sudhirdada

BW-Satyam-Storytelling,Movies-6.4.09-Ad-13.4.9

2009-04-14T07:55:00.000-07:00

BOOKMARK
The Narratology Of Balance Sheets

BY VISHAL KRISHNA
27 Mar 2009

Storytelling Organizations
Storytelling Organizations;
By David M. Boje; Publisher: Sage Publications;
Pages: 282; Price: £24.99
Writers, unfortunately and often, do not pay attention to their narrative, and to making sense. This book by David M. Boje teaches every apprentice of the written word the importance of examining thoughts and theories before putting an idea down on paper.

The book aims to capture narratives of companies’ past business events, and to give an argument some coherence in order to achieve believability. He throws certain theories at the reader with which he (the reader) may introspect before going out to write a story. Boje builds upon the usual journalistic tradition of asking what, where, when, why and who, followed by how, but he also goes beyond connecting the dots.

The author looks at how business organisations can employ story-telling techniques to gather support for the company’s goals from its shareholders and the public. Corporate annual reports, news stories and press releases are routinely mundane, repetitive and, not surprisingly, frequently ignored by writers. The question is: what do we, as writers, do with all this information? Boje’s contention is that information related to a company can be made lively and easy to understand.

The book explains theories such as Michel Foucault’s architectonic narratives, which basically stress on a structure for everything that is to be written. Boje presents eight ways of making sense in a business narrative — the beginning-middle-and-end method is one of them. Although the book does not offer any one solution in order to make sense out of business stories, Boje reminds us of the structure and chaos that exist between the pen and the process of thinking. He points to a direction and turns this book into a tool with which the writer can structure a narrative. In the end, there is no right way of telling a story, as long as readers are captivated with it.

To this end, Boje brings in dialogisms, where one element of the story becomes the storyteller. He illustrates the use of dialogisms with the example of Wal-Mart: for over 30 years, till before his death, Sam Walton based his annual reports on what consumers and employees thought of his company — often featuring their lives in his annual reports and his autobiography. Walton had the reports written carefully so that they would not speak of the company and its greatness. Instead, the focus was always on the target (the stakeholders), and the story would tell them there were no complaints.

David Boje David M. Boje is a professor of management at the New Mexico State University. He has published articles in management journals, including Academy of Management Journal, Leadership Quarterly and Management Communication Quarterly. Boje is former editor of the Journal of Organizational Change Management and founding editor of Tamara: The Journal of Critical Postmodern Organization Science.
The story-telling is a form of propaganda with which a CEO can control his sales force, vendors and customers, writes Boje. But he also says that even though a conglomerate will have some epic stories to tell, the general trend is to favour short reports.

However, approaching a story and shortening it depends on the writer’s ability to capture everything within a small space. To understand and resolve this conflict between a lot of information and little space, Boje throws in a paradox: he says there is no whole story — that a whole story is just a poetic illusion. The story is not about victors with swords, but about a simultaneous narrative with causes and effect, interpreted through characters in the story.

Companies also use writing techniques to prove their legitimacy. Enron was a classic case in point: it kept adding dead assets to its balance sheets, and presented to the world a high stock valuation over business that was non-existent.

Perhaps, the most important part of the book covers strategies related to story-telling. The author explains why elements such as the use of different media, or the hiring of consultants, becomes important for the narrative. He quotes IBM, which says that strategy narrative is important because of “the character of a company — the stamp it puts on its products, services and the market place — is shaped and defined over time. It evolves. It deepens”.

Boje’s work is a theoretical interpretation of how a writer would have to rethink a million times before he organises his script or story by weaving in all the characters. By doing this, the theories showcased in this book become essential reading for professionals in the film, journalism and advertising industry.

The beauty of the book can be captured only when the reader does not confine himself to any one theory. Instead, these theories can be connected to the reader’s real experiences in the corporate field, which can then go towards the writing of a fabulous tale. Sadly, we do live in a repetitive and monotonous era. Boje does well by reminding us of the basics. And it is here that he allows us to find who we really are as writers, and as organisations.

The Story Of My Assassins
Selection 1
Through The Prism Of Crime
The Story Of My Assassins;
By Tarun Tejpal; Publisher: HarperCollins;
Pages: 522; Price: Rs 495
In the story of my assassins, Tarun Tejpal examines the politics of power and shatters any illusions we may harbour of being a tolerant and just society. Set in the Hindi heartland, the book traverses across the multiple Indias that co-exist — urban-rural; educated-uneducated; elite-streetkid; and don-Guru. It makes hunger for power, violence and injustice its central theme.

All journalists have stories to tell. And given Tejpal’s extraordinary life since the 2001 Tehelka exposé, one is eager to hear his. He writes in the first person, weaving an extremely powerful plot and telling it skillfully. The police has foiled a plot to kill the protagonist. Who are the five killers, who is the mastermind? Through the stories of the assassins from childhood to adulthood, Tejpal explores the world of the underclass, the politician-police-don nexus — an India far removed from the reality of the urban educated Indian. The expertly crafted plot comes to a nail-biting finish much too soon.

Tejpal’s command over languages enables him to capture the north Indian idiom like never before. He paints vivid sketches of characters recognisable in everyday life. Also, the author takes a dig at everyone — the panting television journalist, the partner nicknamed Lincoln, the public school elite “who has no idea about the reality of India”. No comment on Indian society is complete without religion, sex and adultery. There is the mistress who works in a women’s advocacy group, all righteous about justice; and there’s Guruji, the protagonist’s spiritual advisor.

This book is a must-read. Cynical, yes — too much anger, violence, injustice, abuse — but extraordinary for its portrayal of modern society.
Sumita Thapar

Memory's Gold: Writing From Calcutta
Selection 2
Pen Sketches Of Kolkata
We live in times when the cultural manifestation of memory is increasingly cast in the digital mode. Digicams, Web albums, Facebook, Orkut, YouTube and blogs galore record the disappearing here and now. The narratives of memory are preferred in short, condensed fragments.

In this context, Amit Chaudhuri’s anthology of writings on Kolkata is a singular collection, for most of its 55 inclusions draw the reader in by their brief compass. Also, the fact that these pieces are eminently readable and combine to evoke a distinctive sense of the place shows the care he has taken in arranging and editing the material for Memory’s Gold: Writings From Calcutta (Penguin).

Robert Clive, a key architect of British India, once described Kolkata as “one of the most wicked places in the universe”. Chaudhuri’s book gives the lie to the English soldier’s dubious hyperbole. The brief introduction announces the editor’s project to trace “an aesthetic of the city”. As an editor, he includes the usual suspects — Rabindranath Tagore, Nirad Chaudhuri, V.S. Naipaul, Gunter Grass, Jug Suraiya, among others. But there is also a heartening inclusion of translations of original Bengali writing that bears witness to the many facets of Kolkata’s past, including a chunk of modern Bengali literary history by way of the work of the Krittibas group. Overall, the book is a nuanced selection of writings that remembers the making of the modern Kolkata.
Ram Shankar Nanda

Alert
ALERT
Bernanke’s Test
By Johan Van Overtveldt
B2 Book (Agate)
While the world scrutinises Federal Reserve Chairman Ben Bernanke’s strides to strengthen the crumbling US economy, Johan Van Overtveldt — in his analysis of the challenges that Bernanke is facing — looks at the careers of previous US Fed chairmen. The author believes that the current economic crisis that is testing the Fed chairman today is in fact rooted in the policies of Bernanke’s predecessor, Alan Greenspan (responsible for the subprime-induced credit crisis). In a detailed documentation of Bernanke’s obstacle, Overtveldt maintains a dispassionate and incisive stand.

Ganesh Ram V.
BROWSING
Ganesh Ram V.
Managing Director, Amoha Education
At the moment, I am reading Rediscovering The Veda by Frits Staal. The book gives insights on the language of the Vedas. Being in the language education industry, I wanted to understand how a language evolves over time. I read all genres — popular science, linguistics, management, philosophy and fiction, the last one only if the author is well-known. One book that I would recommend is A Brief History of Nearly Everything by Bill Bryson.

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MEDIA & ENTERTAINMENT
Picture Imperfect

Despite failures, filmmaking continues to lure corporates

GURBIR SINGH
27 Mar 2009

Sorry Bhai (left) & Black
Black And White: Mumbai Mantra’s maiden venture Sorry Bhai bombed, while Applause Entertainment’s Black was a hit
Speaking at the annual federation of indian chambers of commerce and industry (Ficci) convention at Mumbai in February this year, Mahindra & Mahindra (M&M) chairman Anand Mahindra had the audience in splits with his self-deprecating humour. M&M’s latest foray into the world of film-making was a “spectacular disaster”, he said. Mumbai Mantra, a company owned by a trust set up by Mahindra, had failed to make a success of its first two films. The first — a Bhojpuri film called Hum Bahubali — was unfortunately released at the time of the Bihar floods. The film too got swept away by the swirling waters. Its second movie — a Bollywood production — was equally unlucky. It was released on 27 November when everyone was glued to television sets watching Kasab and his gang wreck mayhem in Mumbai.

“The film was called Sorry Bhai, and we conveyed the box office disaster to the director telling him ‘Sorry Bhai’,” said Mahindra.

M&M isn’t the first business group unable to gauge the quicksand of Bollywood. Attracted by the glitz and glam of the tinsel world, the past 6-8 years have seen many corporate groups enter a business quite removed from their core competence. They have ended up burning their fingers and very often exited as fast as they entered.

Tata Infomedia entered the entertainment industry with a bang in June 2002 announcing Aitbar, a Rs 12-crore venture with Amitabh Bachchan in the lead. However, its appetite for Bollywood risk quickly fizzled out and the Tatas exited with ICICI Venture taking a controlling 50 per cent stake in the company in September 2003 for Rs 100 crore. Kumar mangalam Birla-promoted Applause Entertainment, which produced the successful Sanjay Leela Bhansali-directed Black, also exited by 2005 as it found the business too unpredictable.

Pantaloon chairman Kishore Biyani, too, tried his hand at filmmaking, launching 3-4 movies riding on actor Diya Mirza, all of which turned out to be duds.

But this is not to argue that corporate groups have all failed in film-making. The Manmohan Shetty-promoted Adlabs (now taken over by Anil Ambani’s ADAG) has been a successful production and distribution house. In case of UTV, film production has been its most profitable vertical, and the company is the first to put together the Hollywood studio model in India.

Is the film industry resistant to corporates, or do the corporate groups fail to get the Indian film formula right? According to Madhu Mantena, the young producer of the Aamir Khan starrer Ghajini, and head of Saregama Films, corporate groups have wrongly interpreted the relationship between the studio, the film-maker and themselves. “The corporate group creates the studio platform but not the movie; it is the film-maker and his creative team that creates the movie. The studio provides the platform, then carries the movie forward through marketing and distribution.”

According to Sanjay Bhattacharjee, a film consultant who earlier headed UTV’s film division, “Many of these corporate groups don’t know the value of the products and stars, and end up overspending.”

Meanwhile, the CEO of Mumbai Mantra, Andrey Purushottam, is planning to release two films this year. Part of his learning is to make mid-budget movies in the range of Rs 5-10 crore and focus on strong scripts. Mumbai Mantra has so far invested rs 50 crore in the business, industry pundits estimate, but the mood is clearly to go slow. Despite reverses like those suffered by Mumbai Mantra, Bollywood will continue to attract glam-struck corporates, as failure in the tinsel industry has never been a deterrent.

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SATYAM
One Fraud, Three Stories

Three months after Raju’s confession, several questions remain. Here are three versions of the Satyam saga

ANJULI BHARGAVA
27 March 2009

THE ARREST: Every camera lens in the state focused on Raju as he was arrested two days after his confession (AP)

Even as bidders line up to pick up the company he built, what must be going through Byrraju Ramalinga Raju’s head, sitting alone in his cell in Chanchalguda jail, roughly 15 km from his palatial bungalow in Jubilee Hills, Hyderabad? Stripped of his mobile phone, his personal possessions, contact with his family and the comfortable existence he led before the great fall, what must be the thoughts running through the mind of the former chairman of Satyam Computers?

Would all the implications of his actions, both for himself and his family, have sunk in by now?

Raju’s actions have alienated him and his immediate family from most people today. Once a highly revered figure (“Raju almost had a halo around his head,” says one former family friend) in Andhra society, he finds himself disgraced in his own city today.

Autorickshaw drivers have an opinion on him, and it is not charitable. “Chor hai,” says one rickshaw driver. “Andhra ka naam badnaam kar diya he (He is a thief… he has brought disgrace to Andhra’s name).”

His sons, Teja and Rama Raju junior — both of whom have to some extent lost control of their own companies, Maytas Infra and Maytas Properties (Company Law Board-nominated members are now on the boards of both companies), in the scam fallout — and their wives and his grandchildren are keeping a low profile. Barring his lawyer, his sons and a select few loyal friends, Raju does not get too many visitors. Only investigating officers from various agencies come to meet him. The intense media scrutiny has kept his wife Nandini away, so far. She has been largely in the confines of the Jubilee Hills residence since 7 January. His grandchildren — like the rest of his family — will have to face social disgrace from an unforgiving world. “The Rajus are persona non grata in Hyderabad today,” says a former family friend.

He has become the butt of many jokes. A popular one is: “Raju Raju, yes Papa. Cheating people? No, Papa. Telling lies? No, Papa. Open your balance sheet, ha ha ha.”

But jokes are just one small part of the vilification. The more serious indictment has been from the media, which has seen a steady stream of vitriolic stories, some with scant regard for facts. The local media that once lionised him has turned against him with vengeance.

Click here for enlarged view
With access to two newspapers daily in prison, Raju must be acutely aware of the public castigation. The barbs uttered against him by some who were his acquaintances in better days must surely hurt. When some stories appeared of how Raju had asked for a mosquito net in jail (he got a repellent, in fact), M. Damodaran, former Securities and Exchange Board of India, or Sebi, chairman (and the man under whose nose most of this transpired), said,“The mosquitoes must be very brave to go near him.”

He is equally alienated from his fairly extended family — several of whom have been implicated in the case. Some of his cousins are quite uncharitable, and claim that he owes them huge sums of money.

Barring very few who are sticking to his side and who stayed in the initial days with his wife in the Jubilee Hills house, most of the family are attempting to distance themselves from the episode. While one of his brothers, Suryanaryana Raju, has been trying his best to not get arrested, his younger brother B. Rama Raju, former managing director of Satyam, housed in the same prison, has already fallen out with Ramalinga. Rama Raju has hired a new lawyer to represent him, and has parted ways with Ramalinga’s lawyer who was initially defending both.

But the worst may be the complete alienation from Satyam, the company he built painstakingly over 20 years and for which — according to his supporters — “he risked everything”.

Is Raju thinking of all he has lost or the money he made through the scam? Is he ruing the loss of his reputation of being a “world-renowned visionary, global business leader and a thinker”? Stripped of all the accolades heaped on him over the years (see ‘Can Someone Apply The Brakes?’) does he feel his own nakedness? Is he feeling relieved that the duplicitous life he led is finally over? Or is he regretting his confession that prised open the can of worms?
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SATYAM
Into The Final Lap

As the race for acquiring Satyam approaches the last stages, many new questions are emerging

SRIKANTH SRINIVAS
27 March 2009

CHINESE AUCTION: While the identity of
most Indian bidders are known, there is
less transparency about several overseas
bidders (Pic by Reuters)
It’s ‘show’ time. Over the next 10-15 days, prospective acquirers of Satyam Computers will show their hands in support of their bids for the scandal-hit company. That includes plans on how they will go about dealing with the business, the staff and how they intend to satisfy the clients of what used to be India’s fourth-largest information technology firm.

“Given the way the acquisition process was run, the companies in the game are playing blind,” says the head of a private equity firm that is not in the running, but did not want to be identified. “They cannot even discount the worst-case scenario, because this is the worst-case scenario.” That sentiment is reflective of most views about the ongoing acquisition process.

No one really knows what and how much information Satyam’s board can or will share with the eight or so shortlisted bidders. Perhaps some about client lists, ongoing contracts and, perhaps, even something about the assets and known liabilities.

The head of one securities firm puts it rather colourfully. “It is like buying land in Sri Lanka that was formerly controlled by the LTTE,” says V.R. Srinivasan, CEO of Brics Securities in Mumbai. “It will be very cheap, but who knows where the mines and booby traps are?” But apart from the unknowns, many have had issues with the bidding process itself.

A Few Rumblings
Take the identity of all the bidders: while many are known, there is less transparency about several overseas bidders, just to accommodate their concerns. The overseas bidders believe that their identities should be kept private until such time the final shortlist of those eligible to make financial bids is decided upon.

As BW went to print, presentations were being made by Satyam board members to prospective buyers who made it to the initial shortlist; that was to be followed by discussions wherein individual firms make the case for being picked for the next round of financial bids. Before making their financial bids — slated for 9 April — bidding firms will conduct their own due diligence, limited though that might be.

“Unlike a traditional merger or acquisition, not being allowed to make representations or seek warranties can be a handicap,” says Venkat Rangaswamy, executive director of Edelweiss Capital, a Mumbai-based investment bank and securities firm. “That means you cannot sue the members of Satyam board or the investment bankers if you discover some unforeseen liability after you complete the transaction.” Which raises an interesting question: what is the value of a due diligence exercise in these conditions?

Those making it to the next round make a financial bid — essentially when they quote the price at which they will buy the 31 per cent preferential share offer and at which they will make the open offer to current shareholders. If the offers of two or more bidders with the highest price are within 10 per cent of each other, each gets the chance to revise its bid one final time. Then, the board picks the winner.

Sidelined!
But will there be other losers? Strangely enough, with all the public discussion about the company and the misdeeds of its founder, two classes of stakeholders have been very silent. The first is the individual investor, who has little power or voice.
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ADVERTISING
Media’s Annus Horribilis

A sharp decline in advertising revenues has hit the media across verticals

GURBIR SINGH
03 April 2009

Media’s Annus Horribilis
Source: TAM Media Research

The businesschannel launched by Ronnie Screwvala in April last year, UTVi, has begun a corporate restructuring exercise to raise another round of funding. The original business plan has gone awry. The expectation that UTVi would break the hold of business news leader CNBC has not materialised and the viewership and reach of the channel never took off.

“Against the first year’s cash requirement of Rs 110 crore, and expected ad revenue of Rs 40 crore, the channel has been able to garner barely Rs 15 crore in advertising,” says a senior insider, adding, “the target of a break-even by the third year is clearly not possible with ET Now also entering the fray next month”.

UTV Software Communications, in which The Walt Disney Company holds a 60 per cent stake, will thus bail out the business channel and take a 49 per cent stake in the new special purpose vehicle that will now own UTVi. This is expected to bring in Rs 80 crore-100 crore considering that the valuation of the business channel is unlikely to exceed Rs 200 crore.

With most media companies dependent on ad revenues, the slowdown has had a debilitating effect. The total advertising pie is estimated at Rs 20,000 crore annually of which television takes away Rs 8,500 crore and newspapers account for Rs 10,000 crore.

On television, the advertising volume in November last year fell sharply to 45.31 million seconds compared to the previous month’s 55.37 million seconds — a fall of 18 per cent in a single month. The print industry’s pain was worse. From a high of 20.99 million column centimetres of advertising in October last, ads fell 45 per cent to just 11.59 centimetres in November. Radio advertising, too, declined by 30 per cent from 9,176 seconds in October to 6,515 seconds in November.

The actual fall in ad revenue would be far larger considering that advertising rates have crashed between 15 and 30 per cent across all mediums. From November onwards, too, television advertising has continued to decline marginally. On the other hand, both print and radio ad volumes have been inching up. The April-May Lok Sabha elections are, however, expected to arrest the downward trend. “We expect an infusion of Rs 800 crore – Rs 500 crore in national media and Rs 300 crore on regional platforms,” TAM Media’s CEO L.V. Krishnan said.

News channels have been hit harder by the advertising downturn since most of them are free to air and are largely dependent on advertisement revenues. NDTV suffered a Q3 loss of Rs 125 crore compared to Rs 32 crore in the previous quarter. TV18 was in the red with a Rs 30-crore loss compared to a net profit of Rs 8.4 crore in FY2008. Deccan Chronicle Holdings’ net profit for the quarter ended 31 December 2008 fell sharply by 75 per cent to just Rs 25.7 crore compared to the Rs 103 crore in the previous quarter.

Notably, Hindi entertainment channels have been increasing their subscription revenues to 35-40 per cent of their total earnings. As Rajesh Jain, head of KPMG’s entertainment and media practice puts it: “These are expected to be robust even during the meltdown.” For instance, Zee Entertainment’s third quarter results ending 31 December 2008 showed ad revenue growing just 2 per cent to Rs 264 crore as compared to the previous comparable quarter. On the other hand, subscription revenue grew 17 per cent to Rs 227 crore in the same period. This also means subscription revenue now accounts for 42 per cent of the company’s earnings — up from 38 per cent in the previous comparable quarter.

What is the forecast for calendar 2009? Estimates vary. The Pitch-Madison survey expects a flat scenario. After a heady 17 per cent growth to Rs 20,717 crore, total ad revenues are expected to inch up just 2 per cent in 2009. WPP’s media arm Group M on the other hand is more optimistic forecasting a 8.9 per cent growth to Rs 24,900 crore by the end of 2009. In this, television is expected to grow faster at 11.4 per cent to Rs 9,353 crore as compared to the print medium that is expected to log a 7.4 per cent growth rate to inch up to Rs 10,770 crore.

Crisis in the desert

2009-04-10T21:00:00.002-07:00

Crisis in the desert
R. Priyadarshini
April 2, 2009
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A high-flying ex-ceo sits huddled in a friend’s one-bedroom flat wondering what to do next. Bankers busily scribble off resignation letters after receiving large pay cuts. Expatriates run around in a frenzy winding up their affairs before their visas expire. Labourers from South Asia pack up their meagre belongings and return home. These are the surreal scenes unfurling in Dubai, one of seven citystates in the United Arab Emirates and the once-storied oasis of unbridled, conspicuous consumption.

One of the major reasons for the slump is the implosion of the real estate bubble that spearheaded Dubai’s boom in the past decade.

Most people think that the reason for Dubai’s past success is its oil reserves, but this is a big misconception. Revenues from oil & gas form a tiny 6 per cent of Dubai’s economy. The real drivers behind the rise of Dubai were construction, tourism, banking and shopping—all of which have experienced sharp declines.

For much of the past decade, Dubai indulged in an orgy of construction— fuelled by regional banks—building fantastical projects that were ostentatious in design and price. These included the Palm Jumeirah, an artificial island fanning out into the Arabian Gulf in the shape of a palm frond, consisting of sea-facing, multi-million dollar apartments owned by the likes of David Beckham and Michael Schumacher; the Atlantis, a gaudy $1.5 billion hotel complex that housed a whale shark swimming in a gigantic tank; a massive indoor ski-resort amidst the searing desert heat and Burj Dubai, the tallest building in the world.

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Today, the value of Palm Jumeirah’s apartments has fallen by as much as 60 per cent. The Atlantis stands eerily empty and rumours are that work on Burj Dubai has stalled. Investment bank Morgan Stanley revealed that the UAE is delaying or cancelling real estate projects worth $260 billion, the majority of which are in Dubai. Proleads declared that 52.8 per cent of projects are on hold.

Other high-profile projects in trouble include the Meraas Jumeirah Gardens ($98 billion), Nakheel’s Harbour and Tower project ($38 billion), Tatweer’s $3.3 billion 6,500-room Asia-Asia Hotel, Nad El Sheba race course being built by Mayden LLC ($1.3 billion) and the Dubai Exhibition City ($450 million). Dubai’s skyline has become littered with half-finished skyscrapers that give the once-glittering metropolis the aura of a ghost town.

Dubai's woes

* Dubai is hardly oil rich.the major components of its economy are construction, tourism and banking

* The city overdosed on erecting fantastical structures such as an indoor ski resort and the world's tallest building

* Now, the UAE is delaying or cancelling projects worth $260 billion, the majority of which are in Dubai

* A wide web of companies sponsored by the city's rulers have racked up some $70 billion in bills

* Out of work, a large portion of the 1.2 million migrant workers from South Asia are returning home

The carnage in construction and tourism has had drastic consequences for Dubai’s workforce. Once a haven for wealthy sheikhs, speculators, playboys and business executives who enjoyed tax-free salaries and an opportunity to get rich quick, the city is witnessing an exodus of foreigners who made Dubai their home.

Employees in Dubai are now experiencing the brunt of drastic cost-saving decisions. “Canteen facilities have been aborted. Even the free supply of toilet paper may stop,” complains a marketing executive. Banker Shakeel Ahmed reached his office hoping to get a pat on the back for his “good performance”. Instead, he was informed about a pay cut. “Take it or leave it,” said the boss. Ahmed opted for the latter.

Others are acting proactively to save their jobs: “As we are a new company, a group of us voluntarily suggested that our employer cut our salary. It’s a question of survival,” said Aruna Sen, a media professional. Rumours are also spreading that hundreds of families are relocating their children to India after the exams end in March. But major schools denied such claims saying the situation was normal.

The most hapless victims of Dubai’s downward spiral have been the approximately 1.2 million migrant workers from South Asia, who are shipped in to undertake work on construction sites. Housed in squalor in labour camps situated at the fringes of the desert, and paid a relative pittance—around $140 a month—to build these dream buildings, these labourers have seen their jobs evaporate and their visas cancelled. They’ve been left with no option but to return to their hometowns, penniless and laden with the debt that they had undertaken to land these jobs in the first place.

An unanticipated victim of the Dubai meltdown is the city of Dubai itself. Dubai’s rulers are sponsors of a wide web of companies that have racked up some $70 billion in bills, according to reports— almost matching UAE’s collective $82 billion GDP last year. The crisis has become so severe that Dubai recently announced a $20-billion bond scheme and its Central Bank agreed to purchase half of it to keep the city afloat.

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Waterfront development
The other half of the bond issue was purchased in late February by Dubai’s knight in shining armour, Abu Dhabi, capital of the UAE and the wealthiest Emirate with 95 per cent of the oil reserves in the federation. Abu Dhabi, many say, has grown more cautiously than its neighbour and is bound to supplant Dubai as the financial nerve centre of the region in just a few years. Despite this bleakness, some analysts insist that this is simply a passing phase. “The economy is sliding, but there is no bloodbath.

There is a crisis of market confidence, which is complicated by a lack of transparency and opaque financial declarations by the Dubai Inc. entities,” says Dr Samir Pradhan, Senior Researcher of the Gulf Research Centre. Pradhan says that what is happening to Dubai today is not very dissimilar to what took place in Singapore during the Asian crisis in 1997—and Singapore rebounded successfully in the following years.

Still, Dubai’s recovery is plagued with many more complications than Singapore’s in the late 1990s. In order for it to recover, the city desperately needs to attract institutional funds (a scarcity in this creditstarved global economy), clean up its balance sheet, abandon its gaudy ways and focus on sensible and selfsustaining development. Anything else could bury this once-opulent Mecca of capitalism in the desert for a long time to come.

