriate preventive screenings. Ask for evidence that physicians routinely apply a lifestyle-intervention approach with patients, including recommending healthy behavior changes and tracking a patient’s progress. Use due diligence: Check credentials and interview client references that have a work force population similar to yours.
  • Fit the plan to your people. A good health plan can help you determine what is driving your health-related costs and help you find ways to manage them. That way, the programs you offer will target health needs of relevance to your employee population. Some vendors administer a health risk assessment to identify which behaviors to target for greatest impact, or you may want to survey employees on their wellness interests and goals. Find out from health insurance carriers what wellness programs they offer, and how they measure the success of their programs.
  • Think long-term. Health improvement doesn’t happen overnight, but health and wellness initiatives started now can position your company for savings in the future. If you think of health improvement and wellness as a short-term cost-containment strategy, you may be disappointed with the pace of your results. But over the long haul, benefit plans and wellness programs can have a positive impact on your organization’s cost trends and premiums.

How can employers help their benefit plan succeed?

The success of your health benefits program depends largely on employees’ understanding it and using it wisely. Even if your health benefits package is no-frills, you should communicate its value to your employees.

It amazes me that some employers never share how much they are paying for their insurance. Employees don’t realize how much it costs. They see the tip of the iceberg; they see the 10 or 20 percent that they are asked to pay, and they think that’s an awful lot, but that’s just a fraction of the whole cost. As a minimum initial step, it doesn’t hurt to share with employees how much the employer is putting into their health insurance. It can help them gain perspective on why that employer may not always have a lot left over for other things, like pay increases.

In addition, in your role as company health promoter, don’t forget to encourage employees to use the important preventive services that are most likely included in your coverage. Basic services like screenings and immunizations can yield significant results. In that respect, the money you spend for prevention is an investment in the future health of your employees and your business. Your insurance broker or carrier may have ongoing promotional campaigns that you can tap into — reminders about mammography screenings during Breast Cancer Awareness Month, for instance — and may be able to provide turnkey materials for your use.

Finding a value-adding health care vendor with whom you can establish a stable, mutually rewarding partnership can be good for your workers’ health and your company’s bottom line.

Greg Mercer is vice president of sales, marketing and business development for Kaiser Permanente. Reach him at (216) 621-5600 or

Tuesday, 26 January 2010 19:00

Protecting your data

Not long ago, cyber liability insurance was unheard of, but today, it has become critical to any company dealing with personal data that could be used to commit identity theft.

Jonathan Theders, president of Clark Theders Insurance Agency Inc., says that the word ‘cyber’ doesn’t necessarily have to mean computer-related, as the insurance has evolved to include data privacy and network security risk.

“Cyber risk or breach of data can be loosely thought of as anything that can create a vulnerability to the theft of information that jeopardizes a company’s mission, fulfills its clients’ needs or maintains some measure of trust,” Theders says.

Smart Business spoke with Theders about how companies can use cyber liability insurance to protect their customers’ data and protect themselves from lawsuits.

How has cyber liability coverage evolved?

Here’s an example: Let’s say my laptop was stolen out of my car, and it has all sorts of personal information on it. Chances are, the thief just wanted the laptop and not the personal data inside, but what was on that computer? It could be Social Security numbers or credit card information. If that data is stolen, you have a duty owed to protect that data.

The coverage has evolved from solely computer-related data to data in all forms. It could be paper versions; it could be electronic. It started out as a requirement of HIPAA, in which people were required to keep personal information confidential with a heightened level of security.

Five years ago, some people were very electronically driven, but the majority of business wasn’t. Everything was filed on paper. If I wanted to steal information, I’d have to walk out of an office with stacks of paper and files.

Now I could walk in with a thumb drive that you would never know I had and I could extract thousands of records without your knowledge. It’s made data theft a whole lot easier if that data’s not protected the proper way.

What types of threats to data are there?

When you think of cyber threats, you think of a brainiac sitting in a bedroom hacking into computer systems. That concern will always be there, but there can also be the frustrated rogue employee, the one who is thinking about leaving, who wants to gather this information to use it at their next job or who just really wants to hurt the company before leaving. Or the person may want to sell that information because it has value to somebody else.

It doesn’t always have to be this third-party hacker off in the distance; it could be one of your own employees who has legal, granted access to that data. The insurance coverage should pick up not just third-party but first-party and employee actions, as well.

How do you get coverage to protect your company’s data?

To secure insurance coverage, you have to do an assessment of your computer systems. It forces you to look at the areas in which your systems can be penetrated. That makes you a better company because you’re forced to fill in the gaps of potential penetration.

