Amy Dison

Wednesday, 26 March 2008 20:00

Finding the right balance

When an employee’s personal problems spill over into his or her work, the result can be problematic, for both the employee and the employer. To help resolve the employee’s problems, companies often utilize Employee Assistance Programs (or EAP) as resources capable of helping both parties in the equation. While EAPs are often seen as an HR benefit program, in fact, they represent an important component for employers looking to improve the overall health of their work force.

The value of providing special services for troubled employees with EAPs is widely accepted, but the “cost” of such services is misleading. It is often assumed that using EAP services is something only a large company can afford, but the opposite may be closer to the truth. In many cases, it’s the small company that can’t afford not to offer assistance to troubled employees.

“Employee assistance programs aren’t just a perk for large companies,” says Richard S. Citrin, Ph.D., vice president of EAP Solutions and Worklife Services, part of the UPMC Insurance Services Division. “Smaller businesses can benefit from the variety of services that go well beyond offering support for mental health problems and drug and alcohol addictions, the historic role of EAP.”

Smart Business talked with Citrin about how EAPs are changing and how companies can benefit from such services.

Do small companies really need EAPs?

In many ways, small companies have a greater need for EAP services than bigger ones. For example, if an employee who works in a company of six people were going through a difficult divorce, it could conceivably have more of an impact on the overall workplace atmosphere and productivity than it would if the employee were part of a much larger organization. If a company has a problem with an employee who is performing poorly, that employee could be more easily compartmentalized in a large company than would be the case at a smaller company.

Another reason a small company needs EAP services is because people tend to know each other on a more personal level at small companies. This means it may be more difficult for management to deal with a problem employee. Sometimes, at small companies, management is not as effective in imposing limits or setting performance expectations. A large company that has a human resources department generally does a better job in those areas. It’s reasonable to conclude that the kind of management coaching that an EAP could provide would be very helpful to a small company.

What types of EAP services make the most sense for small companies?

Historically, EAP services have been associated with employees who have alcohol or drug use problems. While EAPs have expanded far beyond that, that traditional service is certainly still very important for small companies. If a small company has an employee with an alcohol or drug use problem, chances are the company does not have the resources to deal with that employee in an effective manner.

An EAP can provide specific recommendations about courses of action for an employer to take. For example, if an employee comes to work intoxicated, the company needs to properly document that fact. There are steps companies need to take to avoid legal issues, and EAP services guide management in the correct direction.

Why should small companies use EAPs instead of simply terminating an employee?

Small companies understand how much it costs to replace an employee. In most instances, it is in a company’s best interests to try to rehabilitate an employee before trying to replace that employee. Simply put, when a company uses EAP services to help its employees make it through difficult times, it is making an important statement to its employees: Your employer cares about you. It’s important for employees to know that their employer cares about their health and well-being. This increases retention.

How are EAP services changing?

EAP services now include the training and coaching of managers, which may be more crucial for those in small-business settings. EAPs can provide a host of work-life resources designed to help employees manage their finances, seek legal help, plan a vacation, schedule a car repair or even reduce credit card debt. EAP services, as always, are confidential and now can be delivered in person, by telephone or online. They are designed to help employees address life and work issues at the earliest stages, when the problem can be more easily managed. EAP services can help employees to find a better balance in their life and avoid more complicated and costly health care or workplace interventions later. Increasingly, EAP services include on-site educational programs on work-life issues, such as stress management, the increasing importance of health in the workplace and balancing work responsibilities with family obligations.

How do you know when to use EAP services?

In general, you can use the ‘60-minute’ rule. Any personal problem or activity that would require more than 60 minutes of an employee’s time on the job to resolve could be better handled by EAP services.

RICHARD S. CITRIN, Ph.D., is vice president of EAP Solutions and Worklife Services, which is part of the UPMC Insurance Services Division. Reach him at (412) 647-9471 or

Tuesday, 29 January 2008 19:00

Check it out

Checking accounts are a basic staple in the business world. While all business owners have them, they often overlook the different options and types of accounts that are available for their businesses.

Business checking accounts may seem simple, but a closer look reveals that they can help with earning income and utilizing resources. Business owners are always aware of their finances. But, when they become too comfortable with the accounts they’re using and don’t take time to research new features or products, problems may occur, according to Chris Stafford, business banker with FirstMerit Bank.

Owners are busy, therefore, in many instances, updating accounts falls under the saying, “If it isn’t broke, don’t fix it.” Thus, it’s important to work with business banking professionals to find the account that fits the needs of your company and helps you increase profit. They can keep you up to date on new products and changes that may benefit your company. Business bankers should add value to your business, giving you time to focus on the business itself, says Stafford.