Slowdown Mantras

2009-04-10T21:00:00.001-07:00

Slowdown Mantras
Ten things to do when there’s less work in the office and more time on your hands
Rachna Chhachhi

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Okay, so it’s that time in life when, if you’ve worked for about seven to nine years, you’re depressed. And if you’ve been around for 18-20 years, you know things will look up. A slowdown can look extremely grim. If you haven’t seen the slow growth rates of the early-1990s, and thought that the seven-year good run was going to continue forever, just sit down and breathe deeply.

You will get a lot of time to do that anyway. Most offices have professionals hanging around, taking cigarette breaks or fatty coffee ones. So, instead of twiddling your thumbs, here’s what can keep you constructively occupied

1. Build Stronger Customer Relationships

Invest this spare time in your clients. This is a good way to be top-of-the-mind for the future. You could send them reports on their industries published by consulting firms, refer them via email to articles that may have carried data on their industry. You could also win goodwill by sending them links for training that could increase their business. To get this data, you can:

*
Research online on your clients and their competitors—there is a wealth of data out there.
*
Go to consulting firm websites to gather information on your clients’ industry segments, and more.
*
Read online versions of business magazines and cull articles you can send
to them.
*
If your clients are in varied industry segments, you could spend a few days on each industry, make folders specific to that industry, and then edit and organise the data to send to them.

2. Take An Online Course

It’s easy to be in office and on your laptop the whole day. Which is what may be expected of you. So, why not hone your skills and take an online course? It will save you from getting bored and add to your resume.

List the topics you’d like to study, the classes to take, to keep you up-to-date with your industry and business skills. Use this time to add to your intelligence pool.

3. Spend Time With Colleagues

This is the best time to get to know your colleagues, bosses and team members. What are their aspirations? What do they expect from you? What are the triggers you can press later to motivate your team. How can you improve your performance? All these questions will be answered once you take time out for people who work with you but who you may not know at all. Make the effort to know them. It will pay. One day.

4. Organise Your Paperwork

There is no time like the present to get your paperwork in order. Use this free time to download your salary slips, bank statements and other receipts. Some things that you can do are:

*
Go through your expense receipts, credit card and mobile bills, and categorise them.
*
Get your Form 16, insurance receipts, salary slips and bank statements in
one file.
*
Scan all your documents for an electronic record.
*
Estimate your last tax payment for the current year.

5. Keep Fit With An Exercise Regime

Okay, so you cannot step out of the office for too long. And you have been putting off losing weight because you never had the time. Start by researching if there is a gym in your office area that you can join. You can always step out at lunch for an hour. Most gyms have a shower facility and, hence, you can be fresh. For those who cannot get away at lunch or are conserving cash, you still don’t have any excuse. Most offices are in multi-storied buildings, and getting away at lunch or noon or 4 pm to go down and climb up 10 flights of stairs is doable. It takes only 15 minutes each. So, start it today, and see your youthful statistics re-emerge.

6. Take A Long Weekend Off

It’s easy to get leave at this time since work pressure is not high. Hence, taking a day off and combining it with a weekend is the best way to take a mini-break. You could use this break to be with the family or just rejuvenate yourself by checking into a spa. There are many weekend getaways within a few hours of the city. It will be a happy, cost-effective holiday with no airfare outflows.

7. Discover A Value-For-Money Lifestyle

In busy times, you might end up trading time for money since you don’t have the time to negotiate or bargain hard. But slow times mean you can haggle with your travel agent, electronics or mobile services or instruments provider. This is the best time to research and get cheap bargains for holidays, phones, iPods, furnishings and even houses. Re-organise your life in a value-for-money (VFM) way. You could even search for cheaper restaurants to eat in, stores to get deals for clothes and grocery items...This information is available right there on your laptop, with the Internet connection provided by your office.

8. Get Creative With Pictures

You’ve taken a million pictures on your digicam and they’re all lying on a drive in your laptop. Go to Snapfish or Kodak, and get the really nice ones printed. Get them framed. These are memories not meant to be locked inside a laptop.

Get T-shirts or mugs printed with you or your family’s pictures on them. If one of your kids has a birthday coming up, get his or her picture printed on mugs as a return present to all the friends, instead of the regular boring ones. This way, your child’s birthday will always be remembered. Online orders can also be delivered to someone else’s address.

9. Spend Time With Family And Friends

When you’re busy, you’re pretty much invisible to all those who truly love and care about you. Now that work is slow, surprise your family by dropping in early in the evenings. They’ve been wondering where you’ve disappeared to. On most days, leave office on time. Delight your kids with an outing. Bowl over your spouse with a mid-week drink. Bring happiness to your parents by visiting them.

10. Rediscover Your Hobbies

You’re able to get away early from work. Three days a week, the family loves to have you home early. One day, meet friends. One day, you can spare for yourself.

Time travel back to college and you will remember many of your passions. Re-ignite them. If you played a musical instrument, re-hone your skills. Join an evening class to learn music. If you were great at dramatics, form an after-office team to put up plays. Soon, you’ll be glowing with your after-work achievements too.

‘Slow’ is a four-letter word, but used well, it can add meaning to your office hours. Now, get on with it

Best 25 Employers

2009-04-10T20:58:00.000-07:00

Zeroing In
How 25 winners were picked from 230 companies that took part in the study
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In July 2008, about 1,500 companies were invited to participate in the Outlook Business-Hewitt Associates Best Employers 2009 Study. More than 230 companies registered, spanning several sectors, including banking and financial services, consumer durables, manufacturing, retail, telecom, IT, ITES and hospitality. The organisations were put through three rigorous surveys:

1) Employee Opinion Survey

This was designed to gauge the level of employee engagement and collect information about employee perceptions of the work environment. It was completed with a statistically valid random sample of employees.

2) People Practices Inventory

It gathered information about philosophies, practices and policies that influence the management of people in organisations in the following areas:

o
People initiatives
o
Recruitment and retention
o
Talent management
o
Leadership
o
Performance management
o
Building capability
o
Rewards and recognition
o
Flexible work arrangements

3) CEO questionnaire

This was designed to understand the CEO’s philosophy and approach to
managing people.

After all this data was analysed, onsite HR audits were conducted at more than 20% of the participating companies. These audits involved focus groups with employees, an interview with HR, a discussion with the CEO and a site visit.

At the end of this exercise, a list of organisations based on overall company score and audit insights were shortlisted for the next stage of the judging process. Exhaustive profiles of each of these companies, along with the full results of the three surveys, were presented to the jury. The four-member jury, chaired by Nripendra Mishra, former Chairman, TRAI, Zia Mody, Managing Partner, AZB & Partners, Pankaj Chandra, Director, IIM Bangalore, and M Anand, Editor, Outlook Business, picked out the 25 winners after day-long deliberations.

The jury, to begin with, considered the company score assigned to each organisation. (This is the weighted average of the overall engagement and alignment scores for each company.) Then, it looked at how these companies were treating employees in the context of the current economic crisis.

It also took special note of company scores on leadership, diversity, learning and development, integrity, honesty and ethics when it selected and ranked the
25 winners.

Top 25 Best Employers
25 Companies that kept employees smiling even in the slowdown
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PHOTO ILLUSTRATION BY ARINDAM 1 HCL Technologies
2 Hindustan Zinc
3 Taj Hotels Resorts and Palaces
4 Cisco Systems
5 ITC Welcomgroup
6 Intuit Technology Services
7 Eureka Forbes
8 LG Electronics
9 Domino’s Pizza
10 Marriott Hotels
11 Godrej Consumer Products
12 Becton Dickinson
13 Stryker Global Technology Center
14 NetApp
15 The Oberoi Group
16 VCustomer Corporation
17 Paypal
18 Accenture Services
19 Kotak Mahindra Bank
20 Whirlpool of India
21 Intelenet Global Services
22 HSBC
23 Hewlett Packard
24 Indian Oil Corporation
25 Ford India

1) HCL Technologies

Industry: IT
Employees: 37,426
Workplace Units: 41
Business units: 11
Unique roles: 76

EMPLOYEES FIRST! WHEN HCL TECHNOLOGIES CEO VINEET NAYAR unveiled this concept at the company’s 2005 ‘global customer’ meet, it left everyone stunned. No one could believe that the company was putting its employees before customers. The shock was even more pronounced as HCL was struggling to find its feet when other Indian IT companies were taking leadership positions in the global IT market.

The Employee First programme was part of HCL’s transformational blue-ocean strategy. Not only was it going aft er newer markets and segments in which other Indian IT companies had a minimal presence, it was also searching for differentiators that would put it six to eight months ahead of the competition. The focus was to consolidate business lines, invest in sales, internal IT processes and services, pursue big-ticket deals and raise bills on output-based pricing. However, all this meant a lot of pressure on the workforce, which was already dealing with high attrition rates.

The new strategy positioned employees as the biggest differentiator. The premise of employee first and customer second is that delighted employees will create delighted customers, thereby sustaining business success. The company was not chasing volume deals, but high-value deals. Nayar says value is created at the point of interface with the client, and this is done by employees. This, in turn, produces business results. “Though it was a transparent concept, it took time to sink in. But we were serious about it, we believed in it and we had the will to implement it,” says Dilip Kumar rivastava, Global Head (HR), HCL Technologies.

HCL’s entire HR policy was revisited to bring in a qualitative shift towards employees. Exposure was increased and skills were updated to enhance knowledge. Employees were empowered to have views about the company and given opportunities to express them. This was done through 360-degree appraisals, surveys and opinion polls. The transformation of employees happened through coaching and mentoring programmes. A reward and recognition system was also put in place. The growth in the business reflects employee and customer acceptance of the programme.

“Change is the only thing that is constant here. I became multi-skilled and started believing in myself. HCL helped me to grow,” says Rajani Kapani, who joined the company in 1998 as a front-office executive. Today, his designation is Deputy Manager, Employee HR Services.

The initiative to put the spotlight on employees has made a huge difference. This, perhaps, is the prime reason for employees being confident about the steps being taken by the management to negotiate difficult times.

Good news or bad, employees get to hear first from the CEO or the leadership team. For instance, in September 2008, Vineet Nayar personally addressed employees across centres and explained the rationale behind the Axon acquisition, and what it meant for the company and the workforce. He also spoke about the economic situation and what it meant for HCL’s business.

Employees learnt that the organisation was not looking at layoffs or salary cuts as part of its efforts to minimise costs. This reassured the employees and also made them work harder. HCL Technologies is already known as the CEO factory for India, with almost 100 of its former employees now holding chief executive posts in the corporate world.

Today, it is evolving into a global company, where nationalities and region dissolve into just one thing: being an HCLite.

-Anurag Prasad

2) Hindustan Zinc

Industry: Metals
Employees: 6,363
Workplace Units: 12
Business units: 13
Unique roles: 221

OUR BIGGEST CHALLENGE,’’ SAYS AKHILESH JOSHI, CHIEF Operating Officer, Hindustan Zinc (HZL), the world’s second largest integrated zinc and lead producer, “is to attract the best talent to some of the remotest areas of the country, where our mines are.’’ Fortunately, for HZL, a part of the global Vedanta Resources Group, the task hasn’t been difficult, thanks to the company’s employees, who have been its “brand ambassadors” and helped rope in talent. Industry-topping salaries and a great work culture have also helped.

HZL’s expansion plans and global operations have added to the lure. Production capacity of zinc and lead (metals) has jumped from 204,000 tonnes in 2002 to 754,000 tonnes in 2008, and is expected to touch 1 million tonnes by 2010. Mining capacity has also increased from 3.45 million tonnes per annum (mtpa) in 2002 to 7.1 mpta in 2008.

For HK Mehta, Vice-President, Human Resources, HZL, the company’s policy of empowering individuals and giving them the freedom to carry out their responsibilities makes HZL an exciting place for its 6,363 employees. Its attrition rate of 12% is much below the industry average of 18%.

There’s also the lure of global career growth opportunities in other Vedanta group companies, to get familiar with cutting-edge technology at mines and smelters across the world, and to add educational qualifi cations. HZL helps science graduates in the company become engineers. It has tied up with the Birla Institute of Technology and Sciences, Pilani, located within its Chanderiya smelter plant complex, for a three-year process-engineering course. Chosen employees can study alongside work, with the company partly footing the course fee.

This has benefited many, including 43-year-old Abdul Waheed, a science graduate from Kota Government College, Rajasthan. Waheed joined HZL in 1991 as a plant operator. Today, the Associate Manager, soon to become an engineer, has set his sights even higher. “In 18 years, I have got five promotions and my salary has more than doubled,’’ says Waheed. Like him, as many as 261 workmen have become executives from 2004 onwards.

Every year, HZL selects 50 ‘stars of business’ based on their performance and puts them on the fast track of growth and development.These stars become heads of ‘strategic business units’ in five to six years,occupying the second-in-command position in one of the verticals of the plant.This is a jump that would have taken 15-20 years earlier.

Sunipa Roy, 28, is one such star. A graduate from Regional Engineering College, Durgapur, she is already the strategic business unit head of the leaching and purification division of Chanderiya smelter complex, commercial unit-II, after just five years in the company. Her salary has risen from Rs 14,000 per month to Rs 75,000, not to forget the bonuses— three times a year—and other generous perks.

There is active employee interaction. “Every quarter, junior members of the company interact with the group Chairman, Anil Agarwal, to understand the vision and philosophy of the company,’’ says Mehta.CEO workshops are also common.

As MS Mehta, CEO, Vedanta Group puts it: “We provide employees a vibrant working environment that helps them to innovate, discover their potential and realise their professional dreams.”

-Ashish Gupta

3) Taj Hotels Resorts and Palaces

Industry: Hospitality
Employees: 13,500
Workplace Units: 43
Business units: 64
Unique roles: 395

WHEN TERRORISTS ATTACKED MUMBAI’S TAJ MAHAL HOTEL ON November 26, last year, hotel employees immediately swung into action trying to save the lives of the guests trapped inside. The heroic manner in which they saved the lives of hundreds, at great personal cost, is well known. When the ordeal was over, the Taj Group not only had to undertake the huge task of restoring the 106-year-old structure to its erstwhile glory, but also to renew the confidence of its traumatised employees.

While some were scared of getting back to work, others were wondering if they had a job to go back to. The day after the attack was snuffed out, the company set up a trauma centre, and with the help of 15 counsellors and psychiatrists from the Tata Institute of Social Services, got each employee and his/her family counselled. “We convinced them that the Taj was safe and so were their jobs,” reminisces an emotional HN Shrinivas, Senior Vice- President, Human Resources, Taj Hotels. “Each one of them had their share of anxieties, but in the end, they all pledged to work together to once again make the Taj Mahal the best hotel in Mumbai.”

Tata Group Chairman Ratan Tata personally met the families of the deceased, and distributed a compensation package of Rs 7 crore. This included a lumpsum payment and other facilities such as ensuring a spouse got the last-drawn salary of the deceased throughout his or her lifetime, taking care of the children’s education, and so on.

This humanitarian approach has underlined how the Taj Group backs its employees even during times of crisis. Employee well-being, says Raymond Bickson, Managing Director, Taj Hotels, Resorts and Palaces, has always been a priority. “We want to be recognised among the best employers in the country.” It is the people who are in the trenches that have made the Taj what it is, he says. A guest at the Taj interacts with the hotel staff on at least 42 occasions each day, right from getting a wake-up call from the operator and getting room service to getting information at the front desk and being greeted by the doorman, says Bickson. “All these employees can be at their best only if they love what they do and feel a sense of belonging.”

To instill this, the company has put in place several programmes such as the ‘speed programme’, through which it identifies good performers and gives them a double promotion. It has also put together an ‘emerging leaders programme’, under which hundreds of managers with leadership potential have been selected and put through a rigorous training programme. “We need 2,000 leaders in the next 10 years and we have already charted out a career plan for these candidates,” says Bickson.

Good employee retention practices help maintain market share and margins. “There are 37 global hospitality brands wanting to enter India and we have to keep up with the times.”

Despite the economic slowdown, the Taj Group is expanding aggressively. The hotel chain plans to double its rooms from 10,000 to 20,000 in the next couple of years. To do so, it will need a lot of manpower. “One can’t open hotels and not hire. However, we will first look at internal movements,” says Bickson.

-Ajita Shashidhar

4) CISCO

Industry: Networking
Employees: 4,600
Workplace Units: 7
Business units: 4
Unique roles: 72

CISCO PRIDES ITSELF ON ITS NETWORKING ABILITIES—HUMAN networking. So, one would expect the company to stress on HR practices that pamper employees. Surprisingly, HR boss Subhash AK Rao is remarkably blasé on what differentiates Cisco as a workplace. “By itself, we don’t do anything out-of-the-ordinary—rather it is the degree to which the attributes of a good workplace come together that makes us unique.” To top it all, this isn’t your usual MNC, where control rests outside India. With 20% of Cisco’s leadership based here, India calls the shots too. Rao explains: “India today leads 28 sectors for Cisco worldwide, up from just five earlier. This has opened up new opportunities.” Because a chunk of Cisco’s work is driven out of India, people here are exposed to a wider canvas.

In a day, a Cisco employee could be working for four different geographies, two technologies and three markets. Employees find this variety exhilarating, but admit its hard work. Long hours are common in Cisco, but employees have the flexibility to work according to their timelines. “If you want to take off early on Friday or get into office late on Monday, nobody will stop you. We are treated as mature adults—there’s no nagging,” says a young hire.

The opportunity to work across different technologies and diverse customer groups is another attraction at Cisco. This is possible, says Rao, because Cisco does not follow a single technology religion. “We started with routers, moved into switches and followed up with data, voice, video and now mobility. There are 20 technologies in which Cisco is either number one or number two globally. At Cisco, we cover the gamut of the hi-tech industry—not many organisations give you this opportunity,” adds Rao.

Although the size of the organisation is $40 billion with 60,000-plus employees on the rolls, Cisco works like a cluster of businesses (built around a particular echnology area). An old Cisco hand says each business unit runs like an independent company, and is responsible for its products and revenue stream. “Targets are set internally and people within the business unit are responsible for these targets. You are pretty much on your own, and that’s what keeps the spirit of innovation alive,” he adds.

At Cisco, innovation is not just about technology and engineering—it’s also about how to run the business. Explains Rao, “Our mantra is collaboration and teamwork. For example, formal reporting is a very insignifi cant part of what defines you—you are defined more by how many councils you are on, what you are leading and what initiatives you are a part of.” Also, as Cisco transitions from simply selling a product to sharing risk and revenues with customers, everyday brings with it new lessons.

Cisco’s tagline of ‘changing the way we live, work, play and learn’ may sound a little exaggerated to outsiders, but Rao says the company actually walks the talk. For example, the use of technology at the workplace enables employees to work anywhere and collaborate with anyone—whether it’s a video-conference at the touch of a button or a ‘virtual office’ router at home. Cisco does not believe in commute to compute— the rationale is that you should be able to compute from anywhere and commuting should be more around collaboration.

People inside Cisco use the phrase ‘worklife integration’ to describe the Cisco culture. “If you enjoy what you do and are able to do it at your convenience, I can’t think of a better alternative,” sums up Rao.

-Nandita Datta

5) ITC Welcomgroup

Industry: Hospitality
Employees: 2,000
Workplace Units: 26
Business units: 14
Unique roles: 21

THE DOWNTURN, THE MUMBAI TERROR ATTACKS, AND MOST recently, the shifting of the IPL to foreign shores, have affected the hospitality sector adversely, but the Rs 2,300 crore ITC Welcomgroup hotel chain has no plans to slow down. The company isn’t lowering growth projections or reducing its workforce. In fact, ITC’s cash-rich, debt-free hospitality division plans to double the number of rooms in its luxury hotels to 5,000 in the next three years, to be in a good position to ride the upturn when it happens.

At a recent conference in Gurgaon, senior officials from across the country discussed how to weather the current difficulties without any major internal upheaval. The message that went out to employees at the end of the three-day conclave was: “no layoffs or pay cuts’’. Given how most other companies are taking drastic cost-cutting measures just to stay afloat, that message would have been very reassuring for employee morale.

Employees have always been treated well, even after they retire. Although it is the ideal hunting ground for other services players such as airlines, business process outsourcing (BPOs) and banks, especially at the junior management level, ITC Welcomgroup has managed to keep attrition down to 11%, well below the industry average. “That has been made possible,’’ says Anil Sharma, Vice-President and Head of HR at ITC Welcomgroup, “by benchmarking our salaries to those paid in these industries, ensuring that the cash component is the highest in the salary, and also paying a handsome retention bonus at the end of three years.’’

For middle-level managers, the benchmark is the hospitality sector: hospitals, competing hotels and real estate companies, because these companies were luring away its managers. ITC Welcomgroup also added the best in lifestyle benefits—houses in good locations and expensive cars—to take care of employees’ family needs. For those at the very top, it is Hindustan Unilever, Infosys and the Tata Consultancy Services (TCS) that became the competition.

A high basic pay is just one part of the package; other intangible benefits such as job satisfaction, ability to move within the organisation and the freedom to express opinions also help in employee retention. Moreover, the company’s distributive leadership model, as opposed to centralised leadership followed by most companies gives strategic business unit (SBU) heads full autonomy and authority to run their respective businesses as they see fit. Also, its emphasis on collective action has built team spirit among employees.

Nakul Anand, CEO, ITC Welcomgroup, feels that morale is high because the company takes care of most employee needs. And he should know, having spent 33 years in the company. Every employee gets ample opportunities to rise up the ladder. Says Sharma: “The only limits to growth in our company is our own competence.” He cites the example of Sunil Sikka, who rose from bellboy to general manager over a 30-year period, after getting 17 promotions.

Anil Sharma recruited Jeevan Unnithan, who was a captain in the army, as an assistant manager nearly six years ago. Today, Unnithan has risen to the post of Divisional Human Resource Manager. “Even in these troubled economic times,
I know I can sleep soundly because I am working with ITC Welcomgroup,’’
says Unnithan .

-Ashish Gupta

6) INTUIT TECHNOLOGY

Industry: IT
Employees: 224
Workplace locations: 1
Business units: 1
Unique roles: 16

A WORK culture that answers to customers is Intuit’s “secret sauce”, says Managing Director Vijay Anand. “Engineers, typically, never get to connect directly with customers. They sit in their cubicles and come up with cool products they think people will want. Unfortunately, it doesn’t always work that way,” he says.

So, Intuit teaches its engineers to follow their customers—that is, meet prospective users of their products, at their workplace (small enterprises like a tailor shop, a local kirana store, a beauty salon, a welding shop, a farming field). The objective is to see their pain points first-hand, and then design products that provide a soothing effect.

Typically, 10-15% of the work time of engineers is left free for them to follow the customer home, connect with the outside world and solve real-time problems that have the potential to become the next big Intuit product. Unstructured time, it’s termed. “This free time is not monitored—you are free to do as you please,” says an employee.

Engineers don’t have to wait endlessly to see their ideas take shape—it can take just six weeks for an idea to move into the prototype stage. UVG Sekar, Head, Human Resources, says Intuit helps engineers hone their entrepreneurial skills, be it the ability to take risks, the passion for an idea, taking an idea to fruition or customer orientation. Products like TurboTax, the number one tax preparation software in the US, and QuickBooks, the number one business accounting software for small enterprises,are outcomes of such support systems.

This open culture requires active participation by senior management. The company is proud of this culture—senior managers are often found lounging around with employees, discussing ideas and strategies. Access to senior management is actively encouraged—Founder & Chairman Scott Cook himself conducts a few training sessions for employees every year. All this makes it a satisfying experience for employees, who vote with their mouths—30-40% of lateral hiring in the company is through employee referrals.

—Nandita Datta

7) EUREKA FORBES

Industry: Consumer durables
Employees: 9,400
Workplace locations: 243
Business units: 4
Unique roles: 106

AT EUREKA Forbes, employees who have put in two years in the company are eligible to contest an in-house election for ‘councillors’ and ‘senators’. In 2008, 270 candidates contested for 56 seats (42 councillors and 14 senators); they even drafted their own manifestos, and articulated plans to develop their ‘constituencies’. All employees cast their votes through a secret ballot to elect the ‘house of Eurochamps’. Councillors meet once a month, the senate once a quarter, to address employee issues. “The idea is to ensure the voice of our people is heard in the decision-making process,” says Suresh Goklaney, Vice-Chairman & Managing Director, Eureka Forbes: “The concept has helped us eliminate barriers in the flow of knowledge and communication across hierarchies.”

For a direct-selling company like Eureka Forbes, employees are its single biggest asset. The company looks to take people with average educational qualifications and turn them into performers through a mix of training and performance-based incentives.The company runs an induction programme for newcomers and a refresher course for front-line employees. In 2000, Eureka Forbes tied up with Narsee Monjee Institute of Management and Higher Studies, and floated an academy to offer management diploma courses to its employees. The academy is still active. The company is now planning to team up with premier B-Schools to co-develop sales-centric training programmes.

Succession planning is also a critical item on the company’s agenda. It is working on a programme that will help it spot potential managers and mould them for bigger roles. So, a front-line sales person can grow to become a Vice-President.

Eureka Forbes, says Goklaney, is highly performance- driven. “Compensation at all levels is performance-linked and the variable component varies from 40-60%,” he says. However, attrition is high. “Although it is 4% at senior levels, it is 30% at the front-line,” says Harsimran Singh, Senior Vice-President-Human Resources & Organisational Effectiveness. Still, she says, there’s a silver lining to this high rate of attrition: “It helps to align the employee base with regular performers.” And that helps the business—and, in turn, the people who run it.

—Rajiv Bhuva

8) LG ELECTRONICS

Industry: Consumer durables
Employees: 3,000
Workplace locations: 41
Business units: 1
Unique roles: 417

THE PREMISE for HR at LG is if the company takes care of its employees, its performance will improve. Yet, just five years ago, LG India was losing 35% of freshers within a year of them joining the company. That number is now down to 5% and not one employee earmarked as core talent or in the successor group has left in the last one year.

Behind this turnaround is a change in the basis of expectations from employees and the way they engage with the company. Activities were introduced and processes were reoriented towards increasing inter- and intra-departmental interaction, promoting fun at work, providing instant recognition and improving work-life balance. LG was considered a tough place to work, especially at the branch level.People were slogging even on Sundays to meet targets. This workaholism ended when the HR imposed a blanket ban on employees working on Sundays. Initially, workers accustomed to chasing targets at the expense of personal lives still flouted the diktat, but HR followed through—they called up employee homes on Sundays and holidays to confirm that employees were not working.

Touches like this make Dr Yasho V Verma, Director (HR and Marketing Sales), LG, say: “On paper, every HR team is strong, it is implementation that matters.” Small things, like the 30-minute freewheeling session with the boss, count. Team leaders managing less than 15 people have to do this once a month; those managing more than 15 people, once in two months. They also have to take their team out every month, at the company’s expense.The bonding and interaction improves trust and team spirit, and creates a better working environment. After these measures were introduced, late sitting in the office reduced by about 80%.

A similar concept exists at the blue-collar worker level too. An HR person takes line guardianship of 30-40 employees, and meets them once a month for at least 15-20 minutes to hear them out and understand their mindset. The onus of resolving employee issues lies with the HR person, and processes in place make them accountable.

For employees, professional growth is important. So, the HR team prepares a five-year plan for employees based on a three-day workshop with them, where behavioural and functional capabilities are assessed. A clear training plan is drawn up on how to achieve the goals. Two months back, this programme covered 1,250 employees. Every month, 40 more employees are added, with the eventual objective of covering all 3,400 employees at LG. Verma sees HR people as “psychologists” who can read employee minds and take quick action. LG’s numbers show they have been doing that.