Not everybody has to have an assessment, but any business that is dealing with and holding customer information can have an exposure. In certain businesses, people feel very comfortable with the controls in place and may not need to do a physical assessment. But if the underwriters feel you could have a significant loss, they would require their insurance company to do an assessment of your systems. They use an in-depth questionnaire that tries to find holes in that particular network.

Or you can hire a third-party company, not just to assess your system but to try to hack it and break the system to try to find those potential holes before someone who wants to cause the business harm finds them.

How can data coverage protect you from litigation?

Think of the example of the laptop stolen out of a car. Part of the coverage would be a year or two of credit monitoring for the people who may be affected. Chances are that none of their records will ever have credit problems, but you have a duty to protect that credit information.

If data is stolen and it is used in a harmful way to the person — they have loans taken out in their name or credit card bills run up and it has affected their credit scores, leading to collectors hounding them — the indemnity would not only make those people whole, but it would give them expenses toward fixing their credit. Most insurance also includes a partnership with a PR firm that can help you regain the faith of your customers.

Also, forensic computer specialists can be hired to determine what was lost. If there was litigation or a class-action suit or someone was adversely affected because his or her identity was stolen and used by someone else, the coverage would pay third-party indemnity.

There can also be regulatory defense fees, so if you have broken some rule of HIPAA or some governmental body and they fine you, the coverage can potentially pick up the fines related to that.

One of the things that matured in the last few years is ransom demands. If someone stole your data and held it for ransom, you can also purchase insurance that would pay that ransom.

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

Saturday, 26 December 2009 19:00

Flirting with disaster

Joe Paterno once said that the minute you think you’ve got it made, disaster is just around the corner. Rick Eckert, chief financial officer of ECBM Insurance Brokers and Consultants, says the legendary football coach’s words are a perfect reminder of the importance of having a plan so that you will be ready when disaster strikes.

“Anything that has the potential to take your business out for an extended period of time needs to have a plan attached to it,” Eckert says. “The last thing you want to be doing is trying to figure out that plan in the middle of it.”

Smart Business spoke with Eckert about what to include in your company’s disaster plan and how to ensure that your plan will work.

Why is it necessary for businesses to have a disaster plan?

In the middle of a disaster, you’re emotional, and if you’re making decisions based on emotion, you’re going to make bad decisions. So take the time to have a thorough, well-practiced plan before disaster strikes. It doesn’t make it any easier if it happens, but at least you’ll have an idea of what to do and you’ll execute instead of panicking.

If you think of people who deal with disaster all of the time, such as police, firefighters, EMTs and the military, the reason it works for them is that they are well-trained and well-disciplined. They don’t stop and think, they don’t panic, their hearts don’t start racing, and they don’t get worried. They execute. That’s why you need a plan.

What areas should a good disaster plan cover?

There are basic components that are the same for everyone, but from those core components, it changes based on your industry and size. There are a lot of variables, so not every company’s plan should be the same.

Start with life and safety. Look at your evacuation plans, fire protection, security, your access to health professionals and where you are located. If you lease space in an office building, you have to understand your neighbors’ plans, as well as your city’s plans, and know how you tie into them.

Then find out exactly what your mission-critical components are. What do you have to do to function, and how would that be replicated in a disaster environment? Can you get temporary space with communications, computers and warehouse space, and how long would it take to set up?

Look at how your business data is secured and if it is accessible off site. Can your employees work from home? Do you have other work sites that can house you temporarily?

Finally, you have to keep in mind that your employees will be dealing with that same disaster in their personal lives. You can’t just expect them to be your employees and do what you say, because maybe their houses got destroyed.

How can business owners develop an effective disaster plan?

First, don’t assume your insurance will take care of everything. Most people think their insurance will take care of it, but that’s not always the case.

You have to look at your plan as a business continuation plan. From there, gather a team that represents all aspects of your business.

Rank every aspect’s importance and determine how you would attack it in a disaster environment.

Then take that a step further and talk to others in your industry. Use trade associations, business groups, your insurance broker, even peers in your business. Government Web sites such as and the Pennsylvania version of that called can also be helpful.

You have to keep in mind that your plan is a living document. Once you build it, it doesn’t just end there. You have to look at it regularly, and you have to change and adjust it.

How can you ensure that prioritizing tasks in the planning process goes smoothly?

Have somebody from the senior executive or ownership level who has significant authority lead the charge, because people by natural tendency are going to get competitive between their units and want their issues to be covered first.

It’s a good idea to have somebody from the ownership level, which is where it really counts, who can referee and make a decision if they have to.

Once it is in place, how can companies evaluate their disaster plan to ensure it is working?

Three words: Practice, practice, practice. Dry run your plan using different scenarios to see what works and what doesn’t. You actually have to run the plan from start to finish. Create a scenario and then practice executing your plan based on that scenario.