Smart Business spoke with Stafford about the benefits of business checking accounts and how to stay up to date with your accounts to benefit your business.

What should a business owner look for or be aware of when selecting an account?

The specific features that are required depend on the individual needs of the company. One should be aware of ‘special features’ or advertisements. The bottom line is business accounts are rarely ‘free.’ If an account is advertised as free, it is crucial you ask about hidden fees. Business accounts are not regulated the same as personal accounts and fees can be hidden in numerous ways. ‘Free’ may cost you more in the long run. With some accounts, minimum balances need to be maintained or you may be limited to the number of transactions or items processed each month. As a consumer, you must ask about and understand the hidden fees a bank may charge. There are many different products on the market, and it’s near impossible to choose one on your own. This is a prime time to sit down with advisers and business bankers to determine the needs of your business and the right account for those needs.

What is used to determine what account is best for your company?

Cash flow. It is crucial that professionals ask many questions about the cash flow of the company. This is not limited to simply income. For needs to be met properly, advisers should know the amount of money collected, the means used to collect money, the path income takes after it is collected, the number of debits and how cash is distributed. A business banker should understand the overall cash flow process and then determine which product best fits the needs of the company.

How does a business checking account affect a company’s bottom line?

Choosing the right account for your business and needs can lower overall expenses and profit can be accrued. Some accounts include such features as Sweep Accounts that move money out of operating accounts and into overnight investments, so it can collect interest income. On the flip side, if a banker does not understand the cash flow, he or she may recommend the wrong account for your needs. There may be extra fees for excessive debits or transactions. Without careful selection, a checking account could potentially cost you in the long run.

How can you ensure that you are up to date with your accounts?

To ensure you are up to date with the best product for your company, at minimum, conduct annual reviews with your business banker to receive information on new products and services. It is also OK to shop around and see what the competition is offering to ensure you are receiving the best deal. Finally, require that your entire team of professionals communicate and work together for the benefit of the overall business.

When is the best time for an owner to open a business account?

In order to properly plan for the current business and its future, a business owner should start consulting a business banker when the idea is still becoming a reality. This way the bank can help the owner predict what future funds he or she may acquire and how to properly transfer those funds for more profit. As an owner, you need to know what is available. Accounts should be up and running before the doors to the business open. If the business is new, you should start with a basic business checking account and work with your banker during the first few months the business is open to review monthly activity and projections to determine what specific account will benefit your overall business. Switching accounts is easy, and you can often keep the same account number and just switch the product within the bank.

CHRIS STAFFORD is a business banker with FirstMerit Bank. Reach him at (216) 663-9620 or

Wednesday, 26 December 2007 19:00

E&O insurance for tech companies

In the ever-changing technology industry, it’s a fact that products and services may fail to perform as expected. Many technology companies do not realize their general liability policy does not protect their business against failure causing financial injury to a third party, such as a customer or vendor, says Ken Harrison, commercial insurance broker with Westland Insurance Brokers.

With attorney fees averaging $300 to $400 per hour, industry experts estimate the average cost to defend a financial injury claim often exceeds $200,000. What business owners need to know is there is insurance available providing coverage for defense costs and settlement awards through a technology errors and omissions (E&O) policy.

Smart Business spoke with Harrison about technology E&O insurance and how business owners can be assured they are making informed buying decisions when it comes to protecting their company.

Why is it important to have E&O coverage?

E&O insurance protects businesses against failure of their products or services causing financial injury to a third party, such as a customer or vendor. It also protects against breach of contract when a business fails to deliver services or products in accordance with contractual terms. It is important to have an E&O policy because it fills in gaps left by a general liability policy that often protects gainst third-party bodily injury and property damage but stops short of providing coverage for monetary damages, such as loss of profits. Each policy may differ, so it is important to work with a broker to determine your specific needs.

Who should purchase technology E&O insurance?

Networking and information technology companies, electronics manufacturers, technology consultants, and telecommunications firms all require such coverage. Because technology companies are at the forefront of innovation, unforeseen or unanticipated failures sometimes occur. Without E&O insurance, hardware, software and telecommunications companies are putting the longevity of their business at risk.

Why is E&O coverage often not purchased?

One of the main reasons companies do not purchase E&O insurance is because they are not aware of or informed of their exposure. Many customers say they have contracts in place with all their customers and vendors that limit their liability and hold them harmless should failure occur. While a legally reviewed contract with well-crafted protective clauses could prevent companies from paying indemnity, it does not prevent a customer or vendor from filing suit or leaving the contractual interpretation up to a judge or jury. Without an E&O policy, a company being sued could be left to find counsel on its own and pay damaging legal expenses out-of-pocket.