—Anurag Prasad

9) DOMINO’S PIZZA INDIA

Industry: Food services
Employees: 5,620
Workplace locations: 5
Business units: 176
Unique roles: 32

IN MOST organisations, a 106% attrition rate would be alarming. At Domino’s, it’s pizza as usual. That triple-digit rate is at the entry (delivery person) level, populated by 12th pass students who are still finding themselves. At the store manager level, the attrition rate is 21%, much better than the industry average of 40-45%. At the corporate office, it’s almost nil, with several employees having been in the company since it was formed in 1998-99.

The challenge for Domino’s is how to keep its 20-somethings interested, compete as it does with the BPO industry, which offers higher salaries and more perks. Still, people stay. Some even return to a system that empowers them to perform and gives a fair opportunity to the deserving to rise through the ranks. For instance, by clearing four training modules, a delivery boy can become a store manager in five years. Straight out of class 12, Raj Sahi joined as a delivery boy in 1996. Today, the 33-year-old oversees the Western region, and is responsible for a turnover of Rs 100 crore per year. With financial assistance from Domino’s, he also completed his graduation.

Employee education is a stated objective at Domino’s— it spent Rs 45 lakh in 2007-08 on training and will spend Rs 55 lakh this year. The company has tied up with leading institutes for distant education courses (both graduate and post-graduate). It also sends chosen employees for a one-year, residential, customised management course at IMT Ghaziabad. Says Ajay Kaul, Chief Executive Officer, “If they stay with the company for two to three months, they see the benefits flowing.”

Store managers are seen as the CEO of their stores. Says Basab Bordoloi, Vice-President (HR): “They practically run the business, which inculcates an entrepreneurial zeal among them.” Store managers handle their store as a separate business unit. They have the right to question corporate moves that have cost implications on their store. “The sense of responsibility and career growth keeps us motivated,” sums up 25-year-old R Devrajan, who manages six stores in Delhi.

—Anurag Prasad

10) MARRIOTT HOTELS INDIA

Industry: Hospitality
Employees: 3,250
Workplace locations: 4
Business units: 5
Unique roles: 27

BUSINESS IS tough, which is even more reason for Marriott to hone its workforce. “Our values get stronger during such times,” says Rajeev Menon, Vice-President for Marriott in India, Malaysia, Maldives and Pakistan. The company’s pyramid organisation structure has associates (its front-end staff ) at the top. They are the company’s biggest asset, says Menon. “So, we have already paid bonuses and the increment has been 8-10%,” he says.

Once a year, associates take an online survey of 42 questions on personal leadership, teamwork, worklife balance, personal growth and rewards. “The survey helps us understand associates and improve their performance,” says Gurmeet Singh, Area Director of HR for India, Maldives and Pakistan.

Marriott runs 14 different training programmes for its employees, and the investment on training is on the no-compromise list. New recruits undergo a week-long training, and follow ups after 60 days and 90 days on the job. There’s an online programme to develop skills of associates and a portal that facilitates their personal development. At the managerial level, Marriott employees are categorised into three bands: red (entry level), blue (department-head level) and purple (divisionalhead level). Across these bands, the company runs a talent development and succession plan. “We have groomed about 80% of our associates to the red band,” says Singh.

With an average increment of 8-10%, Marriott is not a big paymaster, and its 30% attrition rate is a cause for concern. “But we don’t lose employees due to monetary issues. It’s mainly to foreign competition and luxury cruises,” says Nayna Panjanani, Director of HR at JW Marriott (a division of Marriott, in Mumbai). “Many do come back.” Adds Singh: “We focus more on recognition than on rewards.” Every May, Marriott hosts an associate appreciation week, which is a time to thank its associates. “Th e executive committee is on the floor serving them,” says Panjanani.

—Rajiv Bhuva

11) GODREJ CONSUMER

Industry: FMCG
Employees: 1,354
Workplace locations: 8
Business units: 1
Unique roles: 105

“WE SEE our employees, and not our brands, as our greatest assets,” says Adi Godrej, Chairman of the Rs 7,500 crore Godrej Group. It’s a healthy giveand- take relationship, and it is more pronounced in a slow market like this. Says Sumit Mitra, Executive Vice-President (HR), Godrej Consumer, the Rs 1,200 crore group flagship: “The company’s philosophy is do more for people, but also demand more from them.”

The company has always followed a policy to weed out non-performers. Now, it has made its rewards structure sharper than ever before. Says Godrej: “We have a strong performance-linked bonus system and have even extended employee stock options across all levels of management.”

The group believes in empowering its employees and taking initiatives for their development. So, Godrej Consumer offers multi-skilled training to its employees so that they can play multiple roles, instead of hiring afresh and adding to costs. More recently, it launched a consumer immersion programme. Employees, across functions, are encouraged to interact with consumers on Godrej products and pass on feedback to the product development team. One outcome of such engagement is greater emphasis on fragrance and packaging. Says Mitra: “The rough consumer interaction, they realised that, besides core values, fragrances and packaging play a key role in buying decisions.”

In May 2008, the group unveiled a new brand identity that promised “brighter living”. It wasn’t just a cosmetic change, says Mitra. “We took every employee through the attributes of brighter living at a mindset level, and told them that we meant it.” The Godrej brass gives two numbers to make their point. Attrition, says Mitra, is just 1%. Adds Godrej: “In 2008, only 20 stocks gained, and Godrej Consumer was one of them.”

—Ajita Shashidhar

12) BECTON DICKINSON

Industry: Medical tech
Employees: 325
Workplace locations: 7
Business units: 5
Unique roles: 132

IT IS not very often that a company conducts ethical fitness training for its employees. But for Becton Dickinson India (BD), which manufactures and sells medical instruments and devices, ethics are important, even more than growth. “There are no short cuts,” says Ram Sharma, Managing Director of our way to get it.” In the past two months, BD India has walked away from a few large contracts as they would have involved compromising on core values.

Apart from rallying employees around organisational values, the $80 million company’s HR section encourages employees to voice concerns and opinions, and shape its policies. HR policies like allowances and review processes were modified based on employee feedback. Employees are also asked to have an HR orientation. Explains Sharma: “In a small team, HR is too important a function to be delegated. Every line employee should have elements of HR.”

Some HR practices that have been well-received include the option to work from home, flexi-timings, and special provisions for women employees during travel and emergencies. Employees are encouraged to beat targets, but are not treated harshly if they fall short. Its annual ‘Braveheart’ award recognises the top 15% employees on a set of defined criteria. “It has become a coveted award,” says Ajay Kumar, Director (HR), BD India. “Recognition is not just about achieving targets, but also about demonstrating how it was done.”

Employee growth and training go hand-in-hand here. The company has a virtual university to train employees, which is supplemented by career development and job training programmes (that have been developed in close association with employees), and monthly meetings with the MD and CEO. BD India spends around Rs 1 crore a year on learning and training initiatives.

There is a talent pipeline in the short-, mediumand long-term for all roles. This requires some thought since the pool of people is small. “In a small team, finding a replacement with the right skills is difficult,” says Sharma. “So, we have people multitasking and engaging among themselves so that at no point of time is any function without a head.” In the last two years, the company filled 40% of highlevel jobs by promoting employees. This acts as a retention tool too. In the last five years, there has been no attrition in the leadership team.

—Anurag Prasad

13) STRYKER GLOBAL

Industry: IT
Employees: 100
Workplace locations: 1
Business units: 1
Unique roles: 19

14) NETAPP INDIA

Industry: IT
Employees: 877
Workplace locations: 5
Business units: 20
Unique roles: 4

AN EGALITARIAN work culture (even fresh hires are entitled to benefits like stock options and car lease) and a down-to-earth management (Vice- Chairman Tom Mendoza calls employees to thank them for going beyond the call of duty to meet customer expectations) are two workplace attributes at NetApp that employees talk about frequently.

It’s probably people practices like these that keep motivation levels high at the company. “Even in current conditions, we are able to acquire new customers,” says SR Manjunath, Senior Director, Human Resources. “This is because of our people going the extra mile to get the job done. And this happens because NetApp creates a work environment where people want to go the extra mile to give back to the company.”

Right from the selection process (which is more than just skill matching or a job requirement) to the on-boarding process (all new hires are flown to Sunnyvale, California, to meet the founders, senior executive team and heads of functions), the amount of money, management bandwidth and time NetApp invests in making sure people understand the culture and value system is high.

Says Manjunath: “When employees see they are being recognised for their work from a person no less than the Vice-Chairman, sometimes the Chairman, motivation levels go up dramatically.” Apparently, Mendoza makes 30-40 calls a week to employees at all levels for a job well done.

And it’s not work all the time. There’s no monitoring of work time—employees can work at their own convenience. There’s even a break-room on every floor, where employees can saunter in anytime they want and catch some snooker or a game of table tennis. NetApp also encourages community service— globally, NetApp employees get 8-10 days off every year to pursue community service; in India, this is in the process of being rolled out. For NetApp, it’s just another pay out that will pay back.

—Nandita Datta

15) THE OBEROI GROUP

Industry: Hospitality
Employees: 5,740
Workplace locations: 30
Business units: 6
Unique roles: 125

SITTING IN his office at his lush green farmhouse on the outskirts of the Capital, PRS Oberoi, the 79- year-old Chairman of the Oberoi Group, narrates an anecdote. A guest was enamoured by a rare Ganesha mural, with its trunk tilted to the right, at the Oberoi Vanyavilas in Ranthambore, and he wanted to take one home.

The guest, accompanied by a hotel executive, scouted the local markets for the exclusive Ganesha, but to no avail. The next morning, the executive, on what was his off day, drove to the nearest town, found the elusive mural and delivered it just before the guest was about to check out. “That’s the Oberoi Dharma—customer first, company second and self last,” says the patriarch of the Oberoi Group, which owns or manages 30 hotels and luxury cruisers in five countries. Of course, the guest left delighted, and made a special mention of the executive in the guest book.

“We always want to exceed the guest’s expectations,” PRS Oberoi puts it succinctly. A small, eight-page, green book, which spells out the group’s mission, vision, dharma and key principles is a must-carry for all 5,700-odd employees. Not surprisingly, all guest recommendations are taken seriously during performance appraisals.

With the group setting high performance benchmarks, the progression path is merit-based. “The company does not discriminate on age,” says 35- year-old Kapil Chopra, General Manager at Trident Gurgaon, in his second stint with the group. “There are seven GMs below the age of 35 years.”

To offer best-in-class service, the group’s mantra has been simple: hire carefully, train them well and keep them motivated. Around 80% of managers working in the group have passed out from the Oberoi Centre of Learning and Development, its in-house training school. “We don’t create jobs, we make careers for them,” says Oberoi.

Every month, team members meet with department heads to review progress and discuss training requirements. While employees take care of the guests, the employee concierge service helps them on the personal and home front. Says Chandan Chattaraj, Executive Vice-President, Human Resources: “One can ask them to pick up groceries, laundry or book travel tickets. It works 24x7.” Happy employees means happy guests, and vice versa.

—Sudipto Dey

16) VCUSTOMER CORP

Industry: ITES
Employees: 4,000
Workplace locations: 5
Business units: 4
Unique roles: 100

NIMISH SHARMA, who has been working with vCustomer for 15 months now, as a target acquisition executive, gives his vote of confidence to the company’s HR: “It’s not just something at the back-end, it’s a visible team.” It’s about the usual integrating, mentoring, handholding, goal-setting and empowering employees, and creating a good work-fun-life balance for them. The difference from most other BPOs is that the intent is greater and, sometimes, the means resorted to achieve those objectives are different.

Policies are for the people and by the people. For instance, vCustomer has a workforce management team that acts as a bridge between employees and the HR team. Their interactions and subsequent feedback is instrumental in formulating HR policies. “The communication is very open and results in action,” says Sharma. One example of this is the company’s leave policy. Earlier, privilege leave could be taken only in blocks of five days. Most employees would not be able to avail of it, and it would lapse. After consultation, the five-day block was cut to three, enabling more employees to take this leave.

Because of these little things, vCustomer’s attrition rate is lower than the industry. And even then, and despite the slowdown, it has completed its appraisals on time. The company believes in home-grown leadership. Almost 80% of the midlevel management has been trained in the company. Like Siddhartha Pavagadhi, who joined as a call agent in 2001 and is now a senior manager. When it comes to goal-setting, the discussion in vCustomer revolves around an individual’s needs, motivation, learning requirements and any other aspect that will help the company utilise her potential to the maximum. “We identify the functional and behavioural training requirements, and everything is put online to be executed in a time-bound manner,” says Krishnan Viswanathan, Senior Director, vCustomer.

As part of the training programme, vCustomer has put training modules online, enabling employees to access them anytime. Employees are encouraged to take ownership and participate in the decisionmaking process. And evidently, they are.

—Anurag Prasad

17) PAYPAL INDIA

Industry: e-commerce
Employees: 270
Workplace locations: 1
Business units: 2
Unique roles: 8

WHEN THE global economy started slowing, Paypal’s parent in San Jose started laying off employees. Obviously, Paypal employees in India were concerned about their jobs, but not one person has been laid off . Not only that, it conducted counselling sessions to put employees at ease.

Even during these times of cost-cutting, the comfort of employees is a priority. “People need to be taken care of,” says Raj Sundaresan, Head of Paypal India Development Centre. “The spend on them is a small bump on our budget.” So, for instance, Paypal still provides air-conditioned buses to transport its employees. And discretionary spends in- entertaining and comfortable continue. Paypal has earmarked a space for employees to chill out. Called the ‘break out room’, they can munch on sandwiches, down coff ee, play chess, watch TV. Teams are allocated entertainment budgets, which many use to take weekend treks.

At Paypal, the first rule of work is, there are no rules. Employees don’t have to sit on chairs or be at their desk to work. They can use bean bags in their office, and if they want to work from home, that’s fine too. “At times, employees can exercise the option of working from home, depending upon the circumstances,” says Jayanthi Vaidyanathan, HR Head. “Since work gets done, we are happy. We have an open work culture.” The company has a theme for each year. Th is year, it is, “I am Paypal”. The aim is to motivate all employees to imbibe a culture of ownership and entrepreneurship.

Paypal has many programmes to promote talent. Rewards and recognitions for innovations come in plenty, with funky-sounding sobriquets like Labrats and Paypalian. Although Paypal India accounts for 10% of the company’s employees worldwide, half the innovations come from them.

Anita Lekshmi Narayan, an engineer, got a $7,000 Labrats award for an online innovation. “The Labrats concept motivated me,” she says. Every Friday, a TGIF session is held at the office rooftop intended to help employees unwind after a week of work. No wonder, the attrition rate at Paypal has always been less than 10%.

—Sharada Balasubramanian

18) ACCENTURE SERVICES

Industry: Consulting
Employees: 38,000
Workplace locations: 15
Business units: 3
Unique roles: 235

ACCENTURE IN India is not an outpost of a global organisation, says Chairman and Geography Managing Director Harsh Manglik. It’s one company and one culture with integrated global governance. “Our style of working, the bedrock of core values, processes and methodologies, and tools and technologies, are identical across geographies,” says Manglik. “You can take Accenture employees from one part of the world and place them in another, and they will hit the ground running”

That has something to do with people practices that strive for development, leadership, adaptability and expression. So, all employees are assigned individual counsellors, who are, typically, a level or two higher in the hierarchy and who help mould the careers of their wards. Early on in their career, sometimes just two years into the organisation, employees are identified for leadership roles and groomed for it. People are allowed to switch functions and businesses. And the work environment encourages people to ask questions and think for themselves.

Engagement scores are at peak levels and attrition is low. HR Lead Prithvi Shergil says the biggest vindication of Accenture’s strong people focus comes from customers. “I’m often told the employee commitment to outcome and delivery is the same across the organisation, whether in Boston, Buenos Aires or Bangalore,” he says.

Accenture also focuses on learning—employees go through proficiency assessments twice a year, based on which a competency development plan is tailored. In fact, a portion of an employee’s compensation is linked to skill proficiency. Apart from its own learning management system that off ers 20,000 online courses, Accenture partners educational institutions like MIT, XLRI and IGNOU to off er its employees specialised training in functions like HR, marketing, BPO and solutions delivery, among others. Call it partners in progress.

—Nandita Datta

19) KOTAK MAHINDRA BANK

Industry: Banking
Employees: 9,800
Workplace locations: 476
Business units: 17
Unique roles: 463

“OUR people practices are aligned to our culture and values,” says Subhro Bhaduri, Executive Vice- President, Human Resources, Kotak Mahindra Bank. It starts from the time a person is under consideration for a Kotak job. “We try to match a candidate’s aspirations and goals with our values,” he says. It continues into the induction, when an in-house programme spells out the bank’s values, and do’s and dont’s.

This focus on a moral code of conduct may make Kotak look like a pedagogical institution. In some ways, it is, given the organisation’s bent towards learning and career development of its employees. Kotak has several options for executive education, both for senior management (a general management course tailored by IIM-Ahmedabad) and junior employees (a banking course by IIM-Bangalore and management courses by Manipal University). Kotak pays for the senior management courses and gives hefty discounts for the junior ones.

The bank identifies high-potential employees capable of jumping two levels in two years, and nurtures them. “Our hiring policy for manager cadre and above is to avoid outsiders as far as possible,” says Bhaduri. About 28% of the middle-level managers get promoted annually. Even laggards are taken care of. A senior panel meets employees who are stuck in one position for more than two years, and suggests ways to improve their performance.

Although the attrition rate is 5-10%, most of it is in the frontline, where Kotak has a clear policy that non-performers need to move out. “But we give them a fair opportunity for six months,” says Bhaduri. “At the leadership team level, the attrition has been below 2% for the last five years,” says Bhaduri.

Targets for employees are set at the beginning of the year and tracked right through. In the boom years, companies would have tracked employees by volume and value of output only. “However, we focus on both input and output in our productivity metrics,” says Bhaduri. A year ago, five calls a day would have brought two conversions, but now it would take at least 10 calls for the same output. “We set goals that are realistic and grounded in the prevailing business environment,” says Bhaduri.

Kotak’s HR likes to stay connected with employees. “The sessions aim to touch at least 10% of our employee base during a year,” says Bhaduri. Beyond HR, even the business heads call for random meetings with employees two levels below for a brief question-and-answer session, and discuss ways to grow the business—and people.

—Rajiv Bhuva

20) WHIRLPOOL OF INDIA

Industry: Consumer durables
Employees: 1,034
Workplace units: 26
Business locations: 1
Unique roles: 87

A FEW years back, things were looking down for Whirlpool. The company’s product pipeline was drying up, it was losing market share—and losing people, including its leadership team. The HR team lost focus completely.

In 2005, a new leadership team under Arvind Uppal, Head, Asia-Pacific, went about trying to regain lost ground. Product innovation, improved service delivery and customer support were accompanied by extensive changes on the HR side. Says Sanjay Singh, Vice-President (HR): “We could have products and services significantly differentiated, but it is the people behind their delivery that make the real difference.”

This realisation led Whirlpool to make some radical changes in its HR management strategies. When it needed leadership talent, instead of look- given opportunities and training, promising existing employees could take on bigger roles. Whirlpool worked with leading business schools and its own employees to create executive training programmes. It was a rather expensive exercise in a cost-conscious industry, but it is paying off . Attrition is down from 17% in 2007 to 14% in 2008.

The more important thing it did was to introduce multi-tasking programmes to equip employees to handle multiple roles. It was a win-win situation. For young employees, it meant a better job profile and more money. For the company, it meant filling a leadership vacuum and greater stability in the ranks. Take Neeraj Bhalla, Director, Sales Strategy. Bhalla began his stint in Whirlpool as a branch manager and now also handles modern (retail) trade, channel management and price margin realisation projects.

Employees are responding, trust is being built, growth has resumed. From its rough patch, Whirlpool took away three important lessons: trust your employees, earn their respect and encourage collaboration. “Lack of trust holds back performance,” says Singh. “We have even asked senior people to leave if the feedback from their team was negative on parameters of trust.” Despite the strides made—people are staying, it is able to draw new talent, and it is gearing up for strong revenue and profi t growth—the management is continuing to build Whirlpool as an employee brand.

—Anurag Prasad

21) INTELENET GLOBAL

Industry: ITES
Employees: 25,000
Workplace locations: 15
Business units: 30
Unique roles: Not available

IN A business driven by the young and the restless, managing their aspirations and keeping them engaged is critical. So, Intelenet gives importance to rewards and recognition. In 2007, when it announced the largest management buyout deal in India ($200 million), it rewarded 600 employees with stock or cash. A survey of these employees showed that 95% had received more than they had expected. Besides that, the company organises functions, on a quarterly basis, to reward top performers in the organisation.

Intelenet encourages its people to learn and grow, at work and away from work. At work, its ‘internal promotion programme’—I-versity—is designed to outline a growth path for employees, and support them with performance and strategic inputs. “The employee gets to know the company’s expectations as well as the demands of the next growth level,” says Manuel D’Souza, Chief Human Resources Officer, Intelenet.

Under I-versity, there is a six-month programme that enables agents to graduate to team leaders. The top 5% performers in every process—or about 250 employees—go through various stages of training. About 50-60 are short-listed for the programme. This pool of employees identified for accelerated career development programmes become candidates for internal promotions, thus ensuring succession planning. Communication, both top-down and bottom-up, in the organisation is also given importance. Employees get quarterly updates on developments relating to the company and regular CXO interactions.

Away from work, Intelenet promotes executive education. For instance, it had tied up with Narsee Monjee Institute of Management and Higher Studies in Mumbai for an onsite facility, where 44 employees pursued management courses, with the company paying three-fourths of the course fee. Currently, 27 employees are enrolled for correspondence courses at ICFAI, and Intelenet will reimburse part of their course fee on successful completion of the course.

Intelenet also looks to make life easier and fun for its employees. A 24x7 concierge desk takes care of several employee needs like utility bill payments, sending flowers and arranging for a plumber. It arranges on-site doctor visits thrice a week; a counsellor is available to discuss personal or professional issues.

Every month, the company organises two events like volleyball, cricket, kite-flying, and singing and dancing competitions. The company has tied up with various consumer brands and arranges for shopping at work at discounted prices. And despite the downturn, Intelenet is hiring.

—Rajiv Bhuva

22) HSBC

Industry: Banking
Employees: 8,532
Workplace locations: 62
Business locations: 4
Unique roles: 1,034

HSBC WAS the first company in India to implement a flexible work arrangements (FWA) policy. Introduced in February 2008, it offers three options: telecommuting, part-time work and staggered hours. HSBC has hired housewives for its call centre under the part-time work option, and is keen to leverage the FWA to launch a return-towork scheme for women on a career break.

Much before it introduced FWA, HSBC launched a five-day week, in 2006, which is strictly monitored by the HR department. “I ask business heads to step in where the five-day week is ineffective,” says Tanuj Kapilashrami, Head, HR, HSBC. She says work-life balance is critical for its workforce, especially the younger lot—70% of the workforce is under 30. The company’s audit department already practices telecommuting and working-from-home. Employees who want to work from home undergo a three-day counselling session to understand the challenges of doing so.

Under FWA, senior employees can even take a six-month sabbatical in a year. Employees can also swap roles if they have completed 18 months in HSBC, as Nitin Nahata, Vice-President, Rewards and Job Evaluation, and Nidhima Malhotra, Assistant Vice-President, Human Resources, did. Nahata, who joined HSBC’s personal financial services team in Bangalore in January 2008, was keen to switch to rewards and job evaluation. Similarly, Malhotra, who had been working on the rewards team in Mumbai, was keen to move to Bangalore for personal reasons. She wanted to engage in an HR role in relationships management. They swapped. “I got support from my line manager and the HR facilitated the swap,” says Malhotra.

The bank has also put in place a people strategy plan, aimed at delivering greater return on investment in people. “Earlier, business used to ask how many people can we hire, and how quickly. The focus now is on return-on-investment on human capital,” says Kapilashrami. The plan includes strategies to develop leadership skills in employees, performance management and rewards. In terms of rewarding employees, HSBC has a growing variable component—the fixed-to-variable ratio has gone from 85:15 in 2004 to 70:30 in 2009; it’s 50:50 at the senior level.

Another programme identifies talented employees and grooms them to ensure that a sufficient number of employees are ready in a talent pool every time a new position comes up. “Our target is to fill 50% of the new jobs from the pool,” says Kapilashrami, who herself came from the talent pool.

—Rajiv Bhuva

23) HEWLETT PACKARD INDIA

Industry: IT
Employees: 26,494
Workplace locations: 14
Business units: 16
Unique roles: 548

IN 2008, internal hires—people moving within a company—constituted 20% of all hires in HP India. If the number of people who moved within a particular business were added, that number would be higher. Given the size of HP India—about 25,000 employees—that’s a sizeable percentage. Internal job postings are put up on the HP First Portal. The HR department, which is common for all the businesses in HP, not only tracks internal job openings, it also actively follows up with employees on new and exciting opportunities.

HP employees are well-equipped to make lateral moves. HR Director Zarir Batlivala likes to say the company offers a career in IT, not just an IT job. “We are uniquely positioned to offer people the entire spectrum of experience in IT. Our capabilities range from consumer products to high-end enterprise products, from services to consulting, from BPO to basic research.”

HP is considered one of the best organisations for IT professionals to build capabilities. Batlivala says an employee can learn anything, even outside the sphere of their domain, thanks to big investments in the HP Learning Centre, its free online resource. There’s also a structured career development programme, which involves a lot of training around specific skills required to excel in the job.

Employees say HP encourages freedom of expression, it is performance-driven, but not ruthless. Management buzzwords like openness, flexibility, collaboration and profit-sharing owe their origin to HP Founders Bill Hewlett and Dave Packard, who, decades ago, incorporated these into the value system of their fledgling firm. Over time, these attributes have come to be referred to as the ‘HP way’. Neelam Dhawan, Managing Director, HP India, says any employee can speak to their manager or their manager’s manager without fear. “The important thing is to look at the issue been raised, not the person behind it,” she says.

—Nandita Datta

24) INDIAN OIL CORP.

Industry: Oil and gas
Employees: 31,000
Workplace locations: 610
Business units: 40
Unique roles: 1,100

IT IS fairly common for top-ranking officials at IOC, India’s largest company, to leave and join other companies—and earn a far greater salary. But the funny thing is that all of them do so only after retiring, almost never when they are with IOC. It boasts of an attrition of less than 1%. The reason, says VC Agrawal, Director, Human Resources, is that IOC offers the best job content in the industry, though not the best pay.

Agrawal discovered the importance of job content in a 2007 employee engagement survey done by International Management Institute, Gurgaon. To provide rich work content, a company needs to have two things: a strong business growth strategy, and transparent and well-defined HR policies. “Just having one will not suffi ce, even if the company promises the best compensation,” he says.

IOC is the only PSU in this list, but it doesn’t act like one. It has revamped online appraisal system, and 40% of salaries and promotions are linked to performance. It has regular leadership courses for its deputy general managers and above, and project management courses in Indian Institute of Petroleum Management, Gurgaon, and other centres.