With our team, I told them we would have a dry run on a Friday. I told them I wouldn’t spring it on them totally by surprise, but I wouldn’t tell them what time and what disaster would be coming. So they’re sitting on pins and needles, and I send an e-mail saying there is a tornado three miles from here — react.

Throw a few scenarios at them, then execute the plan from a tabletop level. We didn’t actually move people, at least on the first few runs. From there, you will find out what you missed. Then you can have some full-blown total company runs, as well.

Obviously you can’t do that a lot, because you don’t want total disruption, but you should do it at least one each year.

Rick Eckert is CFO of ECBM Insurance Brokers and Consultants. Reach him at (610) 668-7100 or

Saturday, 26 December 2009 19:00

The game plan

For many people, going back to school can be intimidating. Quite often, when a working professional starts college, it’s the first time in years he or she has set foot in a classroom. Like everything else in today’s fast-paced, highly technological world, higher education has changed significantly during the past several years.

Getting back into life on campus and in the classroom can be a daunting task, which is why some institutions have developed support programs that are designed to smooth the transition for “non-traditional” students. At University of Phoenix, for instance, they go so far as to call them “coaching” programs to designate an even deeper level of support.

“While today’s professionals may have some management or business experience, their academic skills may be a little rusty,” says Rich Spinner, a campus college chair, full-time faculty member and student coach at University of Phoenix-Cleveland. “This is where student coaches come in.”

Smart Business spoke with Spinner about how a coaching program can help students navigate the back-to-school process.

What makes an effective coach?

Number one, coaches need to be very good at assessing student skills. They need to be able to ask probing questions to find out where a student may need help, because sometimes the problems students think they have are not the true problems. So coaches need to be good listeners, of course, and be somewhat insightful. Coaches also need a lot of patience, because some of these academic issues are pretty tough to comprehend and absorb. Last, coaches have to be encouraging. It can be tough to take on continuing education when you haven’t taken a class in years. Coaches need to reassure students that they can do it, and remind them that they don’t have to do it alone.

What type of student would benefit from a coaching program?

Take, for example, a 40- to 50-year-old person who has little to no computer experience. Now, put that person into a continuing education program where almost all of the course work is done online. Needless to say, that person is going to need help or the class will quickly pass him or her by.

Some people may assume that anyone under the age of 60 has some familiarity with computers, but in some cases, older professionals may have worked in a role in which they didn’t use computers. Or, they may have other areas where they need help, such as remembering long-forgotten study skills. Perhaps a person is a single parent or someone else who just never found the time to become computer savvy. The first aspect of a coaching program is an assessment that determines exactly how much help a student will need and in what areas.

What is involved in an assessment like this?

The assessment looks for three things. The first step is determining how comfortable the student is with a computer.

The second part of the assessment is reviewing the student’s writing and research skills. Today’s college programs require a lot of research, and there are usually several written assignments, both individual and on a team basis. So, while computer skills are important, the student must be able to effectively research and write in order to survive.

The third part of the assessment is the student’s life skills. Many organizations bring in life coaches, executive coaches and/or career coaches, but nothing trumps the value of a good education from a quality institution. Even if a student has good life skills, returning to school offers a growth opportunity that ultimately leads to career advancement.

Once the assessment is complete, how does the coaching process work?

Generally, students are assessed to determine their comfort level and need. There are those who are already at the level they need to be to move into the program. Then there those who are well versed in many areas, but still need a little help in other certain areas. Then there are the students who need help in several academic areas, so they are the ones who typically benefit most from a student coach.

Once it’s determined exactly how much help the student needs, the coach and the student create a plan that’s designed to get the student up to speed as quickly as possible. The plan may include educational workshops in the classroom, lessons online or over the phone, and/or specific one-on-one tutoring — whatever the student needs to succeed.

But, effective coaching doesn’t end with the plan. In my opinion, a coach should be in constant contact, always available when the student needs assistance. It is helpful when students can contact their coaches directly, who will help them get back on track — even if an assignment deadline is looming.

How can coaches help students who are enrolled in business classes?

When students enter into business programs, such as an MBA, they almost always find at least one class that gives them difficulty. Some business students may ace marketing and HR, while others will be more adept at economics or statistics. The coaches are there to help students get though the rough patches, no matter in what subject.

Rich Spinner is a campus college chair, full-time faculty member and student coach at the University of Phoenix-Cleveland. University of Phoenix, the largest private university in North America, serves a diverse student population, offering associate’s, bachelor’s, master’s and doctoral degree programs from campuses and learning centers across the U.S. as well as online throughout the world. University of Phoenix’s Cleveland Campus serves students online and at locations in Independence, Beachwood and Westlake/Crocker Park. To learn more, contact University of Phoenix at (216) 447-8807 or (800) MY SUCCESS or