Other reasons technology businesses do not buy E&O coverage include not being contractually required to carry it or not wanting to pay the additional premium such a policy would cost. Every technology company has some form of E&O exposure. Whether a small start-up business or a large multinational corporation, there are carriers and policies available to match individual business needs. Every buyer should, at minimum, be aware of his or her exposure and be confident he or she is making informed buying decisions when it comes to E&O insurance.

What is important to understand about a technology E&O policy?

Coverage varies among carriers. This is why it is important to have an experienced broker to point out the differences and match companies with a policy that best fits their needs. Some key aspects include:

  • Claims-made versus claims-made and reported policies. No customer should be purchasing an E&O policy without knowing the difference between the two. Be on the lookout for hidden reporting triggers.

  • Enterprisewide and worldwide coverage. This means the policy is not limited solely to technology products or services and coverage will respond to losses and lawsuits outside the United States.

  • Definition of damages and payment. How a policy defines damages determines how it will respond and pay in the event of a claim. While some policies may leave damages undefined and left to carrier interpretation of the loss, other policies will be specific about the type of damages covered.

  • Indemnification versus pay-on-behalf. Indemnification policies could leave an insured business on its own to pay defense fees and then await reimbursement.

  • Terms. Insurance buyers should read exclusions carefully and also be interested to know whether their policy includes cost of contract, delay in delivery, security breach, choice of counsel and duty to defend clauses.

What should technology business owners look for when selecting an E&O insurance carrier?

One should partner with a carrier that offers breadth of coverage and has specialists in underwriting, risk control and claims handling dedicated to servicing technology companies. There are a limited number of carriers in the market that truly specialize in writing insurance for technology businesses. Take the time to research the various carriers and talk with a broker about the one that can best protect your business.

KEN HARRISON, MBA, is a commercial insurance broker with Westland Insurance Brokers where he specializes in property and casualty insurance for technology companies. Reach him at (949) 553-9700 or

Wednesday, 26 December 2007 19:00

Transparent answers

In the past, health care was a limited service that employers provided employees. The service was limited because there was only coverage for certain physicians, medical procedures and prescriptions, depending on the plan.

Today, health care plans, such as Health Savings Plans, give consumers more choices in health care service. For many consumers, more choices lead to confusion and the need for knowledge to make educated decisions. Health care providers advertise their plans as being transparent to ease consumer fears, but it is important for consumers to truly understand the information they are being provided and how to use such information.

The benefit of transparency is that when consumers are armed with information on quality and price, they can make better decisions, according to Sally Stephens, president of Spectrum Health Systems. Transparency is an initiative enabling consumers to compare the quality and price of health care services, so they can make informed choices among doctors and hospitals.

Smart Business spoke with Stephens about transparency, how consumers should utilize this tool and how it is affecting the health care industry.

What is health care transparency?

Today, transparency simply means the publication of provider charges. However, true transparency only occurs when patients understand their out-of-pocket expenses, not just provider charges.

Numerous influential organizations, including the Healthcare Financial Management Association, various state hospital associations, the American Hospital Association and the U.S. government, have come together advocating patient consumerism by trying to answer some very difficult questions regarding transparency in the health care industry.

Some of America’s largest employers and the medical profession are cooperating to lay the foundation for pooling and analyzing information about purchasers, hospitals and physician services. When this data system is in place, the regional health information alliances will turn the raw data into useful and meaningful information for consumers.

How do consumers utilize this tool?

The true purpose of full health care transparency is to provide the consumer with information on quality of care and cost. This tool will allow them to obtain the information that can assist them in making an informed decision regarding the appropriate level of care that is right for them. And, the responsibility will be on the consumer to make sure they access a credible source for this information. After all, this is how consumers purchase any other service or product they buy.

How can this tool benefit a consumer’s overall health care?

Consumers deserve to know the quality and cost of their health care. Transparency provides them with the information necessary and the incentive to choose health care providers based on value. Consumer choice creates incentives on all levels and motivates the entire system to provide better care for less money. Improvements will come as providers can see how their practice compares to others.

Can there be total or true transparency?

The concept of health care transparency is a noble idea. However, the transition from concept to reality creates significant challenges. Complete display of charges is meaningful to self-pay patients, which only represents 5 percent of the average consumers.

For the vast majority of patients to understand consumerism, they need to understand the unique relationships between the entities or the contracts, charges and benefits. So, to achieve true transparency and empower providers and patients to work together, payors need to provide better access to tools that allow ready access to their contracts and charges. This will allow them to better determine how a procedure will be paid; therefore, integration of contracts, charges and benefits provides all the necessary information for patients to become educated consumers.