—Ashish Gupta

25) FORD INDIA

Industry: Manufacturing
Employees: 622
Workplace locations: 5
Business units: 1
Unique roles: 86

IN ORDER to measure employee satisfaction levels and frame HR policies, Ford India conducts a ‘pulse survey’ every year. In 2009, employees were more satisfied than last year despite operating in a shaky economic environment, which is a good commentary on Ford’s HR practices.

The survey itself is a week-long affair, during which employees open up on their work experiences. All facets of an employee’s life are touched upon, including work-life balance and mental and physical well-being. Health camps, yoga sessions and games are organised. There is space to showcase dormant talents too.

Career development is a stated objective at Ford India. Right from the level of technicians, there are programmes and clear-cut growth paths for everyone. Employees discuss their career development issues with a senior manager, and together they chalk out a programme to achieve stated goals. Employees have access to online subscription-based resources and learning materials, as well as the in-house library. It also has people development programmes at different levels with committees specially constituted to focus on the career development of employees.

Perhaps, the most employee-friendly initiative at Ford is its culture of openness. Hierarchy is not a barrier for communication. Skip-level meetings, where the top management meets technicians, are common. The company tries to bring everybody into its fold. For instance, it has a five-day programme for new entrants: Ford Production System. Here, new hires get to know everything about how a car is built to how it is sold, and everything in between. That means covering many functions, often unrelated to an employee’s designated line of work. So, an engineer will see how the sales force sells a car and the challenges they face. After the induction programme, they know the big picture and the importance of their role in the company. Employees feel the horizontal hierarchy culture nurtures talent and supports cross-functional roles at all levels. If there is potential, there is a position.

—Sharada Balasubramanian

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“There is no recession in the United States”
April 2, 2009
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Lean manufacturing, just-in-time or toyota Production System (TPS) are hallmark management philosophies that have dominated production practices since the 1950s. If TPS transformed Toyota from a small company into the world’s largest automaker and made Taiichi Ohno—one of its key architects— the superstar of process management in the ’60s and ’70s, then in the following decades the person making a profound impact in the field is Israeli physicist Eliyahu M. Goldratt and his Theory of Constraints (TOC).

Enunciated in his 1984 book The Goal, the TOC process of ongoing improvement seeks to identify the constraint and restructure the rest of the organisation around it. Recently in Delhi for the launch of his book, The Choice, Goldratt took some time off to speak with BT’s Shamni Pande about his theory and how he’s driving a change in thinking at Toyota today, among other things.

Excerpts:

Six Sigma and Lean management philosophies are the global buzz words... where does your Theory of Constraints find itself?
In fact, in TOC we force companies to use Six Sigma, but it depends where. And we force companies to use Lean techniques, again it depends where. As a matter of fact, where has Six Sigma come from? It’s come from physics. I don’t see a clash; it’s not either/ or. They are all part of the puzzle, the question is how do you put it together.

Has Toyota Production System, or Lean as it’s known elsewhere, been a runaway success outside of Toyota?
If you ask, then Toyota (which has pioneered Lean, or TPS concept) will probably claim that what is advocated under Lean (in most places) is a distortion. Even 20 years after companies have copied the concept, there is a huge gap in performance between Toyota and others. Reason is the difference in understanding a concept. To Toyota, elimination of waste means waste of time and, somehow, when it is translated elsewhere it means waste of cost. This small difference is a killer! In Toyota, the base for all the improvements is to straighten up the flow and their focus is to eliminate all disruptions to flow. Often, others seek improvements without first putting the flow, so most of it appears to give just an impression of improvements. So, when Toyota sees people ascribing its name to this, it is not very happy.

Evolution of production practices

* Flow Production: Henry Ford pioneered this in 1913 by integrating consistently interchangeable parts with standard work and moving conveyance

* The Control Chart: Conceptualised by Walter Shewhart in 1924 to control variation in the production process, this was the precursor to the concepts of Statistical Quality Control and Six Sigma

* Total Quality Management: With its main focus on quality, this approach was developed in Japan through the ’50s and ’60s based on W. Edward Deming’s statistical approach Toyota Production System: Developed at Toyota between 1948-1975 by Taiichi Ohno, Shigeo Shingo and Eii Toyoda, it first became known worldwide as Just-In-Time (JIT) and later as Lean production

* Theory of Constraints: Introduced by Eliyahu M. Goldratt in 1983, it sought to improve processes by continuously identifying constraints and working to turn them into advantages

* Lean: Prof James Womack described the thought process behind TPS and called it Lean in the 1990s

* TOC vs TPS: Toyota acknowledges TOC a as natural evolution of TPS in 2009.

Have they been very vocal in articulating the difference between the Toyota way, and what others are doing?
The amazing thing is that though they sensed it very deeply and expressed it, they did not know how to articulate it. As a matter of fact, one of the reasons that (I don’t know how to say it... okay, I will say it bluntly) I am very popular at Toyota is because I gave them the verbalization (laughs). They regard me as the heir of Ohno (Taiichi).

They see no conflict or competition with you, as you have your own theory?
They do not view TOC as competition, but as a natural evolution. They do not argue with my arguments, but are in agreement. And are contemplating the adoption of TOC... due to my work, they want to expand it to all other areas.

How do they view TOC an improvement on Lean?
When my book The Goal was published in Japan (six years ago), the president of Toyota made it mandatory reading for all management…

Toyota is famous for the five whys. Most people do not know what these are. The concept of five whys involves search for the real answer: If you are addressing what you see, you are addressing only the symptom; hence, you have to go five times down to the stage where things do not diverge anymore, but converge and go to the core. Now, the problem is it’s easy to ask the first and the second why, but when you come to the third why, you come to the real problem. This is part of the thinking process of TOC, which Toyota realises that this process (of reaching the core) becomes a lot easier with TOC, which is why they view TOC as a natural continuation, an evolution of their Lean process.

So you are, in principle, a great admirer of the Toyota System?
I am. Not of Toyota, but of the people who generated it. I am not an admirer of the fact that for 20 years they did not take it to the next step. I am admirer of Taiichi Ohno; what a guy!

Is the cause-and-effect, which you talk about in your book, a progression of TOC?
From my first book (The Goal), everything is based on cause and effect—it is the basis of TOC. And all of physics is based on cause-andeffect, which is actually common sense. However, most people do not use cause-and-effect, they use extrapolation.

Let me tell you a story: Early this January, I had five top managers from a sizeable Japanese company that produces electronic components visit me. After five minutes into the room and talk of strategy, I realised that their real question was to know how many people should they be laying off? That was a shock for me! I can understand that very well from an American company, but for a Japanese company to talk of lay-offs? They do it only when there is no other way. They explained what was happening and that after seven years of consistent growth their sales had dropped 50 per cent in November-December 2008.

Now, let us see how they went about it: Being a components player, they checked with companies producing electronic systems, and found sales had come down… But they did not check with the retailer who was selling directly to consumers, who were still buying.

Which is why they went into total panic. By following cause-and-effect, we made them check on actual demand and to their surprise they discovered that it had gone up— even in the US.

So you don’t think there is a problem of poor demand?
In my view, there is no recession— even in the US. There is a financial problem in certain segments. However, unfortunately, everyone is reading the same headlines and extrapolating facts and reducing inventory, which is having a devastating effect.

So, in effect, this company has now gone back and is supporting its weakest supplier so that it is able to match demand—unlike its competitor who has already laid off 25,000 people in Japan. Sometime back when oil prices went up, everyone wrote articles on the bad impact it will have on economy. What happened? Price dropped, giving enormous boost to the economy. What happened to all the metal prices? They halved, giving a huge boost to the economy... look closely at what’s happening in China and in India. How much the wages are going up… China and India are actually turning out to be big consumers. As a matter of fact, recently China surpassed Germany in consumption. We are entering into the biggest ever economic boom in the history of mankind. And people are talking about recession.

Why can't I PLAY the way I practice?

2009-03-04T23:11:00.000-08:00

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Why Can't I Play
the Way I Practice?

Jeff Greenwald, M.A., M.F.T

Printable Version

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Why can't I hit my best shots when I need them--like the pros do?
"Why can't I play the way I practice?" "Why can't hit my best shots when I need them most?"

"I don't understand what happened, I was playing so well all week. Then when I played the tournament I played so much worse."

Is there a player who hasn't asked these questions? Is there a coach who hasn't heard them from his players?

Is there any way to bridge this gap between practice and competition? The answer is yes, absolutely. I know because I have helped players make this leap many times.

The performance gap between the ability to hit shots in practice versus matches is a fundamental barrier every competitive player must overcome to realize his or her potential. Unfortunately many players never do.

In this article, we'll take a look at the four barriers that keep players from playing the way that you are really capable. Then I'll introduce clear, step by step solutions to help you overcome them and unlock your ability to hit your best shots when it counts most.

The 4 Barriers
Insufficient Self Awareness Short-Term Focus
Irrelevant Stimuli Sub-Optimal Communication

There are four primary barriers that impede the quality of a player's performance in tournaments. These are: (1) Insufficient self-awareness. (2) Excess focus on short-term results. (3) Preoccupation with "irrelevant" stimuli. And, (4) sub-optimal communication between players and their coaches and parents.

Insufficient Self Awareness

The first barrier is insufficient self-awareness. Self-awareness is a prerequisite for realizing your potential in competition. This is because it is the foundation of learning and development, not only in tennis, but in all areas.

Can you feel what actually happens in your body when you play your best shots?
Sounds simple, but my experience shows it's a major problem for competitive tennis players. Time and time again I see players miss out on important learning opportunities because they are unaware of what is actually happening in their matches.

For example, a player will miss the same ball over and over, but make absolutely no effort to adjust what he or she is doing technically or tactically.

Why? The answer is that emotions get in the way of awareness. Players are either too upset to notice the need to change, or they are unclear about exactly what to change, or they are too distracted to actually execute what their brain tells them to change.

Learning to become more self-aware is a skill and can be trained. But self-awareness requires a different focus. The emphasis has to shift totally into the present, to what is actually happening moment-to-moment.

Too many players are living and dying with the outcome of every point, or sometimes every ball, and what that may mean in terms of whether they will win or lose. How wil this affect my past ranking? How will this affect my future ranking? This mind set makes it literally impossible to focus on anything else.

Andre Agassi put it this way: "There is a time to enjoy the good shots and a time to get upset about what happened, but it's not when you're out there."

Do you sometimes obsess over the outcome of individual points?
Rather than obsessing about the outcome, players have to develop the ability to sense what is actually happening in their bodies. To do this you have to begin paying more attention to how your body feels and what it is really doing when you hit the right shots and when you make errors.

Players often speak in very general terms about what happened when they play well, "I just had a better rhythm," or "I felt more confident today." These comments are not specific enough to be really helpful.

Instead players must learn to cultivate "kinesthetic" awareness. This is a physical or tactile memory of how your body actually feels when you strike the ball well. Being familiar with and "owning" this feeling is the key to the repeated execution of your best strokes, especially under pressure.

For example, when you hit a forehand deep in the court notice how your hand feels on the racquet, what kind of follow through you have, notice the arc of the ball, or whatever strong impressions come into your mind. Initially, this is a conscious process, but eventually this physical awareness becomes automatic. This will help you make critical minor adjustments with ease.

What is the kinesthetic that goes with your best shots?
Ask yourself, do you really know what it feels like when you are hitting your forehand or your backhand well? Can you imagine clearly what your body feels like head to toe when you hit your serve at the highest level? What about when you make a great volley? Can you imagine these feelings and recreate this kinesthetic experience in practice?

Developing kinesthetic feelings should encompasses every area of your game. For example, by shifting the attention into your body you will also be able to correct your footwork and your positioning to the ball because you will know exactly what feels "off."

A second important technique is learning to "scan" your body for excess tension. Typically, the shoulders and arms are where more tension is stored. If you are able to discipline yourself to feel the difference in your body when this is happening, compared to when you are swinging freely, you can then consciously relax these areas. This is another process that will become instinctive over time.

There is a final benefit to learning to play in this intuitive fashion. Your anticipation will improve because you will be more present. Your mind will be more alert and you will become aware of your opponent's patterns. This is hugely important for competitive success. For more on how this works, I highly recommend Jay Berger's two articles on Anticipation. (Click Here.)

Breaking through the emphasis on results requires courage.
Excessive Focus on Short Term Results

Perhaps one of the biggest challenges in developing your game is acquiring a long-term perspective to deal with short-term setbacks.

Players obsess about rankings--that is just a fact. But being impatient with your ranking and tying your success too closely to rankings can be a major barrier to the learning process.

The fear of losing and the emphasis on short-term results prevent players from trying new things and getting out of their comfort zone long enough to see what is really possible. This fear prevents them from feeling what is happening and using the kinesthetic memories that could actually lead to the level of play they are so desperately seeking.

The question is this: Is it more important for you to win today, whatever the cost, or play tennis in a way that helps you access your potential and win in the long- run?

"There is a wasteland of talent in competitive tennis," says a top national coach on the ATP Tour. "Many players are simply chasing rankings and not building their games."

Breaking through this short-term orientation requires you to take risks, to go for your shots, even when you feel tight, and remain focused on the kind of game that will benefit you in the long run.

"Players get too caught up in the pure results of the tournament," says Tom Gullikson, former Davis Cup Captain and top-ranked doubles player on the ATP Tour in the 80's. "Players must be more honest with themselves, assess their strengths, be aware of how they are reacting to pressure, and understand why their play is breaking down at key times."

Pete Sampras evaluated his strengths and weaknesses every year he was number 1.
"Pete Sampras would do this consistently from year-to-year, even in his sixth straight year as the number one player in the world."

Easier said than done, I know. However committing to the small changes and improvements you have made in practice require this long-term vision. When you find yourself falling back into your old tentative patterns you need to be aware that this is happening and recommit to a more courageous style of play.

Committing to the plan that you and your pro or coach have developed together and executing it is the key. You have to take the chance of shifting gears, putting worry aside, and letting your feel for the game emerge.

Think about every match as a stepping stone to your best tennis in the future. Make that vision the most important thing. You have to really believe that the way you play the game is more important than the immediate result.

Performance Goals

The best way to take steps in this direction is by committing to specific performance goals, goals that can be measured in the same way as ranking, but with far more positive effect. Write these goals down--65% first serve percentage, attacking net 5 times per set win or lose, staying composed on break points, focusing on your kinesthetic keys, recognizing what you can and cannot control--whatever goals seem appropriate for where you really are.

Attacking the net 5 times per set: a great example of a performance goal.
Again Pete Sampras is a great example. Developing the skills he needed to play serve and volley tennis took time that cost him results. When Pete was 16 he was ranked #60 in the national juniors. Three years later, he won the U.S. Open at age 19.

Once you are thinking more productively about your game and focus less on the immediate outcome, you will feel more permission to go for your shots. This process takes time, honesty and continual evaluation. But gradually your tournament performance will start to reflect the skills you demonstrate on the practice court.

Irrelevant Stimuli

If you raise your self-awareness on the court and have a longer term perspective of your game, there is another benefit. Your learning curve will rise dramatically as you focus more on what is actually "relevant" during matches. Focusing on the wrong stimuli during matches is a major hindrance to developing as rapidly as possible.

Focusing on the right stimuli is the difference in the return.
Research shows that a majority of successful pros have learned to accelerate their learning curves in this way. Damian Farrow, a scientist at the Australian Institute of Sport, who works with Olympians and other elite athletes, has recently found some important clues in identifying the differences between amateur and expert tennis players regarding their learning process.

One of the most obvious differences between these two groups is the ability for pro players to spend more time on "relevant stimuli" in matches because minds are not distracted by the irrelevant factors discussed above.

To give just one example, Farrow found that pro players were able to track the direction of the serve earlier than amateurs .This gave them a huge edge in reacting to the speed and placement of their opponents' shots.

According to Farrow, "Great tennis players can tell from the angle of a server's arm where the ball will go. Novices generally don't have that skill. But they can learn. Top tennis players can predict the direction and speed of the ball before it leaves the racket."

Reading the serve can double the time interval you have to move and execute.
By predicting the path of the ball from the swing they know a split second earlier where to move. "This fraction of time is game changing," says Farrow. "A serve going 120 miles per hour takes approximately a third of a second to travel the 60 feet from baseline to service line.

"This means that an expert, who doesn't have to wait until the server makes contact to read the shot, has twice as long to move, plant his feet, and swing."

Many players are blocking their ability to react to the ball because they are handcuffed by anxiety related to the possible outcome. When you stay present, stay composed, and stay engaged, a new set of learning opportunities will automatically open.

Sub-Optimal Communication

The ability to stay focused on what is relevant in competition and accelerate your learning process also requires a positive collaborative relationship between player and coach.

For the past two years I have been teaching USTA coaching workshops on how to improve communication with players, manage players' ambivalence about the change process, and helping coaches teach players to apply their skills in competition.

The communication gap between players and coaches affects learning.
Listening to reports from both players and coaches has convinced me that there is a wide spread communication gap in junior tennis that is affecting the learning process.

Here are some of the things I have heard from coaches. "My players are so caught up in the rankings and who's ranked higher that they play in fear."

"My players just won't commit to changes and actually executing them in tournaments."

"A lot of my players melt down as soon as they have their back against the wall."

"My players call me right before their matches asking me what they should do--and have no idea themselves."

On the other side of the fence I have heard this from players:

"My coach is always pushing me to try stuff that doesn't work in matches."

"My coach bombards me to change too many things, and then gets mad when I'm not able to pull them off."

Players have to be truly open to change and trying new strategies.
"My coach never asks me how I want to play. All he does is tell stories from his experiences or talk about theories that don't really make sense to me."

The underlying problem here is that too often there is not an open line of communication between player and coach. The coach blames the player for not doing what the he says, and the player blames the coach for judging him and not believing in his abilities.

Players and coaches have to both feel they can honestly discuss what is and isn't working. The truth is coaches can be defensive when players challenge their authority or expertise.

But players have to have the freedom to voice their reservations about particular swing or strategic changes in lessons and to discuss the potential consequences in tournaments. And coaches have to have the patience to listen and understand the fears of players, even when they disagree or have another perspective.

On the flip side, players have to be truly open to change and have to work to recognize and admit what is really holding them back. The commitment to changes must be a team effort. But once there is agreement on a path of development, players need the courage to embrace the challenge and make the changes their own.

Do players sometimes get too much input in lessons?
Both sides have to be able to talk about this process, especially when it gets derailed or there are set backs. Players will inevitably revert to their old patterns on occasion, and both sides need to discuss this with a supportive attitude and without recrimination.

Case Study #1

One former college player, now at the 5.0 level, began working with me about three months ago to help him play looser in tournaments and get out of a two-year "slump." After just the third session he was more relaxed and playing better than he had in a long time.

However, that week he decided to take a lesson with a new pro. In our next session he reported that he had felt awful on the court all week--overthinking, making unforced errors, and feeling totally indecisive.

As I inquired about the lesson and what the pro had asked him to do, my client reported that "He wanted me to get my right leg through on the forehand, stay lower to the ball, drop my racquet head lower on the forehand, hit higher over the net and wait on the ball longer rather than catching it on the rise."

Input from coaches shouldn't undermine your positive approach.
This was just the instruction for one stroke. There was a similar litany about the rest of his game, all imparted in the course of one hour. From my vantage point, the amount of information my client received was totally overwhelming.

This was particularly true since his biggest issue was overthinking his shots and not trusting himself. I asked him to put a temporary moratorium on lessons and he agreed to put all those technical ideas on hold until he developed a more trusting, positive approach to the game. In three months he began to flourish.

I use this example, because it highlights the frequent absence of effective, collaborative communication in traditional lessons. Of course technical information plays a critical role in proper development. But it can only be effective when communicated in a way that takes the personality, learning style, and psychological challenges faced by the player into account.

The problem was that this particular pro did not identify any of these in my client. Likewise, my client hesitated to speak up and indicate that he felt overwhelmed, and didn't give the pro a chance to adjust his agenda. Without proper intervention, this dynamic could have persisted for months, even years, with both the player and the coach suffering unnecessarily.

Do the goals of your coach match your goals as a player?
Case Study #2

During one of the USTA High Performance workshops I facilitated last year, I was approached by a top-national coach struggling with a very talented, nationally ranked player. He reported to me that on any given day this player could beat any player in the top fifty in the world.

However, he also explained that on an "off" day he could lose to numerous players ranked below him. Essentially, the coach was pulling his hair out because of the gap between his player's talent and his actual execution in tournaments. He asked that I work with him to see if I could help bridge this gap.

I learned that the coach's main objectives, were first, to reduce his player's emotional volatility, and second to help him find a better balance during rallies. He wanted his player to construct points with more patience and flexibility. He wanted the player to add more variety, to take some pace off from time to time and use the court a bit more.

What he wanted did not seem too much to ask in the coach's mind, and he had been pressing his player to do this for quite some time.

Honest, positive communication between players and coaches is critical.
When I talked to the player, however,I found that he simply could not see the value of playing the way his coach insisted. He was a winner and a shot maker. This attitude had been deeply instilled in him by his family. Period.

From his perspective, hitting every ball as hard as he could, from all angles of the court, was working--he was a top nationally ranked player. He had numerous wins over players ranked above him. He was praised for this type of play.

I began to understand the dynamics in play, but my goal was not to adjudicate the issues about playing style. I considered that a judgment call to be worked out between player and coach.

My concern was that there was very little direct collaborative discussion going on. Obviously, the player was not responsive to the coach. But on the coach's part, there was little recognition of the player's concerns about the development of his own game. The player's ambivalence was not being adequately addressed and everyone suffered as a result.

With communication the path to change and a more varied game stays open.
Gradually, through open conversation among all parties, the player began to feel that I understood his position, and that his coach did as well. The coach became more understanding and softened his approach. This in turn caused the player to become more receptive.

Eventually, this player did start playing with some more variety and developed a more "controlled aggressive" approach to rallies. The coach had him hit three different kinds of balls in practice on a regular basis, mixing different paces and spins with his ripping winners.

His training now became less of an either/or confrontation about opposite styles of play. Instead all the options had a value and a place. As a result, he became more comfortable with varying his tactics, and his ambivalence was resolved.

The point is that the coach is critical in helping the player improve, but it is equally or more important that the player be allowed make his own observations, and follow his intuition and sense of curiosity about the learning process.

Work to overcome your barriers and discover the great tennis you really have inside you.
The ability to communicate what you notice about your game and the ambivalence you may feel about certain changes are critical to developing a sense of ownership over your game.

When something doesn't feel right in your game, you have to speak up. Tapping your ability as a player is dependent on it. You cannot be passive in the learning process.

I know there is more ability in you than you probably even imagine. If you have the nagging feeling that you can be better or aren't learning at the rate you thought you should, you are probably right. You can learn to play the way you practice--or possibly even better. Tune into how you feel on the court when you hit the ball well, focus on short-term performance goals, pay attention to what is really happening, tell your coach what you notice, and watch as your game blossoms.

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Jeff Greenwald, M.A., MFT is a nationally recognized sport psychology consultant. Jeff has worked as a consultant for the United States Tennis Association and trains numerous players around the world on the mental game. As a player in the men's 35 and over age division he attained an ITF #1 world ranking, as well as the #1 ranking in men's singles and doubles in the United States.

Greenwald is the author of the Amazon best-selling CD "FearlessTennis: The 5 Mental Keys to Unlocking Your Potential." His new book, "The Best Tennis of Your Life" will be published by Betterway Books in February 2008. Jeff has a private practice based in San Francisco and Marin County, California. He can be reached at 415-640-6928 or by email at jeff@mentaledge.net. You can also visit Jeff's website at www.mentaledge.net.

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Contact Tennisplayer directly: jyandell@tennisplayer.net

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Copyright Tennisplayer 2005. All Rights Reserved.

Contractors' All risk

2009-03-04T21:50:00.001-08:00

Contractors All Risk Policy

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This policy is specially designed to give financial protection to the Civil Engineering Contractors in the event of an accident to the civil engineering works under construction.

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This policy is specially designed to give financial protection to the Civil Engineering Contractors in the event of an accident to the civil engineering works under construction.In case the policy period exceeds 12 months, the premium can be paid in quarterly installments with the first installment being more by 5% and the last installment being paid 6 months before expiry of the policy.

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The policy comprises of 2 Sections :· Section I-Material Damage-covering physical loss, damage or destruction of the property insured by any cause, other than those specifically excluded in the policy.· Section II-Third Party Liability-covering the legal liability falling on the insured contractor as a result of bodily injury or property damage belonging to a third party. The main exclusions under Section I for which no claim is payable, are loss or damage due to:i. faulty design ii. rectification of aesthetic defects of structure not relating to any physical loss or damage to the structure due to any accident, or of material defect or of workmanship defect. The exclusion of defective material / workmanship is limited to the parts of the structure immediately affected and does not apply to any consequential loss to correctly executed items, arising out of the accident due to defective material or workmanship. iii. loss or damage due to gradual deterioration, atmospheric condition, rusting etc. iv. loss discovered only at the time of taking inventory. v. loss arising out of penalty for delay, non-fulfillment of terms of contract.

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(d) Is there any record of the construction site (d)
ever having been effected by any of the
major perils specified in (a) above.

9. Give full details regarding geological
condition including subsoil.

10. (a) Brief description of the arrangements made
for storage of construction materials and
equipments-whether in open or closed
premises.

(b) (i) Will there be a watch and ward round (i)
clock

(ii) If not, what precautions will be taken
against theft malicious damage etc. (ii)

11. THE INSURANCE
(a) Estimated construction period excluding (a).......................months
maintenance period (cover to commence
from the date of first arrival of consignment From...............to..............
materials at site, or, commencement of work
whichever is earlier).
(b) Cover required during maintenance period, (b).......................months
if any From................to................ (c)Probable date on which construction is c)
expected to be completed.

(d)Period of Insurance required (d).........................months

From.................to...............

12. (a) Have you approached any other Insurance (a) Yes No
Co. for Insurance Cover in respect of this
Proposal ?

(b) If yes, please state name of the Insurance Co. (b)

13. Has any such proposal been (a) Yes No

(a) Declined ?

(b) withdrawn ? (b) Yes No

(c) accepted subject to an increased rate or (c) Yes No
special conditions ?

14. SUM INSURED :

I. Contract Works
(Permanent & Temporary works including
all materials to incorporated therein)

(a) Contract Price Rs.

(b)Materials or Items supplied by the Principal Rs.

(c)Any additional items not including in (a) & Rs.
(b) above

(d) Landed cost of imported items as at
construction site [Please specify where
included in [a] and/or (b) above]
@ Exchange Rate..... Rs.________
Total Value of contract works. Rs.________

II. Construction Plant & Machinery to be used
at the construction site (Details as per
attached sheet)

III. Clearance & Removal of Debris Rs.

IV. Insured’s own surrounding property. Rs

V. Extra charges for Express Freight (excluding) Rs.
Air Freight) overtime Sunday & Holiday
rates of wages, if required

VI. On Increased Replacement value for Item Rs. (.......%)
I (a) (b) & (d) above, if required

VII. Third Party Liability

(a) For any one accident Rs.

(b) For all Accidents during the period Rs.

15. Do you wish to opt for higher amount Yes No.
of Deductible Excess ?

If yes, whether (i) 2 times
(ii) 5 times
(iii) 10 times

I/ We the undersigned hereby declare that the above statements and particulars are true and complete and I/We declare and agree that this declaration and the answers given above shall be held to be promissory and shall be the basis of the contract between me/us and the Company.

Place.........................

Date.......................... SIGNATURE OF PROPOSER

PROHIBITION OF REBATES
The following is the copy of Section 41 of the Insurance Act 1938.
1. No person shall allow or offer to allow, either directly or indirectly, as an inducement to any person to take out or renew or continue an Insurance in respect of any kind of risk relating to live or property in India, any rebate of the whole or part of the commission payable or any rebate of the premium shown in the policy; nor shall any person taking out or renewing continuing a policy accept any rebate, except such rebate as may be allowed in accordance with the published prospectuses of rebates of the Insurer.
2. Any person making default in complying with the provisions of this section shall be punishable with fine which may extend to five hundred rupees.
3. ----------------------------------------------------------------------------------------------

ASSURANCE COMPANY LIMITED

The Issue of this form is not to be taken as an admission of Liability

Policy No. __________ Claim No. ___________

Notification of Loss or Damage for Contractor's All Risk Insurance

Claim No.Title of contract insured :Name(s) and address(es) of Insured(s).Location and address of Contract Site:Name of Supervising EngineerNearest Railway Station (Airport)Advisable approach route to contract Site from railway station (airport) or otherwise
1 Which items were damaged ?(a) Contract works(b) Construction plant and equipment(c) Construction machinery
2 When did the loss or damage occur?(State date and exact time)
3 How did the damage occur and what was its probable cause ?(Attach sketches, photos etc.)

4 How far had construction of the damaged item (s) progressed at the time of the occurrence of damage?
5 Give name and address of witness to the occurrence :
6 How will the damaged items be repaired.
7. Will any alterations or improvements be made to design, construction or material when repairs are carried out ?
8. What are the estimated costs for the repairs of damage to(a) Contract Works?(b) Construction plant and equipment ?(c) Construction machinery?
9 Is Third Party Liability involved ?
10. Are existing buildings or surrounding property damaged ?
11 Remarks

The undersigned Insured declares to have answered the above questions conscientiously and truthfully.

Dated ________________ this _____________________ day of ________________________20_________

Signature ________________________________________________________________________________

===============================================================

Marine cum Erection

2009-03-04T21:48:00.000-08:00

Marine cum Erection / Storage cum Erection Policy

Download Forms (RTF Format)
Application Form Claim Form
Any Query on this policy mail us at engineering.nia@newindia.co.in
More Industrial Policies

· Highlights· Scope· Add on covers· Who can take the policy· How to select the sum insured· How to claim· Period of Insurance

This is a comprehensive policy covering all physical risks which a project is exposed to.

Highlights
This is a comprehensive policy covering all physical risks which a project is exposed to right from the warehouse of the supplier of equipments - whether imported or indigenous - to its erection, testing and commissioning at the site.In case the supplier has arranged transit insurance upto the site, a Storage cum erection policy can be issued limiting coverage to risks that the project is exposed to at the site only.In case the policy period exceeds 12 months, the premium can be paid in quarterly installments with the first installment being more by 5% and the last installment being paid 6 months before expiry of the policy.For project value exceeding Rs.1500crs, specially designed policies are available.

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Scope
The policy comprises of 2 Sections :· Section I-Material Damage-covering physical loss, damage or destruction of the property insured by any cause, other than those specifically excluded in the policy. · Section II-Third Party Liability-covering the legal liability falling on the insured contractor as a result of bodily injury or property damage belonging to a third party. The policy covers all risk of physical loss or damage of insured property other than those specifically excluded , including :-§ marine voyage for imports § offloading / storage at port § inland transit to site § storage, handling, erection at site § testing and commissioning at site The main exclusions are :-a. loss or damage due to faulty design, defective material or casting, bad workmanship other than faults in erection. This exclusion is limited to the items immediately affected and does not apply to any consequential loss to correctly executed items. b. cost necessary for rectification or correction of any error during erection unless resulting in physical loss or damage. c. loss or damage due to gradual deterioration, atmospheric condition, rusting etc. d. loss discovered only at the time of taking inventory. e. loss arising out of penalty for delay, non-fulfillment of terms of contract.

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Add on covers
The policy can be extended to cover the following on payment of additional premium.· clearance and removal of debris · damage to owner's surrounding property · maintenance visit / extended maintenance cover · additional customs duty · civil works · express freight · air freight · deletion of duration clause under marine

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Who can take the policy
The policy can be taken by the principal, contractor or sub contractor, jointly or separately.

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How to select the sum insured
The sum insured selected under section I should not be less than the completely erected value of the property inclusive of estimated freights, customs duty, erection cost etc.In case of long term contracts, there is bound to be escalation in prices i.e.prime cost. The basic policy will pay only as per the original cost and prices. However escalation clause can be opted for, under which escalation upto 50%, can be selected to take care of such increase in prices during the policy period.The sum insured shall be adjustable on completion of the erection, on the basis of actual values incurred by the insured in respect of freights, handling charges, customs dues, cost of erection etc. and premium adjusted accordingly.The sum insured under section II should represent the per accident limit (the maximum legal liability that may fall on the insured as a result of an accident in the insured's site). The limit per policy period should be fixed taking into account the maximum number of such accidents which can reasonably be expected to occur.

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How to claim
In the event of any loss or damage giving rise to a claim under the policy, the following steps should be taken :-· take necessary steps to minimise the loss. · inform insurance company immediately. · inform fire brigade in case of fire and police authorities in case of theft. · extend full cooperation to the surveyor deputed by the company. · submit duly filled in claim form along with necessary documents to substantiate the financial loss suffered as a result of the accident.

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Period of Insurance
The period of insurance should not be less than the period of contract and should commence from the date of unloading of the first consignment at the site of the erection and shall continue upto the conclusion of the first test operation or test loading subject to a maximum of 4weeks from the date trial running is made and / or readiness for work is declared by the erectors. If a part of the plant or one or several machines are tested and put into the operation, the coverage under the policy for that particular part of the plant or machine will cease, whereas the coverage will continue for the remaining parts which are not yet ready.In case approval of the plant or any part thereof is not given by the concerned authorities even after expiry of 4weeks of trial running, the policy can be extended and the extra premium to be arranged beforehand.

----------------------------------------------------------------------
Assurance Company Limited

PROPOSAL AND QUESTIONNAIRE FOR ERECTION ALL RISKS/MARINE-CUM- ERECTION INSURANCE

(The Liability of the Company does not Commence until this Proposal has been accepted by the Company and premium paid) (Information given herein will be treated in strict confidence)

PUT A TICK Mark wherever applicable

1.(a) Name and Address of the Principal Trade of Business_______________
________________ ________________

(b) Name and Address of the Contractor Trade or Business ______________
_______________
_______________

(c)Name & Address of the Sub Contractor if any, Trade Business____________
______________
______________

THE INSURED INTERESTS
2. Whose interests are to be insured ? Principal Contractor Sub-contractor
THE CONTRACT WORK
3. Full description of the Plant & Machinery to be erected.
Including Capacity.
(Please attach separate sheet if necessary)
4. (i) Is this a contract/Sub-Contract forming part of an over all
erection project of value exceeding Rs. 5 crores ? (i) Yes / No
(ii) If yes give name of the Project (ii)
5. (a) Have the Plans, Designs and Materials been already tested Yes / No
in any previous erection ?
(b) Is the installations or part there of built for the fist time ? Yes / No
(c) Are you the manufacturer, importer, buyer
or contractor of the installation Manufacturer / Importer/ Buyer/ Contractor

(d)Is the property brand new or is it
second hand and used one Brand New/ Second-hand
-2-

(e) If second hand or used,State Age?

6. (a) Will the erection be carried out by your own personnel ?(a) Yes / No
(b) If not by whom ? (b)
(c) Past experience of the erectors ? (c)
_________________________________________________________________
7. (a) Will any sub-contractors be taking part in the work of (a) Yes / No
erection ?
(b) If yes, what is their position as regards insurance ? (b)
THE CONTRACT SITE
8. (a) Location of site where the Plant is to be erected ? (a) (b) Nearest Post &/or Railway station and distance ? (b)
Note : A complete lay out of the Factory and Site may be enclosed

9. (a) (i) Are any special risk of flood, fire or explosion Involved ? (a) (i) Yes No
(ii) If yes, give details. (ii)
(b) Distance from nearest river or sea-the names and (b)
particulars to be given
(c) Elevation of Erection Site above normal river or sea level (c)
(d) Is there any record of the Erection site ever having been (d) Yes / No
submerged during floods ?
THE INSURANCE
11. (a) Probable date of first shipment or despatch. (a) (b) Expected date of first arrival at site. (b)
(c) Expected date of last arrival at site (c)
(d) Probable date of commencement of erection of Plant
& machinery (d)
(e) Probable date on which erection of Plant & Machinery is (e)
expected to be completed finally.
(f) Duration of Testing Period (including in ‘g’ below) (f) ...........Month
(g) Period of insurance required including Test run
(g)......Months From............ To .............

Items to be Insured Sum Insured
12. A SECTION I Material Damage
1. (a) On landed cost of imported machinery, as at Factory Site
i.e. @ Exchange rate (Sub divided as under)
(i) Invoice cost : Rs
-3-

(ii) Freight Insurance Handling Clearing and forwarding
charges upto Factory Site Rs.
(iii) Customs duty at % Rs.
(b) On Machinery fabricated or manufactured in India
(sub divided as under)
(i) Invoice Cost including insurance, handling for transporting upto factory site. Rs.
(ii) Freight Rs.
(c) On cost of Erection, including salaries all Foreign and
Indian Technicians and Wages of all skilled and unskilled
labour employed at Factory Site during erection. Rs.
(d) On Building in which the above Plant and Machinery is
to be erected
(i) Permanent Civil Engineering Works Rs.
(ii) Temporary Works Rs.
2. Clearance and Removal of Debris. Completely Erected Value Rs.
3. Value of Surrounding Property to be Covered. Rs.
4. Extra charges for Express Freight (excluding Air Freight)
Over time, Sunday and Holiday rates of wages. Rs.
5. Construction Plant and Machinery to be used at the Project
Site Details( as per attached list) Rs.
6. Do you wish Air freight to be covered, if so, amount &
indemnity. Rs.
7. (a) On Increased replacement value (including duty on such
additional replacement value) which may have to be paid on
replacement of imported Plant and Machinery as per
Item I-(a) above Rs.
(b) On increased replacement value which may have to be
paid on replacement of indigenous Plant and Machinery as
per item I-(b) above. Rs.
2. B SECTION II-Third Party Liability
(a) for any one accident. Rs.
(b) For all accidents during the period Rs.
13. (a) Have you approached any other Insurance Co. for (a) Yes / No
insurance Cover in respect of this proposal ?
(b) If yes, please state name of the Insurance Co.
14. Has any such proposal been
(a) declined ? (a) Yes No
(b) withdrawn ? (b) Yes No
(c) accepted subject to an increase or special condition ? (c) Yes No

The following questions are to be answered if Marine/Transit Insurance Cover is required
15. (a) Are there any fragile items like Refractory materials, (a) Yes / No
Asbestos cement sheets, Porcelain materials, Glass
equipments Fire Bricks, Graphite Electrodes etc.
(b) If yes, please give their value, description and mode of
packing (where packed in cases or loose)
16. (a) Do you want cement to be covered ? (a) Yes / No
(b) If yes, give its value and mode of packing (whether
packed in gunny bags or paper bags) (b)

17. Please give particulars of voyage for imports/ transports.
18. What is the limit required
(a) per any one shipment ? (In case of imports) (a)
(b) per any one despatch ? (In case of indigenous materials) (b)
19. Please state (for Inland Transit)
(a) how the goods will be transported to site of erection ?
(a) By Rail By Steamer By Lorry By Country Craft
(b) How many Transhipments will be there ? (b)
(c) Special hazards, if any, in transporting goods from (c)
nearest Station/port to erection site
20. Do you require war & S.R.C.C. risk to be covered during Yes No
Overseas Inland transits.

I/We the undersigned hereby declare that the above statements and particulars are true and complete and I/We declare and agree that this declaration and the answers given above shall be held to be promissory and shall be the basis of the contract between me/us and the Company.

Date :_______________
Place :_______________
Signature of Proposer_____________

PROHIBITION OF REBATES
The following is the copy of Section 41 of the Insurance Act 1938.
1. No person shall allow or offer to allow, either directly or indirectly, as an inducement to any person to take out or renew or continue an Insurance in respect of any kind of risk relating to live or property in India, any rebate of the whole or part of the commission payable or any rebate of the premium shown in the policy; nor shall any person taking out or renewing continuing a policy accept any rebate, except such rebate as may be allowed in accordance with the published prospectuses of rebates of the Insurer.
2. Any person making default in complying with the provisions of this section shall be punishable with fine which may extend to five hundred rupees.
*

---------------------------------------------------------------------------------

ASSURANCE COMPANY LIMITED

Marine Claim Form

The issue of this form is not to be taken as an admission of liability.

Polic No. ____________ Claim No. ___________

E R E C T I O N I N S U R A N C E

Notification of Physical Loss or Damage.

Name

Address

Question Answer
1. When did the loss or damage occur?(state date and hour)
2. State the site where the damage occurred and name and nearest Railway Station.
3. Give the details of the damage :-(a) to Erection Property(b) to property belonging to third parties (a)(b)
4. What was the cause of the damage?(e.g. Defective materials, faulty design, giving particulars of parts concerned).
5. Is any one responsible for the damage ?Is there any Possibility of recovery ?

Questions Answers
6. How will the damage be repaired ?Please state in detail whether any parts must be replaced; (Give weight and value of damaged parts.)
7. What is the estimated amount of the loss or damage ? Rs.
8. How did the damage occur ?

(This question must be answered in detail giving a sketch, wherever possible and supported by statements of witnesses)

9. Do you wish to carry out repairs yourself ?Do you wish to entrust repairs to another Firm (State name).

As soon as a loss or damage has become know, the Company at its Head Office must be notified without delay, on the present form. The Agents are not authorized to accept Notification of Loss or Damage.

The undersigned Policy - holder declares to have answered the above questions conscientiously and truthfully and he is liable for the correctness and completeness of his statements.

___________________
Signature

----------------------------------------------------------------------------------------------------------------

M.B.

2009-03-04T21:47:00.001-08:00

Machinery Breakdown Policy

Download Forms (RTF Format)
Application Form Claim Form
Any Query on this policy mail us at engineering.nia@newindia.co.in
More Industrial Policies

· Highlights· Scope· Add on coversHow to claim

This is a policy which covers financial loss incurred by the insured due to loss or damage to machinery as a result of accidental electrical and mechanical breakdown.

Highlights
This is a policy which covers financial loss incurred by the insured due to loss or damage to machinery as a result of sudden accidental electrical and mechanical breakdown.It reimburses the insured for the cost of repairs or replacement of machinery of like nature.· Who can take this Insurance:This insurance can be taken by the individual owner of the machine or a person or company having financial interest in the machine.· What kind of machines can be covered: All types of industrial machinery like compressors, pumps, turbine etc. as also electrical machines like transformer, electrical motor, generator etc. can be covered under this policy.· What is the sum insured or value for which policy is to be taken: It is a requirement of this policy that the sum insured or value for which the particular machine is insured should represent the present day purchase value of a similar new machine including all incidental expenses like custom duties, taxes, excise, freight, insurance charges, handling charges etc. In case the sum insured under the policy is less than as per the above requirement the claim will be paid only in such proportion as the sum insured bears to the current replacement cost of similar new machinery.

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Scope
The policy covers all kinds of electrical and mechanical breakdown subject to the following exclusions:a. Faulty material/workmanship of the machine b. Action of centrifugal forces contributing to disruption of the rotating parts c. Failure of lubrication due to malfunctioning of lubricating oil pumps or its breakdown. d. Malfunctioning or failure of safety devices. e. Electrical short-circuiting including electrical fire originating from failure of insulation and or over voltage or under voltage conditions. f. Abrupt and sudden stoppage of other connected machinery. g. Entry of foreign bodies into running machine. h. Inexperienced operations causing damage due to error of judgment or error in operation.

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Add on covers
The policy can be extended to include the following risks on payment of additional premium.1. Damage to foundation of machinery 2. Damage to oil in electrical apparatus 3. Express freight (excluding air freight), holiday rates, overtime charges 4. Air freight 5. Additional custom duty i.e the additional percentage of duty payable at the time of reimport for replacement over and above the percentage of duty included in the original sum insured. 6. Own surrounding property i.e. damage to the insured’s own existing property or property in his custody or control (not included in the sum insured of the policy) due to any damage to the insured machines which is covered under the policy. 7. Third party liability i.e. liability falling on the insured for bodily injury to any other party other than those covered by the policy or for property damage belonging to such other party.

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How to claim
In case of any such incident which falls under the scope of the policy, the following steps should be followed:1. Please inform the insuring office by phone, letter or fax. 2. Take all necessary steps to minimise the loss. 3. Obtain estimate of repair from repairer of your choice. 4. Submit this repair estimate and claim form to the surveyor deputed by the insurance company. 5. After getting clearance from the surveyor, proceed for repairing machine or ordering for replacement as the case may be. 6. Submit actual bills of repair/replacement with proof of payment to the surveyor.

ASSURANCE COMPANY LIMITED

PROPOSAL FOR MACHINERY INSURANCE

(The liability of the Company does not commence until this proposal has been accepted by the Company and premium paid)

(Information given herein will be treated in strict confidence)

PUT A ( ) MARK WHEREVER APPLICABLE

(a) Proposer’s Name ____________________________________________
(b) Proposer’s Trade or Business ___________________________________
(c) Proposer’s Postal Address _____________________________________
___________________________________________________________
_____________________________
(b) Address where plant to be Insured is located ______________________
(e) Nearest Railway Station and Distance ____________________________

1. Do the items listed represent the whole of the Plant Yes/No
2. (a) Are you at present Insured : (a) Yes/No
(b) If so with whom ? (b)
3. Has any Company -

(a) Declined to insure any of the machinery now
Proposed ? (a) Yes/No
( b) Required an increased premium or imposed
special conditions

(c) Requested for repairs or made other special(b) Yes/No
stipulations for risk improvement ?
4. (a) Are you aware of any defects/damage existing (a) Yes/No
in the machinery.

(b) If so, give details thereof (b)
5. (a) Has your machinery sustained any damage from
breakdown or other cause during last 3 years ? (a) Yes/No
(b) If so, give details of damage/s and repairing cost(b)
6. (a) Are regular periodical inspections of the machinery (a) Yes/No
carried out ?
(b) If so, by whom and at what intervals ? (b)
7. On payment of additional premium do you wish to If yes, provide limits
cover :- of indemnity
(a) Express Freight (excluding Airfreight), overtime
and Holiday rate of wages (a) Rs. No.

(b) Owners surrounding property (b) Rs. No

(c) Third party Liability (c) Rs. No.
8. Period of Insurance From To

SCHEDULE OF MACHINERY TO BE INSURED
GUIDE NOTES
1. Each Machinery should be entered separately with necessary specification as mentioned in Schedule column No. 3
2. The sum Insured must be calculated on the present day new replacement value of the Machinery to be insured including provision for packing, freight and also value of foundations, erection costs, customs duty, to afford full protection under this Policy.
3. If any of the Machines is a ‘Stand by’ this fact should be mentioned.
4. All portable Machines must be so designated. All items in the open must be so described separately.
5. Separate value for foundations masonry and brickwork or oil in transformers and other electrical equipments are to be specified if cover is required.
Sr. Quantity Description Type, Model Maker’s Name & Year of Make Sum Insured
No. Capacity of Machine/ Country of Origin
Serial No. H.P./KVA Volts
AMPS, RPM
1 2 3 4 5 6

I/We the undersigned hereby declare that the above statement and particulars are true and complete and I/we declare and agree that this declaration and the answers given above shall be held to be promissory and shall be the basis of the contract between me/us and the Company.

Place :_________________

Dated :_________________ Proposer’s Signature_____________

PROHIBITION OF REBATES

Section 41 of Insurance Act 1938

1. No person shall allow or offer to allow, either directly or indirectly, as an inducement to any person to take out or renew or continue an Insurance in respect of any kind of risk relating to live or property in India, any rebate of the whole or part of the commission payable or any rebate of the premium shown on the policy; nor shall any person taking out or renewing or continuing a policy accept such rebate as may be allowed in accordance with the published prospectuses or tables of the insurer.

2. Any person making default in Company with the provisions of this section shall be punishable with fine which may extend to five hundred rupees.

------------------------------------------------------------------------------------------------------------

ASSURANCE COMPANY LIMITED

The Issue of this form is not to be taken as an admission of liability.

Policy No. Claim No._______________

MACHINERY INSURANCE
Notification of Physical Loss or Damage

Name
Address

Question Answers

1. When did the loss or damage occur ?
(State date and hour)

2. Give the name and address of the witness
to the occurrence.

3. What was damaged ?
(a) Item of the Inventory (a)

(b) Sum Insured (b)

(c) Type of machine output of capacity (c)

(d) Manufacturers and year of manufacture (d)
(Full details on maker's plate to be
given)

(e) What is the cost of replacement of the (e)
machine by a new machine of the same
size and capacity.

4. (a) Was the property brand new or second (a)
hand ?

(b) What was the last occasion before the (b)
damage when the machine was over-
hauled or attended to for maintenance
or damage

5. Is the damaged property totally destroyed ?

Questions Answers
6 What has occurred and which parts of the property are damaged to such an extend the replacement is necessary?
7 Has the period of guarantee expired?If so, when ?
8 What is the estimated amount of loss orDamage?
9 What was the cause of the damage and how did it occur?(This question must be answered in detail and a sketch given wherever possible)
10 (a) Has the property undergone any repairs previously(b) What was the nature of such repairs ? (a)(b)
11 Give the name and address of the workshop where repairs will be executed :(Provisional repairs will be indemnified)

As soon as loss or damage has become known the Company at its Head Office must be notified without delay on the present form. The Agents are not authorized to accept notification of loss or damage.

The undersigned policyholder declares to have answered the above questions conscientiously and faithfully and he is liable for the correctness and completeness of his statement.

_________________ 20_____ ________________________
Signature

1. What has occurred and which parts of the
property

Insurance Claims

2009-03-04T21:37:00.000-08:00

CLAIMS

In addition to a competent surveyor , Company Official should visit.

Processing of Claims
Documents :
1) Copy of the policy complete with terms , conditions & warranties
2) Claim form duly completed by Insured
3) Survey report should include :
Indication of the cause of loss
Establishment of liability
Assessment of Loss
Confirmation of compliance of policy terms , conditions & warranties
Admissibility of Claim
Photographs !
Police report ! If necessary
Fire Brigade report !

Claims arising out of AOG Perils

Documents like Newspaper cutings , photographs & meteorological reports

Attention to be paid to concurrent policy & Fin. Inst. Clause

Losses of RSMTD perils

Disposal of Salvage

Disposal of Claims
If all the papers are destroyed in Fire:

LOP
To minimise period of indemnity

IAR : Claims to be dealt as per relevant sections

======================================================

Engg Insuarnce:
Documents required as under:

a) Copy of the policy with full terms , conditions , warranties
b) Claimform
c) Survey report incl: Clear indication of the cause of loss , Extent of damage & loss,Establishment of liability , assessment of loss , confirmation of compliance
Of policy terms , conditions & warranties , Admissibility of loss
d) Photographs
e) Police Report
f) Fire Brigade Report

Items e & f may be waived where survey report is clear & does not cause any doubt on the occurrence as well as extent of loss.

1.1-Theft = FIR
1.2 Steps involved in loss-adjustment shoyuld be as under:
Gross loss assessed
a. Less Depriciation if any
b. Less: salvage
c. Less: underinsurance
d. Less :Excess
e. Net claim payable

2. MCE Policies:Marine practice to be followed for Marine
2.1 in case of mega projects , services of an on-site representative/outside project-monitoring agency could be retained, to:
a) Monitor progress of projecta-ctivity
b) Receive report on genearl conditions prevailing at site , from loss-minimisation point of view.
c) Co-ordinate with different authorities on site,
d) Collect required documents for claims already lodged to expedite disposal
e) Conduct survey of losses falling within self-survey limit
f) Preliminary survey of losses

2.2Inci Expenses like supervision/Storage to the extent they are included in S.I. & actually incurred. When replacement value is not ascertainable , assessment can be based on the original invoice value plus escalation if provided in the policy. However, it may be left to the surveyor to arrive at a value.

2.3 Loss under various extensions like additional custom duty , air freight,express freight , overtime wages etc are to beassessed sepaartely. Such Expenses will be available only when incurred by Insured. Liability under these extensions will be over & above the ones allowed under Std. Policy provided limit is not exhausted by earlier settled claims &/or Claims reported but pending settlement.

2.4 If the claim is assessed both under the main policy & extensions like additional custom duty , express freight , overtime wages etc. , specified excess will be applied for each of these sections separately.

C A R

Surveyor shall confirm that the damage is not due to faulty design as the policy completely excludes loss due to faulty design unlike the erection policy where only a particular portion is excluded & resultant damage is paid.

Excess as applicable.

C.P.M.

Being an annual policy , validity at the time of occurrence to be evrified.

Identification of damaged equipment / item should be asked for to confirm coverage under policy. This is necessary since selection of equipments for insurance is allowed.

Surveyor should confirm accidental damage to the equipment.
For items fabricated by the Contractor & replacement values not available , the surveyor should assess the loss on the basis of actual costs incurred by the Insured.

Machinery insurance:
1) Test reports of the admaged parts if demed necessary by the Surveyor & / or suggested by the Insurers is to be submitted to the insurer/surveyor.
2) Repairs / replacement to be confirmed by surveyor.

Claim payable may include costs of dismantling , transportation to the repairer’s shop repairs & re-transportation & re-erection & other incidental expenses. If damaged equipment being sent out is covered under a Marine transit policy , the cost of such insurance may also be reimbursed.

If repeated loses are reported on same equipment , U/W office can take help of outside expert to ascertain the precise cause of repeated loses & suggest measures for avoidance/minimisation of reoccurrence of break-down / loss.

The exclusion of damage to belts ., ropes, chains , Rubber tyres,dyes , moulds to be considered.As to the oil & other operating meduia in transformer & equipment , these may be reimbursed only when specifically covered under the policy.

Loses under other extensions like additional custom duty , air freight , express freight etc. are to be assessed separately & the u/w office should confirm the availability of additional s.i. specifically for such items of expenditure while recommending the claim for settlement. If the assessment involves additional expenses for repairs / replacement , surveyor should confirm that the expenses are reasonable.

Boiler Explosion Insurance

a) Copy of the certificate issued by Inspectorate of Boilers(Wherever applicable) for operation.
b) Boiler inspection report on the occurrence.

Electrical Equipment Insurance

Since the selection of equipment is allowed , u/w office should confirm existence of cover for the damaged item.
Avrious exclusions under the basis policy /./ It should be ensured that claim does not fall under any exclusions.

LOP Insurance

Claim admissible only if loss or damage to M/C or Boiler covered under corresponding policy is admissible.

Selection allowed.Reconfirm coverage.