Are there risks on solely relying on transparency when selecting a health care plan and/or provider?

Giving consumers the information and decision-support tools they need is much more complex than just comparing prices. In fact, introducing transparency depends on a convoluted set of circumstances and challenges. For example, physician fees for a specific service or procedure have little relationship to the total cost of care. Therefore, the total costs associated with an entire episode of care would be more relevant. Currently, cost-of-care measurements are unavailable.

How does transparency affect the relationship between providers and employers?

The goal is that transparency enhances the relationship with doctors and patients. Patient inclusion improves care and can help move us from episodic intervention to a model of chronic care management that rewards keeping people healthy. Data exposure will lead to patient empowerment. Empowerment results in an increased demand for evidence-based medicine because it demonstrates effectiveness and improves quality of care. And, quality of care means lower costs.

SALLY STEPHENS is president of Spectrum Health Systems. Reach her at

Wednesday, 26 December 2007 19:00

Seeing returns

Many people consider the current markets, especially real estate, volatile and risky. There have been highs and lows, and some regions have a large number of residential and commercial properties that have been on the market for months. While this news may seem discouraging, according to Michael Mason, senior vice president and commercial real estate team leader with FirstMerit Bank, this is not all bad news.

If you are an experienced real estate investor looking for multi-tenant residential properties, retail centers or office buildings, this can be a great time to invest in commercial real estate. There are plenty of properties for sale at an attractive price and long-term interest rates are very favorable. Due to the current condition of the real estate market, says Mason, it is clearly a buyers market. However, that does not mean an investor should simply buy and manage a property.

The most successful real estate investors will make ongoing improvements to a property, particularly during an economic downturn. Ongoing reinvestment in a property will typically assure maximized occupancy and rental rates, and a maximized future selling price during an economic recovery. The key is to know how to successfully purchase and manage the property that will provide the investor with the desired return on investment. Given the current market conditions, this is not the time for the highly leveraged novice to make real estate investments.

Smart Business spoke with Mason about what the current market means for real estate investors and how investors can prepare for future swings in the market.

There has been a lot of bad news in real estate. Is there light at the end of the tunnel?

There is light. Actually, for long-term investors, now is a good time to invest in the real estate market since property values and interest rates are relatively low and certain properties may be eligible for historic tax credits. The truth is, investors will not realize immediate profit, but if an investor is willing to invest time and money into a property, there will be profits in the long-run. Many economists believe that long term commercial real estate investments will continue to outperform the stock market.

What is the status of long-term interest rates, and what does it mean for investors?

The general consensus among experts is that interest rates will remain flat or decline slightly in 2008. Keep in mind that 2008 is an election year and politicians will do everything in their power to keep interest rates low during an election year. Long-term rates will also continue to be impacted by the issues surrounding the sub-prime lending market. As a result, investors will benefit from near historic low long-term interest rates.

Are there new factors the lending industry is abiding by for real estate buyers?

Investors should be prepared for more stringent underwriting standards as financial institutions are going back to a more traditional lending model. Financial institutions will continue to be competitive and creative with loan structure, however, there will likely be more reliance on the experience of the investor, the ‘global’ performance of an investor’s entire real estate portfolio, and the quality of the tenants. In particular, a diversified tenant mix and the sustainability of their income streams are important factors for lenders. High-quality investors that are willing to inject equity into a property to sustain future slumps in the market are looked upon ery favorably. The greater the investor’s equity position, the more aggressive a lender can be in providing financing.

What should investors be looking for when selecting properties in which to invest?

Location and diversification are the keys. Understanding the quality of the other properties near your investment is important. Investors need to clearly understand the rents and cash flow streams associated with that property and how they compare to current market conditions. A diversified tenant mix and a clear understanding of the credit-worthiness of the tenants are important. For example, a 10-year lease to a weak tenant means nothing once that tenant goes bankrupt. Also, make sure the tenants represent diverse segments of the economy. A downturn in one specific industry segment could cause a large vacancy in your property.

What can investors do to protect themselves against similar slumps in future markets?

Don’t over-leverage the property and keep a reserve for repairs and maintenance. Some investors look to take out all the equity in a property without properly funding ongoing repairs and maintenance. This will get the investor in trouble during times of low occupancy or depressed rents since investors will have difficulty making loan payments, keeping real estate taxes current, and simply maintaining the property. A lack of maintenance leads to higher vacancy and, ultimately, a lower property value.

Why should investors have cash reserves?