Applicable time excess. Selection of indemnity period is made depending upon type of M/C.

MD surveyor & LOP Surveyor should report on steps
======================================================
Misc. accid ent

Personal Accident
Generally scrutiny of following documents is esential.
a) Duly completed claim form.
b) Report of attending Doctor either as a sepaarte document or on the reverse of claim-form
c) Invest reports like Lab tests,X-ays & reports esential for confirmation of injury
d) Police reports wherever necessary.
e) Certificate of proof of age of dependent childin case claim is under Education grant provision.
f) Med Bill corresponding to doctor’s prescription where medical extension is granted.
In case of fatal accidents , following documents will be scrutinised
1) Death Certificate
2) Post-Mortem Report
3) Coroner’s report.
4) Inquest report

Original documents to be returned, only photocopies retained.
Bills/Receipts for Company records
Affidavit for legal heir to be obtained.

All Risk

Theft Claim
In case of personal efects , invoice / bill should not be insisted upon but Market value should be the basis of settlement.While final police report should be called for , where it is not forthcoming within 6 Months of the loss, claim may be settled on the basis of 1st Investigation report lodged providedother documents are in order. Indemnity bond is to be obtained before settlement.

Baggage Insurance
Following Documents:
1) Duly completed claim form
2) Final Investigation Report
3) Survey Report
4) Photographs

In case of small losses upto a specified amount by dealing office.

Burglary Insurance
1) Duly completed claim form
2) Final Investigation report of police
3) Survey report
4) Photos
In case of small losses , dealing office can settle the claim.It is preferable to appointan investigator to check up books of accounts involving assessment . This has to be a licensed surveyor.
Waiver of Final Invest Report can be considered at the discretion of competent authorityso long as report does not raise any doubt. Subrogation / Indemnity letter is a must.

Money Policy
Following documents are considered important while processing claims:
1) Duly completed claim form
2) Final investigation report from Police
3) Survey Report

Incase of losses reported from premises , procedure to be followed on similar lines of Burglary.

However if infidelity of the employee is involved, Dept proceedings & / or criminal action to be initiated against erring employee

Limit per sending declared will be max. indemnity & average will not apply if cash carried is more than limit intimated.
Since policy is on adjustment basis , annual estimate of carrying does not have any bearing on claim.

Fidelity Guarantee
Completed Claim Fiorm , Survey Report & / or inestogator’s report & Final Investigation report.It is necessary to verify with the employer whether any amt. Is due to defaulting employee which can be withheld by the employer & adjusted against claim.

However, Final investigation report may be waived where the surveyor / Investigator have not raised any doubts as to cause / quantum of loss. Settlement of claim to be effected after obtaining letter of indemnity / subrogation from the Insured.

Where Dept. inquiry by employer has established guilt of the employe & asessment report is clean , settlement may be effected after suitable indemnity / subrogation letter is received from Insured without waiting for the outcome of any criminal action pending in any court of law./

Shopkeepers’ Insurance
Package Policy- Various covers such as Fire , burglary , cash in Transit , PA &/or liability.Depending on section aplicasble , procedure for settlement of claim/guidelines may be followed.

Householders’ Comprehensive

Each specified class would be same as per respective class.

CLAIMS

Genius-What makes a Genius

2009-03-03T18:43:00.000-08:00

How to be a genius
Scott Berkun

Geniuses don't exist in the present. Think of the people you've met: Would you call any of them a genius in the Mozart, Einstein, Shakespeare sense of the word? Even the MacArthur Foundation's "genius" grants don't call their winners geniuses.

In Pictures: 10 Geniuses And What Made Them Great
Editor's Choice
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When The Egg Comes Before The Chicken
How Emerging Designers Stand Out
In Pictures: How To Figure Out Where You Fit

We throw the g-word around where it's safe: in reference to dead people. Since there's no one alive who witnessed Wolfgang Amadeus Mozart pee in his kindergarten pants or saw young Pablo Picasso eating crayons, we can call them geniuses in safety, as their humanity has been stripped from our memory.

Even if you believe geniuses exist, there's little consensus on what being a genius means. Some experts say genius is the capacity for greatness. Others believe it's that you've accomplished great things.

Forget this pointless debate. Chasing definitions never provides what we want: a better understanding of how to appreciate, and possibly become, interesting creative people. Instead let's run through the history of geniuses and pull out some telling patterns.

Have a great, or horrible, family

Picasso, Mozart, Beethoven, Einstein and Goethe are popular geniuses whose parents were interested in their creative lives. Mozart and Beethoven both had fathers who were professional musicians and they were taught by them during childhood to play instruments. Can you guess what Picasso's dad did? Yes, he was a painter, and he spent many hours with young Pablo.

One popular legend surrounding Einstein is that he was obsessed with a compass given to him by his dad. The more potent factor in his development was family friend Max, who taught Einstein science and philosophy. Then, of course, there's Van Gogh. The only healthy relationship he ever had was with his brother Theo.

But lousy families can make geniuses, too.

Beethoven's dad was cruel, torturing him during practice sessions. Unlike many child prodigies who burn out at adolescence, Beethoven kept his passion for music. Leonardo da Vinci barely knew his father.

Isaac Newton was also born to a single-parent home and hated his stepfather. From that broken relationship may have come the seed of unrest that fueled his independent life and ideas.
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Be obsessed with work

Show me a genius and I'll show you a workaholic. Van Gogh produced 2,000 works of art between 1880 and 1890 (or 1,100 paintings and 900 sketches). That's four works of art a week for a decade. He didn't even get started until age 25.

Da Vinci's journals represent one clear fact: Work was the centre of his life. He had neither a spouse nor children. Picasso was a machine, churning out 12,000 works of art. He said, "Give me a museum and I'll fill it" and made good on that boast. Shakespeare wrote more than 40 plays, plus dozens of sonnets, poems and, of course, grocery lists.

These are people who sacrificed many ordinary pleasures for their work.

The list of lazy geniuses is short. There are burnouts, suicides and unproductive years in retreat--but none could be called slackers. Malcolm Gladwell, in his book Outliers contends that the key to any success is 10,000 hours of practice.

The debate over talent vs. effort is moot: History makes it clear you always need extraordinary effort.

Have emotional or other serious problems

For all their brilliance, most geniuses did not live well-adjusted lives. Picasso, Van Gogh, Edison, Einstein and Nietzsche (and most major modern philosophers) were often miserable. Many never married or married often, abandoned children and fought depression.

Newton and Tesla spent years in isolation by choice and had enough personality disorders to warrant cabinets full of pharmaceuticals today. Michelangelo and da Vinci quit jobs and fled cities to escape debts.

Kafka and Proust were both hypochondriacs, spending years in bed or in hospitals for medical conditions, some of which were psychological. Voltaire, Thoreau and Socrates all lived in exile or poverty, and these conditions contributed to the works they're famous for.

Happily positive emotions can work as fuel, too. John Coltrane, C.S. Lewis and Einstein had deeply held, and mostly positive, spiritual beliefs that fueled their work.

But the real lesson is that all emotions, positive or negative, provide fuel for work and geniuses are better at converting their emotions into work than more ordinary people.

Don't strive for fame in your own lifetime

Most people we now consider geniuses received little publicity in their lifetimes compared with the accolades heaped on them after their deaths. Kafka and Van Gogh died young, poor and with little fame.

Desiring fame in the present may spoil the talents you have. This explains why many young stars have one amazing work but never rise to the same brilliance later: They've lost their own opinions. Perhaps it's best to ignore opinions except from a trusted few and concentrate on the problems you wish to solve.

In Pictures: 10 Geniuses And What Made Them Great

To focus on learning and creating seems wise. Leave it to the world after you're gone to decide if you were a genius or not. As long as you're free to create in ways that satisfy your passions and a handful of fans, you're doing better than most, including many of the people we call geniuses.

Top 10 Global Insuarnce Companies

2009-03-02T01:24:00.000-08:00

0
50,000
100,000
150,000
200,000
250,000
2000 2001 2002 2003
UK Germany France Italy Netherlands
The Top 10 Global Insurance Companies
Increasing profitability, market share and competitive edge
Financial Services Management Report
Source: The Top 10 Global Insurance Companies
Total life and non-life premium volume
in the top five European markets
“Last year saw a further decrease in life insurance premium
income, in many countries including the UK. This trend is
because of the recession and persistent low interest rates,
resulting in life insurers offering lower returns...”
Improve profitability and exploit new opportunities in insurance markets
using this new report’s analysis of the strategies helping top insurers remain global leaders...
BUSINESS INSIGHTS
Total Premium Volume (€m)
Business Insights’ portfolio of financial services management reports are designed to help you make well
informed, timely business decisions. We understand the problems facing today’s financial services executives when
trying to drive your business forward, and appreciate the importance of accurate, up-to-date, incisive product,
market and company analysis. We help you to crystallize your business decisions.
The strength of our financial services research and analysis is derived from access to unparalleled databases
and libraries of information and the use of proprietary analytic techniques. Business Insights reports are authored
by independent experts and contain findings garnered from dedicated primary research. Our authors’ leading
positions secure them access to interview key executives and to establish which issues will be of greatest strategic
significance for the industry.
Our financial services portfolio of reports can be used across a wide range of business functions to assess market
conditions and devise future strategies. The order form on the back of this brochure lists titles available within the
following categories: Banking, Finance, Insurance, Wealth Management, Investment and Strategy.
Business Intelligence for the Financial Services Industry
“Japan is an
over-insured market.
Three of the top 10
Japanese insurers,
Mitsui Life, Sumitomo
Life, and Asahi Life,
have been marked
with non-investment
grade ratings...”
Examining the Key Issues
• Bancassurance - identify the most effective models using this
report’s examination of penetration levels and profiles of major
European bancassurers including Lloyds TSB, Allianz, Banca
Unicredito and Caj Madrid.
• New European regulations - predict their effects by reading this
reports explanation of the impact of changes to regulations
including depolarization in the UK and pension reform in Germany.
• Global stock-market decline - discover the strategies global
insurers are implementing to compensate for the resulting
reduction premium revenues and sluggish growth.
• Mergers and Acquisitions - they may offer access to new market
segments, new products and new customers, but find out the real
costs and benefits of mergers including that of Allianz and Dresdner
in this report’s analysis of merger activity.
Germany 19% 51% 9% 21% 0%
UK 18% 17% - 56% 9%
Italy 56% 34% 9% 1% 0%
France 61% 8% 6% 9% 16%
Spain 77% 0% 3% 20% 0%
IFAs/ Other
brokers
Direct
sales-force
Tied
agents
Banks/
bancassurers
Country
The Top 10 Global Insurance Companies
The Answers to Your Questions
• Which countries show the most rapid growth in insurance premiums?
• What is the most effective method of life insurance distribution
through bancassurance in each of the major European markets?
• What are the key characteristics of the world's most successful
insurers?
• How and why are so many insurers seeking to enter new markets?
• Which life insurance distribution channels are the most popular in
Europe and why?
• How are insurers reacting to the effects of stock-market decline?
Last year, after two years of worldwide recession the insurance market
finally showed signs of recovery. However, increased competition from
new entrants combined with a lack of consumer confidence still create a
difficult environment in which to either acquire or retain customers.
The Top 10 Global Insurance Companies: Increasing profitability,
market share and competitive edge provides an overview of the
global insurance market, including statistics on both life and non life
insurance. Uniquely, this report not only details the global insurance
market but also analyses the key issue of bancassurance. Ten extensive
profiles of global insurers are included, examining the reasons behind
each organisation’s growth, their potential weaknesses and defining the
threats that could affect their global position in the future.
Find new ways to gain profit using this report's analysis of key
market trends and the strategies of the world's most successful
insurers.
“The most successful bancassurance market in
Europe is Spain, where banks dominate the market
with 77% market share. Prior to 1992, banks were
not allowed to distribute life assurance products.
Spanish banks own seven of the top 10 life
assurance competitors...”
Source: The Top 10 Global Insurance Companies:
Increasing profitability, market share and
competitive edge
Distribution of life assurance by distribution
channel
Source: The Top 10 Global Insurance Companies
“After the lesson
learned by the Allianz
and Dresdner deal,
bancassurance players
prefer strong
partnerships rather
than full-scale
mergers...”
• Growth rates in the global insurance industry are recovering after
two years of global recession. To limit exposure to the stock-market
insurers are trying to diversify their portfolios into less risky products
including bonds.
• Insurers are expanding their product offerings and making their
services more customer friendly in search of higher profitability.
• Non-life insurance growth is being driven by renewed premium
rate increases rather than new business, as new non-financial
entrants create competition.
• Unit linked insurance real growth was negative in France, Spain
and the UK as customers were reluctant to buy products directly
linked to the stock-market.
• Developing markets in Asia are now an increasingly attractive
market for insurers, especially China, because of its strong growth
and low insurance market penetration.
Key findings from this report
The Value Proposition
Benefit from 130 pages of expert insight and analysis, enabling you to:
• Increase profitability by directing your investments to the
products and markets targeted by top insurers.
• Identify the best bancassurance strategy for your company
using this report's examination of the most successful European
bancassurance models.
• Benchmark your performance against the top European
insurers, learn best practices, avoid their mistakes, replicate their
successes and be aware of the potential threats they are facing.
• Improve your strategic planning using global premium income
and growth data split at country level.
“UK insurers face
tighter regulations
after the collapse of
the commercial
insurer, Independent
Insurance and the
problems at Equitable
Life, the world's oldest
mutual life assurer...”
“Almost all of the
global insurers are
trying to win a share
of the precious, fast
growing Chinese
market, forecasted by
FT World Insurance to
be $33.82 billion by
2005...”
Strengths
Strong U.S. brand name:
State Farm has been in the insurance business for over 75 years and during this
time the company has grown from a small farm mutual auto insurer to one of
the world's largest financial institutions. Further, its customer oriented service,
strong distribution network in the United States and positive financial ratings all
contribute to its brand image, which can be leveraged suitably.
Major U.S. property and casualty insurer
State Farm is the main home insurer in the United States, the company has over
73 million policies in force and about 28 million households are insured with
the company. One out of every five automobiles in the United States is insured
by State Farm, meaning that State Farm is the main car insurer in the country.
The company is licensed to sell insurance products in all 50 states, an
advantage over other insurance companies operating there.
Extensive distribution network
State Farm has about 76,000 employees working across the United States and Canada and nearly 17,000 agents who are trained to sell State
Farm insurance products and 58,000 staff members. However, the company had to close some of its offices, including the Winter Haven office.
Weaknesses
Risk factors: weather and equity markets
State Farm has significant exposure to severe weather, such as windstorms and hail, given its top five market share throughout the United
States. Another risk is the fact that the personal lines insurance industry is heavily regulated, which imposes limits on company's ability to alter
rates, or products. Additionally, State Farm is exposed to equity market volatility and it has asbestos exposure in discontinued operations, which
further increases the risk the business faces. The exposure to equity markets was one of the reasons why the year 2001 experienced the largest
underwriting loss ever. The year 2003 saw some improvements, and the property and casualty ratio for State Farm has improved, by moving
from 125.1% in 2001 to 100.6% in 2003.
Home insurance, construction, replacement, repair costs
Homeowners insurance is facing some difficulties at the moment, due to the fact that according to some insurers, it is now increasingly used
like a warranty product, rather than protection against sudden and accidental losses. Competitive actions over the course of previous years,
such as offering low deductibles and inadequate exclusions for mould or water damage claims in the policy form, contributed to the lowered
threshold for filing a claim affecting all homeowner insurers. At the end of 2002 the company announced an unexpected increase in
homeowners insurance rates by an average 5.2%. According to State Farm, although mould and water claims are starting to stabilise now in
the homeowners insurance market, construction, replacement and repair costs are increasing.
Mutual status means lack of ability to raise capital
State Farm insurance is a large mutual insurance company, which means that it is owned by its policyholders. However, the mutual status
restricts the potential for development transparency of its operations and it means that the company is unable to raise capital by selling
stocks, which can be used for funding growth and paying for acquisitions.
Sample information from the report
Chapter 9: State Farm Insurance Companies
Threats
• High interest rate increases
• Increasing property prices
• Regulatory changes
• Competition
Opportunities
• Cost conscious management
• Small business insurance market
Weaknesses
• Risk factors: weather, equity performance
• Home insurance, construction, repair and
replacement costs
• Mutual status means lack of ability to raise
capital
Strengths
• Strong US brand name
• Major US property and casualty insurer
• Extensive distribution network
State Farm Insurance Companies
SWOT Analysis
Source: The Top 10 Global Insurance Companies
Order this report today to find out more...
Table of Contents
EXECUTIVE SUMMARY
• The global insurance market overview
• The top 10 global insurers: Company analysis
CHAPTER 1: INTRODUCTION
• Report structure
- Global insurance overview
- Introducing the top 10 global insurance companies
CHAPTER 2: THE GLOBAL INSURANCE OVERVIEW
• Summary
• Introduction
• Life and non-life insurance markets worldwide
- Definitions
• European life bancassurance overview
- Unit linked policies
- Opportunities in European bancassurance
- Regulations
CHAPTER 3: ALLIANZ
• Summary
• Overview
• History
• SWOT analysis
- Strengths
- Weaknesses
- Opportunities
- Threats
• Company activity snapshot
CHAPTER 4: AXA
• Summary
• Overview
• History
• SWOT analysis
- Strengths
- Weaknesses
- Opportunities
- Threats
• Company activity snapshot
CHAPTER 5: AMERICAN INTERNATIONAL GROUP INC.
• Summary
• Overview
• History
• SWOT analysis
- Strengths
- Weaknesses
- Opportunities
- Threats
CHAPTER 6: ASSICURAZIONI GENERALI S.P.A.
• Summary
• Overview
• History
• SWOT analysis
- Strengths
- Weaknesses
- Opportunities
- Threats
CHAPTER 7: ING GROEP N.V.
• Summary
• Overview
• History
• SWOT analysis
- Strengths
- Weaknesses
- Opportunities
- Threats
• Company activity snapshot
CHAPTER 8: NIPPON LIFE INSURANCE COMPANY
• Summary
• Overview
• History
• SWOT analysis
- Strengths
- Weaknesses
- Opportunities
- Threats
• Company activity snapshot
Table of Contents
CHAPTER 9: STATE FARM INSURANCE COMPANIES
• Summary
• Overview
• History
• SWOT analysis
- Strengths
- Weaknesses
- Opportunities
- Threats
• Company activity snapshot
CHAPTER 10: AVIVA PLC
• Summary
• Overview
• History
• SWOT analysis
- Strengths
- Weaknesses
- Opportunities
- Threats
• Company activity snapshot
CHAPTER 11: ZURICH FINANCIAL SERVICES
• Summary
• Overview
• History
• SWOT analysis
- Strengths
- Weaknesses
- Opportunities
- Threats
• Company activity snapshot
CHAPTER 12: THE DAI-ICHI MUTUAL LIFE INSURANCE
COMPANY
• Summary
• Overview
• History
• SWOT analysis
- Strengths
- Weaknesses
- Opportunities
- Threats
• Company news
CHAPTER 13: REPORT CONCLUSIONS
• Summary
• Global insurance industry recovers
• Japanese stagnation
• China, the land of potential
• Stricter regulations
• Bancassurance
CHAPTER 14: APPENDIX
• Definitions of distribution channels
• Index
TABLES
- Total life/non-life premium volume
(top five European markets, 2000-2003)
- Stock market indices
(major European markets, 2000-2004)
- Total life insurance premium volume
(top five European countries, 2000-2003)
- Allianz SWOT Analysis
- Axa SWOT Analysis
- AIG SWOT Analysis
- Generali SWOT Analysis
- ING Groep SWOT Analysis
- Nippon Life Insurance Company SWOT Analysis
- State Farm Insurance SWOT Analysis
- Aviva SWOT Analysis
- Zurich SWOT Analysis
- Dai-Ichi SWOT Analysis
FIGURES
- Top 10 global insurance companies
(by premium income in 2000-2003)
- Total premium insurance volume
(by country and region, 2000-2003)
- Life insurance premium volumes
(by country and region, 2000-2003)
- Non-life insurance premium volumes
(by country and region, 2000-2003)
- Distribution of life assurance
(by distribution channel, 2002)
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Ins Trg-Fin Planning consultants-Plan builder

2009-02-28T20:26:00.000-08:00

Video on http://financialsoftware.com/planbldr/index.htm

Surrounding the financial planning process with tools to improve your efficiency, from start to finish.

Financial Plan - Design & Delivery presented by David Stitt CEO of Plan Builder

Learn how to use your Sample Financial Plan to close fee-based engagements by offering a formal satisfaction guarantee - and by delivering a truly superior comprehensive plan for implementation.

Plan Builder - The Evolution of EnterAct financial planning software helps you develop comprehensive financial plans, quickly and easily.

Create unlimited "what-if" scenarios - including Monte Carlo simulations - then illustrate your plans with colorful charts and graphs. In real time. Use compelling, easy-to-understand presentation helps your clients see the wisdom of your plans immediately.

PowerPoint Presentation

Client Builder is a presentation system for financial advisors that motivates the prospect to engage your services on your preferred basis. It is ideal for helping you charge a separate fee for the financial plan. A sample (editable) Plan Fee Schedule is included.

Client Builder is extremely consistent with receiving insurance and securities commissions — as well as portfolio management fees.

Client Builder uses Microsoft PowerPoint, with colorful high-impact graphics and psychologically tested text. phrases. You may present Client Builder using a laptop, desktop system, with a video projector or even have your edited slides printed and assembled in a desktop flipchart easel.

* Dramatize your prospect’s immediate need for a comprehensive personal financial plan.

* Establish the basis for requiring your professional help to create this plan.

* Explain the steps in the personal financial planning process and why they need you.

* Provide a due diligence record of what you agreed to perform — and charge.

* Convey your offer of a 100% Satisfaction Guarantee — to motivate a quick decision.

* Close the engagement of your services on a profitable Plan Fee plus commission basis.

Maximize your Long-Term Professional Income!

When financial planning developed in the early 1970s the pioneers offered to their prospective clients a comprehensive financial plan, generally receiving a substantial Plan Fee. They then helped clients implement that plan with insurance, investments, loans and portfolio services. Soon many were handling $50-$100 million of client investments. The same need for a written plan exists today, but many course graduates do not have a proven system for presenting the need, explaining the process and closing the engagement. They are qualified as advisors, but haven’t the tools to close the engagement. Veteran financial advisor, Ed Morrow, used Client Builder to close hundreds of engagements for millions in plan fees — plus product commissions.

Now you can use Client Builder — and gradually customize it for your market, your way of doing business and your unique qualifications. More new clients, properly secured, means more assets to manage and more high caliber referrals — the lifeblood of a growing, successful practice.

Client Builder provides:

* Three PowerPoint and many Word files.
* 50 + page booklet describing how to use and modify the presentation.
* Sample letters, agendas, checklists and forms to secure a solid client relationship.
* Customizable screens to insert your personal identification and credentials.

Presentation Suggestions

Complete instructions on how each of the 26 slides helps you close the fee-based relationship immediately.

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Emerging Risks

2009-02-27T23:05:00.000-08:00

Emerging Risks
Archived Posts from this Category

Tue 10 Feb 2009
ID Theft on the Rise
Posted by Claire under Emerging Risks , Technology

In a reflection of current turbulent economic times, Javelin Research & Strategy’s latest annual report on identity fraud yesterday revealed for the first time since its debut in 2004 that the number of identity fraud victims has increased 22 percent to 9.9 million adults. While there were 1.8 million more victims in 2008 than in 2007, the total annual losses ($48 billion in 2008, up 7 percent from $45 billion in 2007) did not show a commensurate rise in scale. Instead, the data shows the average loss declined by 12 percent to $4,849 from $5,488 because of increased fraud prevention efforts. On a positive note, individuals spent 31 percent less (an average of $496) to clean up a fraud and more than half spent nothing. A CNNMoney.com report quoted James Van Dyke, president of Javelin as saying the increase in ID theft cases was likely due to the economic recession. “If people need to make money, and decide to do so illicitly, identity fraud is the logical opportunity,” he said. Another interesting finding: online fraud was the reason for only 11 percent of cases; improper use of checkbooks and credit or debit cards after a wallet or pocketbook is lost or stolen remains the most common means of ID theft (43 percent of cases); while 25 percent had their PINs compromised on ATM cards. Check out I.I.I. info on identity theft.

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Fri 6 Feb 2009
Data Breaches: Rising Priority
Posted by Claire under Emerging Risks , Technology

Data protection and information leakage emerged as a top priority for financial institutions in 2008, according to Deloitte’s 6th Annual Global Security survey. The top three information security priorities of financial institutions are: security regulatory compliance; data protection and information leakage; and access and identity management. Deloitte noted that recent high profile data breach and identity theft incidents and the increasing popularity of social networks and mobile media such as USB keys, MP3 players and PDAs, are contributing to increased awareness of the risk. The leading drivers for financial institutions to protect the privacy of their clients information are privacy regulatory requirements (79 percent) followed by reputation and brand concerns (70 percent), according to the survey. Meanwhile, as companies look to manage their growing exposure to data breaches, insurers are here to help. Earlier this week Lockton, in conjunction with Lloyd’s underwriters (ACE Global Markets, Brit Syndicates Ltd, Hiscox) and legal and security experts announced a risk management package designed to help companies address outsourcing risk and corporate response plans for data breaches. As the well-worn saying goes, prevention is better than cure. Check out further I.I.I. info on identity theft.
1 Comment >>

Thu 29 Jan 2009
Political Risk Rising
Posted by Claire under Emerging Risks

The impact of the global credit crunch will shift from an economic problem to a political problem in 2009 and Iceland and Greece serve as early warnings, according to the 16th annual Political Risk Map produced by Aon. In its ranking of the political risk of 209 countries and territories, Aon said the past year has seen a number of High Risk countries (Afghanistan, Congo DRC, Iran, Iraq, North Korea, Somalia and Zimbabwe) continue to deteriorate to the point that the creation of a Very High Risk category was warranted. Overall some 18 countries were downgraded to a higher risk level, reflecting the general rise in the risk level globally. On the other hand, four High Risk countries (Malawi, Moldova, Syria and Turkmenistan) saw an improvement in their status to Medium-High Risk. A total of 13 countries were upgraded to a lower risk level. The map measures the risk of: currency inconvertibility and transfer; strikes, riots and civil commotion; war; terrorism; sovereign non-payment; political interference; supply chain interruption; legal and regulatory risk. Included in this year’s map is a Commodity Crunch Exposure Matrix, which identifies the countries most vulnerable to political instability in 2009 if commodity prices (including oils, metals and minerals) continue to fall, as suggested by some forecasters. Check out I.I.I. facts & stats on terrorism.