There will always be highs and lows in the real estate market, along with unforeseen expenses. A cash reserve and/or the ability to inject equity into a property will assure that a property will retain or increase its value even during difficult economic times. Investors must look at their properties as a long-term investment and be prepared for whatever challenges may arise.

MICHAEL MASON is senior vice president and commercial real estate team leader with FirstMerit Bank. Reach him at (216) 694-5654 or

Friday, 26 October 2007 20:00

A positive environment

Workers’ compensation can be a major expense for company owners. While there is no real way to prevent workers’ compensation costs, there are many ways to limit such expenses and decrease them in the future.

Employers often look for ways to ensure safety at a job site and among employees but often overlook simple ways to reduce costs, says Jerome Shalauta, a commercial insurance broker with Westland Insurance. Many times, the way you treat your employees and the work atmosphere you create can help reduce workers’ compensation expenses. Creating a positive work environment not only reduces these expenses but increases overall productivity, says Shalauta. Often business owners need to revert back to the basics when implementing safety and determining how to treat employees.

Smart Business spoke with Shalauta about how employers can work to reduce workers’ compensation expenses and increase overall productivity.

How can an employer reduce workers’ compensation costs?

Implement safety. Employers who implement and practice safety measures on a daily basis have fewer accidents, and employees may feel more comfortable coming to work each day.

Create a positive environment. Employees who enjoy coming to work each day are less likely to file a fraudulent claim or seek excuses from work when healing from injury. Satisfied employees want to come to work each day.

Involve yourself with employees. There should not be a divide between management and employees. If employees know you are genuinely concerned, they will feel appreciated. Employees who are appreciated are less likely to litigate, and litigation can drive compensation expenses through the roof.

Hiring practices. Think about the people you hire and how they will contribute to the overall work environment.

Compensation or rewards. Offering employees compensation and/or rewards when a certain number of days pass without an accident or claim may cause employees to work more carefully and prevent them from filing frivolous claims.

How can an employer ensure safety and communicate safety procedures to employees?

Safety is crucial when workers’ compensation is involved. There is a major difference in the number of claims filed in companies that do not implement and practice safety routinely versus companies who have safety plans and ensure they are communicated effectively.

Good workers’ compensation carriers should supply a safety staff that will come out to your office or job site to evaluate the site and the employees’ actions. They can then offer an expert opinion about how safety can be increased and practiced. It is important to consider a carrier not strictly on cost alone but also on what a carrier can do for the overall safety and claims prevention for the company. Meet with the experts and let them help you.

Communication is critical. Newsletters, information postings and regular meetings can be used to communicate safety procedures. Employers can make these meetings mandatory to ensure every employee is properly educated.

How should employers treat workers before and/or after compensation claims?

It sounds so simple but, honestly, the more you communicate and are involved with an employee on a daily basis, the better your overall relationship will be with that employee. A good relationship, a positive work environment and employees who feel appreciated often lead to employees who will be less likely to file an unnecessary or grudge claim after an accident.

After an injury, you must stay in touch with the employee. It makes a world of difference if the employee knows you are concerned and that he or she still has a job to return to after recovering.

Is there any way employers can protect themselves against fraudulent or grudge claims?

There is currently a huge emphasis on eliminating fraud in workers’ compensation. Limits have been put on attorney costs in an attempt to prevent excessive lawsuits. Nuisance settlements — settlements made by employers with employees out of court — have also been largely eliminated.

Employers also have more control over the medical attention that employees receive. This helps ensure that employees are receiving proper but not excessive treatment for any injuries.

What can a poorly handled claim cost a company?

This depends on the type of claim filed. A serious accident can cost a company a few thousand dollars if it is handled properly. If it is not handled correctly, the costs could be debilitating. Employers must realize that this is not just one employee and one claim. Rather, this claim will affect your Experience Modification (X-MOD) that is calculated by the Workers’ Compensation Insurance Rating Bureau (WCIRB). This may mean increased workers’ compensation.

JEROME SHALAUTA is a commercial insurance broker with Westland Insurance Brokers. He can be reached at (949) 553-9700.

Friday, 26 October 2007 20:00

Consistency is key

People who rely on media headlines or talking heads on television for investment advice will often be too scared to maintain their investment plan during trying times in the market. Conversely, they will find themselves encouraged to ignore the risks and over-invest during the good times. Creating and sticking to a consistent long-term plan is the best way to grow your investment dollars, says Robert Leggett, CFA, chief investment officer with FirstMerit Bank.

“In my opinion, people who do not have an investment plan should always be ‘afraid’ of the market,” Leggett says. “People who have well-thought-out investment strategies customized to their financial situations and longer-term plans should never fear the market.”