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Wed 28 Jan 2009
Infrastructure Report
Posted by Claire under Insurers and the Economy , Emerging Risks

The American Society of Civil Engineers (ASCE) has assigned a grade of D to the nation’s infrastructure and warned that $2.2 trillion in repairs and upgrades is needed over the next five years to meet adequate conditions. The 2009 Report Card for America’s Infrastructure shows that since ASCE’s last assessment in 2005, there has been little change in the condition of America’s roads, bridges, drinking water systems and other public works. According to an early Associated Press report on the findings, out of 15 infrastructure categories, three were given lower grades in 2009: aviation and public transit went from D+ to D; while the nation’s roads went from D to D-. A key takeaway from the report is that America’s 100,000 miles of levees have been added as a new area of failing infrastructure. Levees are graded D- with ASCE warning that the risk to the public health and safety from levee failure has increased. The report is timely given renewed attention from the White House, Congress and the public on infrastructure as part of President Barack Obama’s $825 billion economic stimulus package. At last count some $77.7 billion of the $825 billion is assigned to transportation and infrastructure (including highway infrastructure, clean water, transit and water resources).
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Tue 20 Jan 2009
Administration Change Impact
Posted by Claire under Emerging Risks , Legal Environment

As America’s 44th President takes office, there are any numbers of experts ready to predict what this Administration change will mean for the country. The potential impact on the legal and judicial landscape is one such area of discussion. Empirical research from Vanderbilt professor of law and political science Tracey George shows how the United States court system, especially the Supreme Court and the Court of Appeals, could dramatically change soon after Barack Obama takes office. George says there is likelihood that as many as three Supreme Court justices could leave the court while Obama is in office. There are also currently 13 vacancies on the courts of appeals and an additional 41 vacancies on the district courts. While George W. Bush came into office with even more openings to fill, George says the number of openings may quickly rise because the change in party in power may prompt Clinton and Carter appointees to step down soon to ensure a like-minded replacement. For more on this story, check out a January 16 online article at Insurance Journal. From the perspective of insurers, an Insurance Information Institute (I.I.I.) poll indicates the changing legal landscape is on the radar screen. Sixty-three percent of insurance industry executives believe that tort trends will deteriorate in 2009, while 32 percent believe they will stay the same. Only 5 percent believe they will improve. Check out further I.I.I. info on the liability system.
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Fri 16 Jan 2009
Bird Strike Hazard
Posted by Claire under Emerging Risks , Environment

Yesterday’s narrow escape for 155 people aboard a US Airways Airbus 320 aircraft forced to make an emergency landing on the Hudson River in New York City after its engines were reportedly struck by a flock of geese is a reminder of the significant safety risk that bird and wildlife strikes pose for civil aviation around the world today. As noted previously here at Terms & Conditions, bird hazard may not be the first risk that comes to mind when stepping aboard an aircraft, but bird strikes are a major risk exposure for airlines and their insurers. Globally, wildlife strikes have killed more than 219 people and destroyed over 200 aircraft since 1988. According to the Federal Aviation Administration (FAA), some 82,057 strikes were reported to civil aircraft in the U.S. from 1990 to 2007. Birds were involved in 97.5 percent of the reported strikes, terrestrial mammals in 2.1 percent, bats in 0.3 percent and reptiles in 0.1 percent. The number of strikes annually reported more than quadrupled from 1,759 in 1990 to a record 7,666 in 2007. For the 18-year period (1990-2007), reports were received of 43 aircraft destroyed or damaged beyond repair due to wildlife strikes. The annual cost of wildlife strikes to the U.S. civil aviation industry is estimated at in excess of $628 million. The growing potential frequency and severity of wildlife-aircraft collisions is not that surprising given that natural habitats around airports tend to be home to increasing populations of large bird species that have adapted to living in urban environments. At the same time air traffic worldwide has increased substantially, adding to the risk. The Bird Strike Committee annual meeting includes a wide variety of presentations on how to mitigate bird strike hazard. Check out further I.I.I. facts on aviation.

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Wed 14 Jan 2009
Challenging Risks to Global Economy
Posted by Claire under Insurers and the Economy , Emerging Risks

Deteriorating fiscal positions, a hard landing in China, a collapse in asset prices, gaps in global governance and issues relating to natural resources and climate are the pivotal risks facing the world this year. According to the World Economic Forum’s (WEF) new Global Risks 2009 report, the economic outlook for 2009 is a grim one for most economies, as markets remain volatile, liquidity has not returned, unemployment is rising and consumer and business confidence has fallen to record lows. In this climate, risks become even more potent in their impact. The report notes that the financial crisis has exposed the lack of coordination among policymakers, regulators and supervisors, and that a key lesson to be learned from the crisis is the need to embed better risk governance globally. But while acknowledging the need for better governance globally, it warns against a knee-jerk over-reaction that would increase transaction and compliance costs and ultimately prove ineffective in the face of the next crisis. The WEF report is published in cooperation with Citigroup, MMC (Marsh & McLennan Cos), Swiss Re, the Wharton School Risk Center and Zurich Financial Services.

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Mon 15 Dec 2008
Nanotech Risk Needs Further Study
Posted by Claire under Emerging Risks

A report from the National Research Council has pointed to serious weaknesses in the United States government’s plan for research on the potential health and environmental risks posed by nanomaterials. The report criticizes the research plan developed by the National Nanotechnology Initiative, which it says misses elements crucial for progress in understanding nanomaterials’ health and safety impacts. While the National Research Council report did not evaluate whether current uses of nanomaterials represent unreasonable risks to the public, it did focus on what would constitute an effective national research strategy. The upshot is that it recommends a new national strategic plan that goes beyond federal research to incorporate research from academia, industry, consumer and environmental groups as well as other stakeholders. The findings follow a recent report by the United Kingdom’s Royal Commission on the challenges and benefits arising from nanotechnology. Food, drugs, medical devices and cosmetics are just some of the products that may incorporate nanomaterials.

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Wed 3 Dec 2008
Biological and Nuclear Attack Warning
Posted by Claire under Emerging Risks

Just a week after the terrorist attacks in Mumbai, India a Congressional report has warned that a weapon of mass destruction (biological or nuclear) is likely to be used in a terrorist attack by 2013. The report suggests a terrorist attack using a biological weapon is the more likely. It calls on the United States government to take aggressive steps to prevent biological terrorism. Among its recommendations: the U.S. should strengthen international measures to prevent biological weapons proliferation and terrorism; conduct a global assessment of biosecurity risks; strengthen global disease surveillance networks; tighten government oversight of high-containment laboratories.

Initiatives focused on prevention will be welcomed by insurers. As we know, the loss potential associated with acts of terrorism can be significant. For example a study by the American Academy of Actuaries estimated a large chemical, nuclear, biological, and radiological (CNBR) attack in New York could result in insured losses of up to $778.1 billion. Check out a Guy Carpenter bulletin for an update on the Mumbai attack. Check out further I.I.I. information on terrorism risk and insurance.

[2] Comments >>

Mon 24 Nov 2008
Hospital Infections: the new Med Mal?
Posted by Claire under Emerging Risks , Health & Safety

Medical malpractice claims related to hospital infections are on the increase according to a November 20 online article at Lawyers USA by staff writer Sylvia Hsieh. The article cites Centers for Disease Control and Prevention (CDC) data estimating that over two million hospital-acquired infections occur annually, resulting in 90,000 fatalities. In long-term care facilities the CDC estimates an additional 1.5 million health-care associated infections occur annually. The article notes that 26 states have passed laws that require reporting of hospital-acquired infections. Meanwhile, the Committee to Reduce Infection Deaths (RID) says that hospital infections add an estimated $30.5 billion to the nation’s hospital costs each year. A recent Aon analysis noted that hospital-acquired conditions (sometimes referred to as “never events”) – including hospital-acquired infections, hospital-acquired injuries, objects left in surgery and pressure ulcers account for one out of every six med mal liability claims. Aon’s 2008 Hospital Professional Liability and Physician Liability Benchmark Analysis also pointed to a potential rise in the frequency of related hospital professional liability claims. Check out I.I.I. background information on medical malpractice.
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Call for Climate Legislation
Posted by Claire under Climate Change , Emerging Risks

Five major U.S. corporations have teamed up with investor coalition Ceres to launch a new business alliance calling for strong U.S. climate and energy legislation in early 2009. The group’s key principles include stimulating renewable energy, promoting energy efficiency and green jobs, requiring 100 percent auction of carbon allowances and limiting new coal-fired power plants to those that capture and store carbon emissions. The founding members of the Business for Innovative Climate and Energy Policy (BICEP) include such household names as Starbucks and Nike. The group says it will push the Federal government to enact legislative changes to spur a clean energy economy and reduce global warming pollution. Check out the I.I.I. background paper on climate change and insurance issues.
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Fri 14 Nov 2008
The Case of Nanotechnology
Posted by Claire under Emerging Risks , Regulation

We look across the Pond today to a posting on the Lloyd’s risk blog by Trevor Maynard, head of the emerging risks team. It highlights the findings of a new report by the UK’s Royal Commission on the challenges and benefits arising from nanotechnology. The report points to areas of concern about governance and regulation of nanomaterials, such as “the profound ignorance and uncertainty about the behavior of some types of nanomaterial in the environment or the risks they pose for human health.” The Commission suggests that existing regulatory frameworks will need to be adapted to deal with nanomaterials. Here in the United States, the FDA’s Nanotechnology TaskForce report last year recommended the agency consider developing guidance to address the benefits and risks of drugs and medical devices using nanotechnology. As we’ve noted before, new technologies bring with them inherent benefits as well as risks. More than $1.1 trillion of products across a broad range of sectors incorporated nanotechnology in 2007, and this impact could extend to nearly $4 trillion by 2015, according to market research firm Lux Research. Food, drugs, medical devices and cosmetics are just some of the products that may incorporate nanomaterials. On both sides of the Atlantic, the regulation of nanotechnology is an evolving area that insurers will be monitoring.

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Thu 13 Nov 2008
Google Tracks Flu
Posted by Claire under Emerging Risks , Technology

We all recognize what a valuable source of data the Internet can be. Whether it’s a Web site or social media such as message boards and blogs, there’s an infinite wealth of data that can be extracted online. A new Web tool from Google written about in the New York Times yesterday is one with potentially useful applications for our industry. According to the article, the tool — known as Google Flu Trends — may be able to detect regional outbreaks of the flu up to 10 days before they are reported by the Centers for Disease Control and Prevention (CDC). How? Well, Google has found a correlation between how many people search for flu-related topics and how many people actually have flu symptoms. It says a pattern emerges when all the flu-related search queries from each state and region are added together. When compared with data from a surveillance system managed by the CDC, Google discovered that some search queries tend to be popular exactly when flu season is happening. By counting how often it sees these search queries, it can estimate how much flu is circulating in various regions of the United States. What this amounts to is an early warning system for influenza outbreaks. We’re wondering what other applications this tool might have for insurers managing pandemic risks…

1 Comment >>

Fri 31 Oct 2008
ID Theft Rules Deadline Extended
Posted by Claire under Emerging Risks , Business Risk

The Federal Trade Commission (FTC) has given financial institutions and creditors an extra six months, until May 1, 2009, to comply with the so-called “red flags rule” which requires them to develop and implement written identity theft prevention programs. Apparently some industries and entities within the FTC’s jurisdiction had expressed confusion and uncertainty about their coverage under the rule. Just to be clear, the FTC said the extension does not affect compliance with the original November 1, 2008 deadline for institutions subject to oversight of other federal agencies. Those of you who read our posting a year ago will already be aware that under the red flags rule, financial institutions and creditors with covered accounts must implement prevention programs to identify, detect, and respond to patterns, practices, or specific activities that could indicate ID theft. As we’ve said before, financial institutions are prime targets of ID theft, so new rules requiring them to take preventive measures could increase their potential liability. Check out further I.I.I. facts and stats on ID theft.

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Fri 17 Oct 2008
Indoor Mold Warning
Posted by Claire under Emerging Risks , Health & Safety

A study from the U.S. Government Accountability Office (GAO) once again throws the spotlight on the issue of mold. GAO’s findings suggest that while federal guidance on minimizing indoor mold growth is generally consistent, guidance on mitigating exposure to indoor mold is sometimes inconsistent about cleanup agents, protective clothing and equipment and sensitive populations. As a result, GAO warns that the public may not be sufficiently advised of indoor mold’s potential health risks. GAO notes that mold growth may be particularly severe following natural disasters such as hurricanes and flooding. However, it says that differences among guidance documents could confuse the public about the safest and most effective way to remove mold. For example, if bleach is not necessary in most instances, using it unnecessarily could lead to avoidable problems, since bleach itself is a hazardous substance that can generate toxic fumes if it is mixed with ammonia based cleaners. The GAO report also calls for better coordination of federal research activities on mold and other indoor air issues. Check out I.I.I. information on mold and the insurance industry.

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Wed 8 Oct 2008
Climate Change Initiatives
Posted by Claire under Climate Change , Emerging Risks

A couple of climate change initiatives announced this week remind us that financial risks are not the sole focus for our industry. In the first of these the National Center for Atmospheric Research (NCAR) working with federal agencies and universities as well as the insurance and energy industries has launched a study to examine how global warming will influence hurricanes in the next few decades. The project will use a combination of global climate and regional weather models, run on one of the world’s most powerful supercomputers, to look at future hurricane activity. Researchers are targeting the hurricane-prone Gulf of Mexico and the Caribbean Sea and will examine three decades in detail: 1995-2005, 2020-2030, and 2045-2055. The project includes support from the Willis Research Network.

In another initiative Munich Re is collaborating with the London School of Economics (LSE) to advance research into the economic consequences of climate change. The five-year cooperation agreement is with the LSE’s newly established Centre for Climate Change Economics and Policy, of which Munich Re is a founding corporate partner. Research will focus on a range of issues, including: analyzing the risks and opportunities for the insurance industry; the economics of climate change and product trends in the finance industry; improving models to quantify the cost of a climate-related increase in natural catastrophes and economically efficient responses to this. Check out a new I.I.I. issues update on Climate Change.

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Mon 22 Sep 2008
Texting Risk
Posted by Claire under Emerging Risks , Auto Trends

The dangers of text-messaging while driving a vehicle, at work, even crossing the street are making the headlines both in the U.S. and overseas. A September 19, 2008 New York Times article by Jennifer Steinhauer and Laura M Holson, focuses on the danger texting can pose by distracting users. The issue has been receiving widespread attention following the September 12 train collision in California that left 25 dead. Last week the National Transportation Safety Board (NTSB) confirmed it is investigating how text messaging by the Metrolink train’s engineer may have affected his operation of the train.

Meanwhile, new research conducted by the UK’s Transport Research Laboratory for the Royal Automobile Club Foundation has found that texting behind the wheel impairs driving skills more than being drunk or high. Reaction times deteriorated by over one-third (35 percent). This was worse than alcohol at the legal limit (12 percent slower) and driving under the influence of cannabis (21 percent slower). In addition, drivers drifted out of their lane more often, with steering control 91 percent worse, compared to 35 percent worse when under the influence of cannabis. The ability to maintain a safe following distance also fell. Despite the danger, 48 percent of UK drivers aged 18-24 admit to using short message services (SMS) while driving. Check out I.I.I. information on auto crashes.

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Wed 20 Aug 2008
Granite Countertops and Radon
Posted by Claire under Emerging Risks

The potential link between granite countertops and increasing indoor radon levels is the subject of an August 15 online article at Lawyers USA by staff writer Justin Rebello. The article notes that the Environmental Protection Agency (EPA) has received several complaints that claim the countertops (popular in high-end kitchens) can decay and emit radon. Radon is the second leading cause of lung cancer in America and claims about 20,000 lives annually. While to-date there has been no confirmed litigation, the article says that plaintiffs’ attorneys have already begun advertising for potential clients. For its part, the EPA at this time does not believe sufficient data exist to conclude that the types of granite commonly used in countertops are significantly increasing indoor radon levels. However, the U.S. Surgeon and the EPA recommend that all homes be tested for radon in indoor air.
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Tue 19 Aug 2008
Emerging Challenges
Posted by Claire under Emerging Risks

RAND Corp has celebrated its 60th anniversary by publishing 11 essays from its staff on important policy issues that it anticipates will likely become front-burner issues within the next five years. Published in the Summer edition of the RAND Review, the essays touch on a range of topics on the horizon of interest to insurers. From the problems posed by Social Security and Medicare’s looming budget shortfalls, to corporate income tax avoidance becoming corporate America’s next big scandal, to supporting our aging infrastructure with innovative technology solutions, the essays highlight some major policy problems and possible solutions. These issues also point to emerging risks that insurers will be monitoring closely.

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Tue 12 Aug 2008
Oil and Gas Risk Report
Posted by Claire under Emerging Risks , Business Risk

National oil companies (NOCs) are facing a riskier business environment, yet there is a gap between the importance of the risks they face and how well they are managed. A new survey from Marsh found the overall level of risk facing the industry remains high, with the NOC Risk Index score rising to 4.51 out of a possible 6 in 2008. By contrast, the Risk Management Effectiveness Index score was just 3.8. The top five risks in 2008 ranked by participants are: availability of oil and gas resources; recruitment and retention of a qualified workforce; energy price volatility; environmental impact of operations; and political/regulatory risk issues. Availability of oil and gas resources as a risk issue was rated 5.3 out of a possible 6. It was also the top-ranked risk in 2007 but with a rating of 4.9.
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Emerging Risks
Archived Posts from this Category

Wed 6 Aug 2008
Data Loss Vulnerability
Posted by Claire under Emerging Risks , Technology

Federal prosecutors yesterday said they have charged 11 individuals allegedly involved in the hacking of nine major U.S. retailers and the theft and sale of more than 40 million credit and debit card numbers. In the words of U.S. Attorney General Michael Mukasey, this is “the single largest and most complex identity theft case ever charged in this country”. The case underscores not only the increasing vulnerability of individuals to identity theft, but also the potential liability faced by companies when a breach in data security occurs. The retailers targeted included: TJX Companies, BJ’s Wholesale Club, OfficeMax, Boston Market, Barnes & Noble, Sports Authority, Forever 21 and DSW. The perpetrators used sophisticated computer hacking techniques, breaching security systems and installing programs that gathered enormous quantities of personal financial data, which they allegedly sold to others or used themselves. In total they caused widespread losses to banks, retailers and consumers. A risk survey conducted by the Economist Intelligence Unit and sponsored by ACE European Group (ACE) last year found that one in three global businesses see loss of data as a significant threat. A trend to monitor.
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Thu 31 Jul 2008
Aging Infrastructure Remains Concern
Posted by Claire under Insurers and the Economy , Emerging Risks

Tomorrow marks the one-year anniversary of the Minneapolis Interstate 35W bridge collapse that resulted in 13 fatalities (see our August 3, 2007, posting). A year on, a new report by the American Association of State Highway and Transportation Officials (AASHTO) outlines the difficult challenges that lie ahead in maintaining, repairing, and replacing the nation’s bridges. Age, deterioration, soaring construction costs, and increasing traffic congestion were cited by the AASHTO as some of the major bridge problems facing the U.S. The report notes that the average bridge in the U.S. today is 43 and almost 20 percent of these “Baby Boomer” bridges are now over 50 years old. It puts the price tag to repair or modernize the country’s 600,000 bridges at $140 billion. The report calls for increased investment in transportation at all levels of government; support for revenue options such as tolls, tax increases, annual road user fees; and a continued commitment to research, innovation and technology. What do you think of these proposed solutions?
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Fri 18 Jul 2008
Contaminated Food Concerns
Posted by Claire under Emerging Risks , Health & Safety

If you’re still avoiding raw tomatoes or spinach, you’re apparently in good company. A new Associated Press-Ipsos poll finds that 46 percent of Americans are worried they might get sick from eating contaminated food and are avoiding foods they would normally buy. The poll revealed that 86 percent would support labeling produce so its origin can be tracked should there be an outbreak of illness. Some 80 percent would also support establishing stricter federal safety standards for fresh produce. Despite the concerns, 75 percent of respondents remain confident the food they buy is safe to eat. Food for thought.

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Thu 17 Jul 2008
Obesity: Rising Prevalence
Posted by Claire under Emerging Risks , Health & Safety

The obesity epidemic among adults in the United States continues to rise. Latest data from the CDC’s Behavioral Risk Factor Surveillance System show that an estimated 25.6 percent of U.S. adults reported being obese in 2007, an increase of 1.7 percent from 23.9 percent in 2005. Alabama, Mississippi and Tennessee lead the way with all three states reporting an obesity prevalence of above 30 percent. Colorado had the lowest obesity prevalence at 18.7 percent. Obesity is defined as a body mass index (BMI) of 30 or above. BMI is calculated using height and weight. By region, the report also finds that obesity is more prominent in the South, where 27 percent of respondents were classified as obese, compared with 25.3 percent in the Midwest, 23.3 percent in the Northeast, and 22.1 percent in the West. Check out I.I.I. information on obesity liability.
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Wed 18 Jun 2008
Global D&O Protection Gap
Posted by Claire under Emerging Risks , Business Risk

Worldwide U.S. directors and officers (D&O) policies do not provide the global protection that many insureds may believe they have. That’s the upshot of the latest annual D&O liability survey by Towers Perrin. It found that only 3 percent of survey participants with international operations have purchased separate local D&O liability insurance policies for individual countries. This is despite the fact that many countries do not permit non-admitted D&O insurance policies to cover local directors and officers. Towers Perrin warns that many companies are not yet aware of this emerging issue. Given the increased claim activity outside the United States, this issue is unlikely to go away. By the way, some 43 percent of survey participants indicated that their firms are global. Something to think about.
1 Comment >>

Fri 16 May 2008
Managing Emerging Risks
Posted by Claire under Emerging Risks , Business Risk

A new report from Lloyd’s and the Economist Intelligence Unit titled Directors in the Dock: Is Business Facing a Liability Crisis? reveals that boards could make better use of the time they spend on liability and litigation issues by switching their focus to emerging risks. Many executives interviewed for the report admit that there has not yet been board-level discussion on a range of emerging threats, even though they recognize the need to tackle the issue. For example, nearly four in 10 said that they should discuss work-related stress, but have not yet raised this issue formally, while 29 percent believe technology security should be discussed. Indeed, technology risks – such as data and system security and nanotechnology – are among the top three emerging risks that executives are most concerned about. Environmental liabilities and the liabilities arising from poor corporate governance are also top board concerns. Check out further I.I.I. info on the U.S. liability system.

1 Comment >>

Thu 1 May 2008
Climate Change Discussion
Posted by Claire under Climate Change , Emerging Risks

A panel discussion organized by the Swiss Society of New York and the Swiss-American Chamber of Commerce, and supported by Swiss Re will take place at Swiss Re’s NYC offices next Tuesday, May 6. Aptly named “Climate Change: From Dialogue to Action”, the discussion will bring together experts from the UN, Harvard Medical School, UBS and Swiss Re to discuss the impact of global climate change and propose possible solutions. The gathering will start at 5.30pm, ET, and will be followed by a moderated Q&A session and cocktail reception.

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Fri 18 Apr 2008
‘Invisible Wounds of War’
Posted by Claire under Emerging Risks , Health & Safety

Is the title of a new RAND report that estimates nearly one in five military service members who have returned from Iraq and Afghanistan report symptoms of post traumatic stress disorder or major depression, yet only slightly more than half have sought treatment. Researchers also found about 19 percent of returning service members report experiencing a possible traumatic brain injury while deployed, with 7 percent reporting both a probable brain injury and current PTSD or major depression. In what RAND describes as a “major health crisis”, researchers estimate that PTSD and depression among returning service members will cost the nation up to $6.2 billion in the two years following deployment, including both direct medical care and costs for lost productivity and suicide. Injured veterans returning from war present unique challenges for insurers as I.I.I. president Dr. Robert Hartwig outlined in a January 2006 report: When Johnny Comes Marching Home.
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Wed 16 Apr 2008
Subprime Crisis and Policy Options
Posted by Claire under Insurers and the Economy , Emerging Risks

An article by reporter Greg Ip in today’s Wall Street Journal highlights a timely new report from the Paris-based Organization for Economic Cooperation and Development (OECD) on the subprime crisis. In its analysis, the OECD now puts the total estimated loss range from the crisis at between $352 billion to $422 billion. In addition to the headline figures, the OECD also notes that the world is moving to a situation in which individuals bear more and more risks, without necessarily being able to cope with them. This concerns not only credit, including sub-prime mortgages, but also insurance or pensions. According to the OECD, this situation calls for a new culture of risk awareness and financial education mechanisms. What do you make of this warning?

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Fri 14 Mar 2008
Underestimating Risk
Posted by Claire under Emerging Risks , Business Risk

Hindsight is a beautiful thing. Just as the current credit crisis and related economic issues began to emerge in the third quarter of 2007, senior executives felt very confident about their ability to manage risk and opportunity it appears. The striking findings come in a new study conducted by Towers Perrin, in conjunction with the Economist Intelligence Unit. Towers Perrin notes that with the benefit of hindsight, the study reveals that many organizations underestimated risks or completely missed emerging risks and that the levels of optimism and confidence revealed in the third quarter of 2007, when economic times were relatively good, were not justified. Survey respondents included CEOs, CFOs, board members, presidents, managing directors and other senior execs of midsize and large companies across a range of industries, including insurance. What are your thoughts?
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Hazop Analysis

2009-02-27T22:57:00.000-08:00

HAZOP BASIS

A HAZOP, or HAZard and OPerability analysis, is a structured technique in which a multi-discipline team performs a systematic study of a process using guide words to discover how deviations from the design intent can occur in equipment, actions, or materials, and whether the consequences of these deviations can result in a hazard.

The results of the HAZOP analysis are the team's recommendations, which include identification of hazards and the recommendations for changes in design, procedures, etc. to improve the safety of the system. Deviations during normal, startup, shutdown, and maintenance operations are discussed by the team and are included in the HAZOP. A block flow diagram of the HAZOP process is given below:

The following terms are used in the HAZOP process and in the HAZOP table (see downloadable pdf file at right):

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Design Intent - the way a process is intended to function.
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Deviation - a departure from the design intent discovered by systematically applying guide words to process parameters.
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Guide Word - simple words such as "high" pressure, "high" temperature, "leak" etc. that are used to modify the design intent and to guide and stimulate the brainstorming process for identifying process hazards. The library-based approach was used in which the most appropriate guidewords for the process were selected from the total list of possible guidewords.
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Cause - the reason why a deviation might occur.
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Consequence - the results of a deviation.
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Safeguard - engineered systems or administrative controls that prevent the causes or mitigate the consequences of deviations.
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Hazard Category - an assessment of the hazard risk of the operation. In this analysis, we have used the MIL-STD-882D, "Hazard Risk Assessment Matrix."
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Recommendations - recommendations for design changes, procedural changes, or for further study.

Guide words for flow in a chemical process include High Flow, No/Low Flow, Reverse Flow, Misdirected Flow, High Pressure, Low Pressure, High Temperature, Low Temperature, High Contaminants, Leak and Rupture.

For processes utilizing explosives, the guide words include electrical initiation, ESD spark, Impact shock, Friction, Impingement, Incompatibities, Explosive shock, Thermal ignition, Propagation, Personnel Injury, Environmental contamination, Equipment damage and Product damage.

Ins. Trg-Glossary Insurance terms

2009-02-27T22:50:00.000-08:00

http://www.iii.org/media/glossary/alfa.C/

A-SHARE VARIABLE ANNUITY
A form of variable annuity contract where the contract holder pays sales charges up front rather than eventually having to pay a surrender charge.