Whether the U.S. dollar is weak or strong, whether the Federal Reserve is cutting or raising rates, or whether the talking heads are screaming, “Buy, buy, buy” or, “Sell, sell, sell,” you will be better off to follow the reasoned advice of a trusted adviser than to allow your emotions to drive your investment actions.

Smart Business spoke with Leggett about investment options and how to approach the market.

Whom should a person consult if he or she is looking to invest for the first time?

People who are looking to invest for the first time should generally look to the company they work for. There is probably a 401(k) option that allows them to set aside a portion of their income in retirement savings. Most companies match at least a portion of your annual contributions. Many people are fully capable of managing their own investments, but few people actually have the time to do so. That is where investment advisers come into play.

How can you determine when and how much you can invest in the market?

Simply start investing as early as you can, invest as much as you can spare, invest consistently and get the long-term advantage of compounded earnings. ‘Dollar cost averaging’ over many years has proven to be a successful approach to amassing funds to pay for college education, retirement, etc. The exception to this is for individuals with large amounts of high-interest-rate debt. The best investment in that case would be to pay off your debts, so they do not compound against you.

Why do investors need to diversify, and how do they achieve diversification?

The most important decision to be made is allocating your assets among various asset classes. Asset classes include stocks (equities), bonds, money market funds, real estate and commodities. The allocation of your investment dollars among these alternatives is the key factor in determining the growth of your assets.

Diversification means investing in two or more classes. True diversification requires investing in multiple subasset styles. It is very risky to put all of your eggs in one basket. If you diversify, you won’t do as well as the best investment, but you’ll do far better than the worst investment.

Mutual funds are one way to diversify. Another way is to hire a qualified professional adviser to handle diversification using a Separately Managed Account approach. SMAs, also known as ‘wrap’ programs, use individual securities rather than funds. A separate account is set up for each style-specific manager employed.

What is the Market Meter?

The FirstMerit Market Meter is the basis of our disciplined approach and the keystone to our investment philosophy: asset allocation. The allocation of your financial assets between stocks, bonds and cash will be the primary determinant of the growth of your assets. While the stock market has returned more than 10 percent annually over the past 80 years, it can also be difficult for extended periods, as was reinforced by the 50 percent drop in the Standard & Poor’s 500 between 2000 and 2003.

Strategic allocation shifts are crucial if you want to limit losses when trends are bearish. We think that is critical to meeting the goal of helping investors reach their financial goals. The Market Meter signals whether an investor should be fully invested or should allocate assets away from the stock market.

The Market Meter is a combination of quantitative and qualitative, fundamental and technical, and trend-following and turning-point forecasting factors. It is not for short-term ‘market timers,’ as it has given only two major signals in the past several years: a bearish signal from 1999 into early 2003 and bullish since then.

How can people utilize the Market Meter?

As with many asset allocation models, there are complicating factors, which require the interpretation of the creator of the model. The bad news is that a ‘late cycle’ +4 rating has different implications than an ‘early cycle’ +4. A continuation of current trends would drop the economic and technical trends to neutral or negative before year-end, forcing us to implement a defensive strategy. This would include raising cash and reducing exposure to cyclical opportunistic stocks as well as exploring investments that are uncor-related to equity market returns. At the current time, the Market Meter is signaling that higher stock prices lie ahead.

ROBERT LEGGETT, CFA, is a chief investment officer with FirstMerit Bank. Reach him at

Tuesday, 25 September 2007 20:00

Educated decisions

The health care industry is a fluid market. Business owners should be active members in managing their health care options. Brokers and insurance providers offer guidance that is essential for keeping up with the constant changes in the market.

A business owner who remains active is likely to find better health care prices because plan designs are always changing, says David Fells, employee benefits consultant for Westland Insurance Brokers. With new cost-sharing designs, health care costs are decreased for employers, and employees are encouraged to become more active in their health care options.

Smart Business spoke with Fells about rising health care costs, methods employers can take to reduce costs and optional benefits employers can offer to enhance their health care package.

How do plan design changes and new innovations in the medical insurance market influence rising costs?

With the limited number of carriers in a consolidated medical insurance market, it is essential to compare competing programs. Comparing newly developed plan designs that will lower premiums by increasing cost sharing is necessary for any employer attempting to reduce health care costs.

Employers have the option to change plan designs during their renewal period to lower their bottom line. This is an effective way to substantially lower the premium amount by slight increases in co-pays, deductibles and co-insurance.

Employers can also introduce consumer-driven health plans (CDHP) or higher-deductible, HSA-compatible plans that allow the employees more control of their health care while keeping premiums in check.

What should business owners/employers be looking for when they sit down with a broker?

Business owners do not want confusing plan designs and benefits programs that basically become an expensive underutilized benefit because the employees don’t

understand how they work. A good employee benefits broker is a consultant first and foremost who will take the unique company factors into consideration and devise a simple, affordable program that is easy to explain and administer.

Employers should look for a broker who brings true value to the table. A good broker is the employer’s consultant and advocate. A broker should have a broad knowledge of the industry and experience in dealing with medical insurance carriers and underwriters. You should look for someone with whom you can have a rapport and who is responsive and quickly resolves any issues that may arise. Brokers should diligently shop the market, keeping a business owner’s interests and concerns first and genuinely ‘go to bat’ for the client.

How does the network of providers influence premiums?

Limited network programs are offered by most of the group insurance carriers at a substantial discount. Often when employers check their employees’ current providers, they will find that they do not need the more expensive expanded provider network. Premiums for these limited network programs are substantially less expensive.

To change to a limited network without affecting employee coverage, it is necessary to see if you are eliminating any of the physicians that your employees are currently using. A little homework before the change can make for an easy transition for you and your employees. Brokers should be utilized to hold open enrollment meetings to educate the employees so they know how to effectively utilize their plan.

What should employers be looking at when they get their annual renewal?

For groups with less than 50 employees, the employer’s Risk Adjustment Factor (RAF) is a key element in calculating the premium. There is basically a 20 percent variance in the RAF, so potentially as companies grow, there is a 20 percent discount a group can obtain given its size and particular situation. A good broker will shop the market for current RAF promotions and work to lower the RAF to its lowest possible number.

Choose only A-rated carriers and consider consolidating multiple lines of coverage with one carrier to qualify for premium discounts. Consolidating coverage will also lower the in-house administrative burden and enhance control of the policy by leveraging technology and online administrative services offered by the carrier.

How could the employer ‘sweeten the pot’ for employees when premiums go up?

Adding ancillary voluntary benefits to a group program, such as dental, vision or short-/long-term disability coverage, that would normally only be available to company employees and not individuals sweetens the pot. This enhances the overall employee benefits package offered by employers, giving employees a menu of benefits to choose without adding to the overall bottom line. This gives employees control and allows them to buy up if they desire.

DAVID FELLS is an employee benefits consultant with Westland Insurance Brokers. Reach him at (619) 584-6400 ext. 3235 or

Sunday, 26 August 2007 20:00

A head start

An estate plan can encompass many different financial and personal details. Such a plan may seem overwhelming to individuals who may not know how to approach the task of developing it. Business owners are so entrenched in their day-to-day operations that they may put the plan on the back burner, says Douglas Price, vice president and client adviser with FirstMerit Bank.

It is important to know that the estate plan does not have to be perfect from the beginning because the client’s circumstances are always changing. A business owner’s assets and goals will evolve and develop as a business continues to grow. That means the estate plan will have to change as well, says Price. The important thing is to begin a process with a financial consultant with whom you are comfortable and build from there.

Smart Business spoke with Price about estate and succession planning and the importance of developing a plan with the appropriate team.

Does everyone need an estate plan?

Everyone, not just business owners, should develop a plan for the future. Tax and financial issues are important to any business or personal plan, but the nontax issues are crucial and may be avoided because of the family and emotions involved.

The goal for a business owner is to develop a business plan that meets the current goals of the company and a succession plan that will one day leave the business in the hands of those people who can continue on the legacy that he or she has worked to create.

It is important to identify what aspects of the business plan are crucial to the success of the business and goals for the succession of the company. A well-developed estate plan includes a succession plan that ensures a smooth transition when the owner is ready to give up his or her part of the business.

The estate plan also ensures all legal documents are accurate for either business or personal plans. With documents such as a power of attorney, individuals can choose the person or institution to make decisions on their behalf if they are incapacitated for any reason.

Should estate planning be part of a business financial plan or a personal financial plan?

The distinction between personal assets and business assets may be a gray area to some business owners. The plan should be looked at as a whole because often the business is an owner’s largest personal asset. To look at the overall picture, the proper advisers should be brought in to make decisions. A team of advisers should consist of those who will compliment one another and work together toward the goals of the business owner in both personal and business plans.

The team should consist of an estate-planning attorney, a CPA, the insurance provider and an individual familiar with the owner’s financial assets. This team should learn to communicate well and should meet whenever there is a significant event in the business owner’s life or every five years. The business owner should provide all the necessary documentation in order to receive the most specific and useful information possible from his or her team.

When should an estate plan be developed?

It is never too early to create a road map. A business owner is going to have certain business objectives from the onset. As soon as the goals of the business are defined, an estate plan and succession plan should be developed to continue the business after the founding member of the business leaves or retires. For personal assets, there is no time like the present to define your plan.

Without an estate plan and succession plan, there may be unnecessary tension between family members or business partners. If there is an unexpected tragedy and the current owner cannot continue to run the business, a succession plan would have the desired chain of command defined. Without this preparation, the business may not continue on in a profitable manner or may not be sold for profit. This could be devastating to the legacy of the business as well as the financial future of loved ones.

How does charitable giving fit in to an estate plan?

Around 70 percent of people give to a charity during their lifetime. Only 10 percent of people give to a charity in their will or their trust. There are a lot of feel-good reasons people give to a charity. It can help leave a legacy of your family. There are also tax benefits both current and into the future that one can receive.

Advisers should ask individuals in the planning stages the importance of charitable giving in their life and overall plan. If they are contributing annually, they may want to plan to provide a lump sum after they are gone. The lump sum could be invested into a charity’s endowment, if one is available, to keep giving in perpetuity. This kind of giving can be set up in an estate plan.

DOUGLAS PRICE is vice president and client adviser with FirstMerit Bank. Reach him at or (216) 694-5671.

Monday, 25 June 2007 20:00

Innovative business protection

What would you do if a natural disaster, a fire or other catastrophic event destroyed the business in which you have invested all of your time, money and heart?

No one likes to think about or plan for the effects a catastrophe or theft, but unexpected events do occur and planning is necessary.

After a catastrophe, one of the first things you will need is a list of all the assets that were lost or destroyed. With the stress and shock of the situation, it will be very hard or near impossible to recall — opening the door to possibly understating your business loss, says Jim Coleman, a property documentation specialist at Westland Insurance Brokers.

A cost-effective video property inventory service that can better prepare the business owner for a future catastrophic loss is currently available.

“‘A picture is worth a thousand words’ describes the situation perfectly,” says Coleman. “Video property inventory is an innovative way for business owners to protect their assets and their business.”

Smart Business spoke with Coleman about video property inventory services and how they can protect a life savings and provide peace of mind.

What is a video property inventory?

This comprehensive service offers a complete visual record of your business assets in the event of catastrophic property loss due to fire or theft.

It has two components. The first is a high-quality digital video documentation of all business assets, which gives you a general view of quality and quantity of assets of the business. The second component is digital photographs of specific assets. This can include custom equipment or items you might want to document in greater detail than you get with video. The combination of video and photos provides the details you need when submitting an insurance claim.

The video is presented on a DVD, and digital photographs are encoded to a CD. The DVD can be played on any DVD player, while the CD can be viewed on and photos printed from any computer. Scanned business documents can also be encoded to the CD. Within a week, the client receives a package that includes two copies of the DVD and CD along with other valuable information.

How does this inventory service assist in the claims procedure?

Having a pre-loss visual record of your business assets will help you identify specific items lost and provide accurate information to the adjuster. This is an added value for everyone involved in the claims process. Insurance companies want to pay fair value. Reviewing a video inventory saves time and money in claims research. A fair value can then be assessed for payment of claim and restoration of normal business operations as soon as possible.

How should business owners prepare for the video inventory?

The types of assets we record vary from business to business. Items may include machinery at a printing company, fabric rolls in an upholstery warehouse, or computer equipment, plasma TVs and expensive furniture at a mortgage company.

A business owner should think about suffering a loss. Any relevant documentation should be set out to be photographed during the inventory.

It is important that you accompany the photographer on the inventory tour to describe any valuable machinery or assets so you have a visual and audio record.

Besides a visual record, what does this service provide businesses?

This service can assist a property broker in making sure the business has proper insurance coverage. After the inventory is collected, you should meet with your insurance broker to review your assets and determine if there is sufficient coverage. Inventory should be updated every three years or when a business is growing or immediately after a new major purchase.

In the event of a catastrophic loss, an inventory can assist in speeding up the claims process and getting a business back on its feet as soon as possible. High-quality digital video and photographic documentation allows an accurate assessment of the loss in a timely manner. This service can provide business owners or homeowners peace of mind, knowing they have a complete digital record of their assets without having to be a technology wizard themselves.

Can customers use this service for their homeowners insurance?

Absolutely. If it makes sense for a business, your next greatest asset is probably your home. Almost always, a business owner will see the value of the business inventory and request a home inventory.

Any items of particular value, such as jewelry or heirlooms, should be pulled out and documented. A property documentation expert can help you document items you may have overlooked as valuable. It is a small amount of time and money for such a significant protection.

JIM COLEMAN is a property documentation specialist at Westland Insurance Brokers Inc. Reach him at (949) 388-0211 or