ABSOLUTE ASSIGNMENT*
An irrevocable transfer of complete ownership of a life insurance policy or an annuity from one party to another. Contrast with collateral assignment. (See Assignment)

ACCELERATED DEATH BENEFITS
A life insurance policy option that provides policy proceeds to insured individuals over their lifetimes, in the event of a terminal illness. This is in lieu of a traditional policy that pays beneficiaries after the insured’s death. Such benefits kick in if the insured becomes terminally ill, needs extreme medical intervention, or must reside in a nursing home. The payments made while the insured is living are deducted from any death benefits paid to beneficiaries.

ACCIDENT AND HEALTH INSURANCE
Coverage for accidental injury, accidental death, and related health expenses. Benefits will pay for preventative services, medical expenses and catastrophic care, with limits.

ACCIDENTAL DEATH AND DISMEMBERMENT (AD&D) BENEFIT*
A supplementary life insurance policy benefit that provides for an amount of money in addition to the policy’s basic death benefit. This additional amount is payable if the insured dies as the result of an accident or if the insured loses any two limbs or the sight in both eyes as the result of an accident.

ACCIDENTAL DEATH BENEFIT (ADB)*
A supplementary life insurance policy benefit that provides a death benefit in addition to the policy’s basic death benefit if the insured’s death occurs as the result of an accident. (See Double indemnity benefit)

ACCOUNT RECEIVABLES
See Receivables

ACCUMULATION AT INTEREST DIVIDEND OPTION*
An option, available to the owners of participating insurance policies, that allows a policyowner to leave policy dividends on deposit with the insurer and earn interest. (See Dividend)

ACTUAL CASH VALUE
A form of insurance that pays damages equal to the replacement value of damaged property minus depreciation. (See Replacement cost)

ACTUARY
An insurance professional skilled in the analysis, evaluation and management of statistical information. Evaluates insurance firms’ reserves, determines rates and rating methods, and determines other business and financial risks.

ADDITIONAL LIVING EXPENSES
Extra charges covered by homeowners policies over and above the policyholder’s customary living expenses. They kick in when the insured requires temporary shelter due to damage by a covered peril that makes the home temporarily uninhabitable.

ADDITIONAL TERM INSURANCE OPTION*
An option available to owners of participating insurance policies under which the insurer uses a policy dividend as a net single premium to purchase one-year term insurance on the insured’s life. Also known as fifth dividend option. (See Dividend; Policy dividend options)

ADJUSTABLE LIFE INSURANCE*
A form of life insurance that allows policyowners to vary the type of coverage provided by their policies as their insurance needs change.

ADJUSTER
An individual employed by a property/casualty insurer to evaluate losses and settle policyholder claims. These adjusters differ from public adjusters, who negotiate with insurers on behalf of policyholders, and receive a portion of a claims settlement. Independent adjusters are independent contractors who adjust claims for different insurance companies.

ADMITTED ASSETS
Assets recognized and accepted by state insurance laws in determining the solvency of insurers and reinsurers. To make it easier to assess an insurance company’s financial position, state statutory accounting rules do not permit certain assets to be included on the balance sheet. Only assets that can be easily sold in the event of liquidation or borrowed against, and receivables for which payment can be reasonably anticipated, are included in admitted assets. (See Assets)

ADMITTED COMPANY
An insurance company licensed and authorized to do business in a particular state.

ADVERSE SELECTION
The tendency of those exposed to a higher risk to seek more insurance coverage than those at a lower risk. Insurers react either by charging higher premiums or not insuring at all, as in the case of floods. (Flood insurance is provided by the federal government and some private insurers, but is sold mostly through the private market.) In the case of natural disasters, such as earthquakes, adverse selection concentrates risk instead of spreading it. Insurance works best when risk is shared among large numbers of policyholders.

AFFINITY SALES
Selling insurance through groups such as professional and business associations.

AFTERMARKET PARTS
See Crash parts; Generic auto parts

AGENCY COMPANIES
Companies that market and sell products via independent agents.

AGENT
Insurance is sold by two types of agents: independent agents, who are self-employed, represent several insurance companies and are paid on commission; and exclusive or captive agents, who represent only one insurance company and are either salaried or work on commission. Insurance companies that use exclusive or captive agents are called direct writers.

ALEATORY CONTRACT*
A contract in which one party provides something of value to another party in exchange for a conditional promise, which is a promise that the other party will perform a stated act upon the occurrence of an uncertain event. Insurance contracts are aleatory because the policyowner pays premiums to the insurer, and in return the insurer promises to pay benefits if the event insured against occurs. Contrast with commutative contract.

ALIEN INSURANCE COMPANY
An insurance company incorporated under the laws of a foreign country, as opposed to a “foreign” insurance company which does business in states outside its own.

ALLIED LINES
Property insurance that is usually bought in conjunction with fire insurance; it includes wind, water damage and vandalism coverage.

ALTERNATIVE DISPUTE RESOLUTION / ADR
An alternative to going to court to settle disputes. Methods include arbitration, where disputing parties agree to be bound to the decision of an independent third party, and mediation, where a third party tries to arrange a settlement between the two sides.

ALTERNATIVE MARKETS
Nontraditional mechanisms used to finance risk. This includes captives, which are insurers owned by one or more noninsurers to provide owners with coverage. Risk-retention groups, formed by members of similar professions or businesses to obtain liability insurance and selfinsurance, are also included.

ANNUAL ANNUITY CONTRACT FEE
Covers the cost of administering an annuity contract.

ANNUAL STATEMENT
Summary of an insurer’s or reinsurer’s financial operations for a particular year, including a balance sheet. It is filed with the state insurance department of each jurisdiction in which the company is licensed to conduct business.

ANNUITANT
The person who receives the income from an annuity contract. Usually the owner of the contract or his or her spouse.

ANNUITIZATION
The conversion of the account balance of a deferred annuity contract to income payments.

ANNUITY
A life insurance product that pays periodic income benefits for a specific period of time or over the course of the annuitant’s lifetime. There are two basic types of annuities: deferred and immediate. Deferred annuities allow assets to grow tax-deferred over time before being converted to payments to the annuitant. Immediate annuities allow payments to begin within about a year of purchase.

ANNUITY ACCUMULATION PHASE OR PERIOD
The period during which the owner of a deferred annuity makes payments to build up assets.

ANNUITY ADMINISTRATIVE CHARGES
Covers the cost of customer services for owners of variable annuities.

ANNUITY BENEFICIARY
In certain types of annuities, a person who receives annuity contract payments if the annuity owner, or annuitant, dies while payments are still due.

ANNUITY CERTAIN*
A type of annuity contract that pays periodic income benefits for a stated period of time, regardless of whether the annuitant lives or dies. Also known as period certain annuity. Contrast with straight life annuity. (See Payout options)

ANNUITY CONTRACT
An agreement similar to an insurance policy for other insurance products such as auto insurance.

ANNUITY CONTRACT OWNER
The person or entity that purchases an annuity and has all rights to the contract. Usually, but not always, the annuitant (the person who receives income from the contract).

ANNUITY COST*
A monetary amount that is equal to the present value of future periodic income payments under an annuity. (See Gross annuity cost; Income date; Net annuity cost)

ANNUITY DATE*
See Income date

ANNUITY DEATH BENEFITS
The guarantee that if an annuity contract owner dies before annuitization (the switchover from the savings to the payment phase) the beneficiary will receive the value of the annuity that is due.

ANNUITY INSURANCE CHARGES
Covers administrative and mortality and expense risk costs.

ANNUITY INVESTMENT MANAGEMENT FEE
The fee paid for the management of variable annuity invested assets.

ANNUITY ISSUER
The insurance company that issues the annuity.

ANNUITY PROSPECTUS
Legal document providing detailed information about variable annuity contracts. Must be offered to each prospective buyer.

ANNUITY PURCHASE RATE
The cost of an annuity based on such factors as the age and gender of the contract owner.

ANTISELECTION*
The tendency of individuals who suspect or know they are more likely than average to experience loss to apply for or renew insurance to a greater extent than people who lack such knowledge of probable loss. Also known as adverse selection and selection against the company.

ANTITRUST LAWS
Laws that prohibit companies from working as a group to set prices, restrict supplies or stop competition in the marketplace. The insurance industry is subject to state antitrust laws but has a limited exemption from federal antitrust laws. This exemption, set out in the McCarran- Ferguson Act, permits insurers to jointly develop common insurance forms and share loss data to help them price policies.

APPORTIONMENT
The dividing of a loss proportionately among two or more insurers that cover the same loss.

APPRAISAL
A survey to determine a property’s insurable value, or the amount of a loss.

ARBITRATION
Procedure in which an insurance company and the insured or a vendor agree to settle a claim dispute by accepting a decision made by a third party.

ARSON
The deliberate setting of a fire.

ASSET-BACKED SECURITIES
Bonds that represent pools of loans of similar types, duration and interest rates. Almost any loan with regular repayments of principal and interest can be securitized, from auto loans and equipment leases to credit card receivables and mortgages.

ASSETS
Property owned, in this case by an insurance company, including stocks, bonds and real estate. Insurance accounting is concerned with solvency and the ability to pay claims. State insurance laws therefore require a conservative valuation of assets, prohibiting insurance companies from listing assets on their balance sheets whose values are uncertain, such as furniture, fixtures, debit balances and accounts receivable that are more than 90 days past due. (See Admitted assets)

ASSIGNED RISK PLANS
Facilities through which drivers can obtain auto insurance if they are unable to buy it in the regular or voluntary market. These are the most well-known type of residual auto insurance market, which exist in every state. In an assigned risk plan, all insurers selling auto insurance in the state are assigned these drivers to insure, based on the amount of insurance they sell in the regular market. (See Residual market)

ASSIGNMENT*
An agreement under which one party—the assignor—transfers some or all of his ownership rights in a particular property, such as a life insurance policy or an annuity contract, to another party—the assignee. (See Absolute assignment; Collateral assignment)

ASSOCIATION GROUP*
A type of group that generally is eligible for group insurance and that consists of members of an association of individuals formed for a purpose other than to obtain insurance coverage, such as teachers’ associations and physicians’ associations.

AUTO INSURANCE POLICY
There are basically six different types of coverages. Some may be required by law. Others are optional. They are:

1. 1. Bodily injury liability, for injuries the policyholder causes to someone else.
2. 2. Medical payments or Personal Injury Protection (PIP) for treatment of injuries to the driver and passengers of the policyholder’s car.
3. 3. Property damage liability, for damage the policyholder causes to someone else’s property.
4. 4. Collision, for damage to the policyholder’s car from a collision.
5. 5. Comprehensive, for damage to the policyholder’s car not involving a collision with another car (including damage from fire, explosions, earthquakes, floods, and riots), and theft.
6. 6. Uninsured motorists coverage, for costs resulting from an accident involving a hit-and-run driver or a driver who does not have insurance.

AUTO INSURANCE PREMIUM
The price an insurance company charges for coverage, based on the frequency and cost of potential accidents, theft and other losses. Prices vary from company to company, as with any product or service.

Premiums also vary depending on the amount and type of coverage purchased; the make and model of the car; and the insured’s driving record, years of driving and the number of miles the car is driven per year. Other factors taken into account include the driver’s age and gender, where the car is most likely to be driven and the times of day—rush hour in an urban neighborhood or leisure time driving in rural areas, for example. Some insurance companies may also use credit history related information. (See Insurance score)

AVIATION INSURANCE
Commercial airlines hold property insurance on airplanes and liability insurance for negligent acts that result in injury or property damage to passengers or others. Damage is covered on the ground and in the air. The policy limits the geographical area and individual pilots covered.
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B-SHARE VARIABLE ANNUITY
A form of variable annuity contract with no initial sales charge but if the contract is cancelled the holder pays deferred sales charges (usually from 5 to 7 percent the first year, declining to zero after from 5 to 7 years). The most common form of annuity contract.

BALANCE SHEET
Provides a snapshot of a company’s financial condition at one point in time. It shows assets, including investments and reinsurance, and liabilities, such as loss reserves to pay claims in the future, as of a certain date. It also states a company’s equity, known as policyholder surplus. Changes in that surplus are one indicator of an insurer’s financial standing.

BANK HOLDING COMPANY
A company that owns or controls one or more banks. The Federal Reserve has responsibility for regulating and supervising bank holding company activities, such as approving acquisitions and mergers and inspecting the operations of such companies. This authority applies even though a bank owned by a holding company may be under the primary supervision of the Comptroller of the Currency or the FDIC.

BASIS POINT
0.01 percent of the yield of a mortgage, bond or note. The smallest measure used.

BEACH AND WINDSTORM PLANS
State-sponsored insurance pools that sell property coverage for the peril of windstorm to people unable to buy it in the voluntary market because of their high exposure to risk. Seven states (AL, FL, LA, MS, NC, SC, TX) offer these plans to cover residential and commercial properties against hurricanes and other windstorms. Georgia and New York provide this kind of coverage for windstorm and hail in certain coastal communities through other property pools. Insurance companies that sell property insurance in the state are required to participate in these plans. Insurers share in profits and losses. (See Fair access to insurance requirements plans / FAIR plans; Residual market)

BENEFICIARY*
The person or legal entity the owner of an insurance policy names to receive the policy benefit if the event insured against occurs. (See Annuity beneficiary; Contingent beneficiary; Irrevocable beneficiary)

BINDER
Temporary authorization of coverage issued prior to the actual insurance policy.

BLANKET INSURANCE
Coverage for more than one type of property at one location or one type of property at more than one location. Example: chain store

BODILY INJURY LIABILITY COVERAGE
Portion of an auto insurance policy that covers injuries the policyholder causes to someone else.

BOILER AND MACHINERY INSURANCE
Often called Equipment Breakdown, or Systems Breakdown insurance. Commercial insurance that covers damage caused by the malfunction or breakdown of boilers, and a vast array of other equipment including air conditioners, heating, electrical, telephone and computer systems.

BOND
A security that obligates the issuer to pay interest at specified intervals and to repay the principal amount of the loan at maturity. In insurance, a form of suretyship. Bonds of various types guarantee a payment or a reimbursement for financial losses resulting from dishonesty, failure to perform and other acts.

BOND RATING
An evaluation of a bond’s financial strength, conducted by such major ratings agencies as Standard & Poor’s and Moody’s Investors Service.

BOOK OF BUSINESS
Total amount of insurance on an insurer’s books at a particular point in time.

BROKER
An intermediary between a customer and an insurance company. Brokers typically search the market for coverage appropriate to their clients. They work on commission and usually sell commercial, not personal, insurance. In life insurance, agents must be licensed as securities brokers/dealers to sell variable annuities, which are similar to stock market-based investments.

BURGLARY AND THEFT INSURANCE
Insurance for the loss of property due to burglary, robbery or larceny. It is provided in a standard homeowners policy and in a business multiple peril policy.

BUSINESS INCOME AND EXTRA EXPENSE INSURANCE (also known as BUSINESS INTERRUPTION INSURANCE)
Commercial coverage that reimburses a business owner for lost profits and continuing fixed expenses during the time that a business must stay closed while the premises are being restored because of physical damage from a covered peril, such as a fire. It also may cover financial losses that may occur if civil authorities limit access to an area after a disaster and their actions prevent customers from reaching the business premises. Depending on the policy, civil authorities coverage may start after a waiting period and last for two or more weeks.

BUSINESSOWNERS POLICY / BOP
A policy that combines property, liability and business interruption coverages for small- to medium-sized businesses. Coverage is generally cheaper than if purchased through separate insurance policies
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C-SHARE VARIABLE ANNUITIES
A form of variable annuity contract where the contract holder pays no sales fee up front or surrender charges. Owners can claim full liquidity at any time.

CAPACITY
The supply of insurance available to meet demand. Capacity depends on the industry’s financial ability to accept risk. For an individual insurer, the maximum amount of risk it can underwrite based on its financial condition. The adequacy of an insurer’s capital relative to its exposure to loss is an important measure of solvency.

A property/casualty insurer must maintain a certain level of capital and policyholder surplus to underwrite risks. This capital is known as capacity. When the industry is hit by high losses, such as after the World Trade Center terrorist attack, capacity is diminished. It can be restored by increases in net income, favorable investment returns, reinsuring more risk and or raising additional capital. When there is excess capacity, usually because of a high return on investments, premiums tend to decline as insurers compete for market share. As premiums decline, underwriting losses are likely to grow, reducing capacity and causing insurers to raise rates and tighten conditions and limits in an effort to increase profitability. Policyholder surplus is sometimes used as a measure of capacity.

CAPITAL
Shareholder’s equity (for publicly traded insurance companies) and retained earnings (for mutual insurance companies). There is no general measure of capital adequacy for property/casualty insurers. Capital adequacy is linked to the riskiness of an insurer’s business. A company underwriting medical device manufacturers needs a larger cushion of capital than a company writing Main Street business, for example. (See Risk-based capital; Solvency; Surplus)

CAPITAL MARKETS
The markets in which equities and debt are traded. (See Securitization of insurance risk)

CAPTIVE AGENT
A person who represents only one insurance company and is restricted by agreement from submitting business to any other company, unless it is first rejected by the agent’s captive company. (See Exclusive agent)

CAPTIVES
Insurers that are created and wholly owned by one or more non-insurers, to provide the owners with coverage. A form of self-insurance.

CAR YEAR
Equal to 365 days of insured coverage for a single vehicle. It is the standard measurement for automobile insurance.

CASE MANAGEMENT
A system of coordinating medical services to treat a patient, improve care and reduce cost. A case manager coordinates health care delivery for patients.

CASH DIVIDEND OPTION*
For participating insurance policies, a dividend option under which the insurer sends the policy owner a check in the amount of the policy dividend. (See Dividend; Policy dividend options)

CASH PAYMENT OPTION*
One of several nonforfeiture options included in life insurance policies and some annuity contracts that allows a policy owner to receive the cash surrender value of a life insurance policy or an annuity contract in a single payment. Also known as cash surrender option. (See Cash surrender value; Nonforfeiture options)

CASH SURRENDER VALUE*

1. For life insurance, the amount, before adjustments for factors such as policy loans, that the owner of a permanent life insurance policy is entitled to receive if the policy does not remain in force until the insured’s death.
2. For annuities, the amount of a deferred annuity’s accumulated value, less any surrender charges, that the contract holder is entitled to receive if the policy is surrendered during its accumulation period. Also known as cash value and surrender value.

CASH VALUE*
See Cash surrender value

CATASTROPHE
Term used for statistical recording purposes to refer to a single incident or a series of closely related incidents causing severe insured property losses totaling more than a given amount, currently $25 million

CATASTROPHE BONDS
Risk-based securities that pay high interest rates and provide insurance companies with a form of reinsurance to pay losses from a catastrophe such as those caused by a major hurricane. They allow insurance risk to be sold to institutional investors in the form of bonds, thus spreading the risk. (See Securitization of insurance risk).

CATASTROPHE DEDUCTIBLE
A percentage or dollar amount that a homeowner must pay before the insurance policy kicks in when a major natural disaster occurs. These large deductibles limit an insurer’s potential losses in such cases, allowing it to insure more property. A property insurer may not be able to buy reinsurance to protect its own bottom line unless it keeps its potential maximum losses under a certain level.

CATASTROPHE FACTOR
Probability of catastrophic loss, based on the total number of catastrophes in a state over a 40-year period.

CATASTROPHE MODEL
Using computers, a method to mesh long-term disaster information with current demographic, building and other data to determine the potential cost of natural disasters and other catastrophic losses for a given geographic area.

CATASTROPHE REINSURANCE
Reinsurance for catastrophic losses. The insurance industry is able to absorb the multibillion dollar losses caused by natural and man-made disasters such as hurricanes, earthquakes and terrorist attacks because losses are spread among thousands of companies including catastrophe reinsurers who operate on a global basis. Insurers’ ability and willingness to sell insurance fluctuates with the availability and cost of catastrophe reinsurance. After major disasters, such as Hurricane Andrew and the World Trade Center terrorist attack, the availability of catastrophe reinsurance becomes extremely limited. Claims deplete reinsurers’ capital and, as a result, companies are more selective in the type and amount of risks they assume. In addition, with available supply limited, prices for reinsurance rise. This contributes to an overall increase in prices for property insurance.

CELLPHONE INSURANCE
Separate insurance provided to cover cellphones for damage or theft. Policies are often sold with the cellphones themselves.

CHARTERED FINANCIAL CONSULTANT / ChFC
A professional designation given by The American College to financial services professionals who complete courses in financial planning.

CHARTERED LIFE UNDERWRITER / CLU
A professional designation by The American College for those who pass business examinations on insurance, investments and taxation, and have life insurance planning experience.

CHARTERED PROPERTY/CASUALTY UNDERWRITER / CPCU
A professional designation given by the American Institute for Chartered Property Casualty Underwriters. National examinations and three years of work experience are required.

CLAIMS MADE POLICY
A form of insurance that pays claims presented to the insurer during the term of the policy or within a specific term after its expiration. It limits liability insurers’ exposure to unknown future liabilities. (See Occurrence policy)

COBRA
Short for Consolidated Omnibus Budget Reconciliation Act. A federal law under which group health plans sponsored by employers with 20 or more employees must offer continuation of coverage to employees who leave their jobs and their dependents. The employee must pay the entire premium. Coverage can be extended up to 18 months. Surviving dependents can receive longer coverage.

COINSURANCE
In property insurance, requires the policyholder to carry insurance equal to a specified percentage of the value of property to receive full payment on a loss. For health insurance, it is a percentage of each claim above the deductible paid by the policyholder. For a 20 percent health insurance coinsurance clause, the policyholder pays for the deductible plus 20 percent of his covered losses. After paying 80 percent of losses up to a specified ceiling, the insurer starts paying 100 percent of losses.

COLLATERAL
Property that is offered to secure a loan or other credit and that becomes subject to seizure on default. Also called security.

COLLATERAL ASSIGNMENT*
A temporary transfer of some of the ownership rights in a particular property, such as a life insurance policy or an annuity contract, as collateral for a loan. The transfer is made on the condition that upon payment of the debt for which the contract is collateral, all transferred rights shall revert back to the original owner. Contrast with absolute assignment.

COLLATERAL SOURCE RULE
Bars the introduction of information that indicates a person has been compensated or reimbursed by a source other than the defendant in civil actions related to negligence or other liability.

COLLISION COVERAGE
Portion of an auto insurance policy that covers the damage to the policyholder’s car from a collision.

COMBINED RATIO
Percentage of each premium dollar a property/casualty insurer spends on claims and expenses. A decrease in the combined ratio means financial results are improving; an increase means they are deteriorating.

COMMERCIAL GENERAL LIABILITY INSURANCE / CGL
A broad commercial policy that covers all liability exposures of a business that are not specifically excluded. Coverage includes product liability, completed operations, premises and operations, and independent contractors.

COMMERCIAL LINES
Products designed for and bought by businesses. Among the major coverages are boiler and machinery, business income, commercial auto, comprehensive general liability, directors and officers liability, fire and allied lines, inland marine, medical malpractice liability, product liability, professional liability, surety and fidelity, and workers compensation. Most of these commercial coverages can be purchased separately except business income, which must be added to a fire insurance (property) policy. (See Commercial multiple peril policy)

COMMERCIAL MULTIPLE PERIL POLICY
Package policy that includes property, boiler and machinery, crime and general liability coverages.

COMMERCIAL PAPER
Short-term, unsecured, and usually discounted promissory note issued by commercial firms and financial companies, often to finance current business. Commercial paper, which is rated by debt rating agencies, is sold through dealers or directly placed with an investor.

COMMISSION
Fee paid to an agent or insurance salesperson as a percentage of the policy premium. The percentage varies widely depending on coverage, the insurer, and the marketing methods.

COMMUNITY RATING LAWS
Enacted in several states on health insurance policies. Insurers are required to accept all applicants for coverage and charge all applicants the same premium for the same coverage regardless of age or health. Premiums are based on the rate determined by the geographic region’s health and demographic profile.

COMMUTATIVE CONTRACT*
An agreement under which the contracting parties specify the values that they will exchange; moreover, the parties generally exchange items or services that they think are of relatively equal value. Contrast with aleatory contract.

COMPETITIVE REPLACEMENT PARTS
See Crash parts; Generic auto parts

COMPETITIVE STATE FUND
A facility established by a state to sell workers compensation insurance in competition with private insurers.

COMPLAINT RATIO
A measure used by some state insurance departments to track consumer complaints against insurance companies. Generally, it is stated as the number of complaints upheld against an insurance company, as a percentage of premiums written. In some states, complaints from medical providers over the promptness of payments may also be included.

COMPLETED OPERATIONS COVERAGE
Pays for bodily injury or property damage caused by a completed project or job. Protects a business that sells a service against liability claims.

COMPREHENSIVE COVERAGE
Portion of an auto insurance policy that covers damage to the policyholder’s car not involving a collision with another car (including damage from fire, explosions, earthquakes, floods and riots) and theft.

COMPULSORY AUTO INSURANCE
The minimum amount of auto liability insurance that meets a state law. Financial responsibility laws in every state require all automobile drivers to show proof, after an accident, of their ability to pay damages up to the state minimum. In compulsory liability states this proof, which is usually in the form of an insurance policy, is required before you can legally drive a car.

CONTESTABLE PERIOD*
The time during which an insurer has the right to cancel or rescind an insurance policy if the application contained a material misrepresentation. (See Incontestability provision)

CONTINGENT BENEFICIARY*
The party designated to receive the proceeds of a life insurance policy following the insured’s death if the primary beneficiary predeceased the insured. Also known as secondary beneficiary and successor beneficiary. (See Primary beneficiary)

CONTINGENT LIABILITY
Liability of individuals, corporations, or partnerships for accidents caused by people other than employees for whose acts or omissions the corporations or partnerships are responsible.

CONVERTIBLE TERM INSURANCE POLICY*
A term life insurance policy that gives the policy owner the right to convert the policy to a permanent plan of insurance.

COVERAGE
Synonym for insurance.

CRASH PARTS
Sheet metal parts that are most often damaged in a car crash. (See Generic auto parts)

CREDIT
The promise to pay in the future in order to buy or borrow in the present. The right to defer payment of debt.

CREDIT DERIVATIVES
A contract that enables a user, such as a bank, to better manage its credit risk. A way of transferring credit risk to another party.

CREDIT ENHANCEMENT
A technique to lower the interest payments on a bond by raising the issue’s credit rating, often through insurance in the form of a financial guarantee or with standby letters of credit issued by a bank.

CREDIT INSURANCE
Commercial coverage against losses resulting from the failure of business debtors to pay their obligation to the insured, usually due to insolvency. The coverage is geared to manufacturers, wholesalers and service providers who may be dependent on a few accounts and therefore could lose significant income in the event of an insolvency.

CREDIT LIFE INSURANCE
Life insurance coverage on a borrower designed to repay the balance of a loan in the event the borrower dies before the loan is repaid. It may also include disablement and can be offered as an option in connection with credit cards and auto loans.

CREDIT RATING
See Bond rating

CREDIT SCORE
The number produced by an analysis of an individual’s credit history. The use of credit information affects all consumers in many ways, including getting a job, finding a place to live, securing a loan, getting telephone service and buying insurance. Credit history is routinely reviewed by insurers before issuing a commercial policy because businesses in poor financial condition tend to cut back on safety, which can lead to more accidents and more claims. Auto and home insurers may use information in a credit history to produce an insurance score. Insurance scores may be used in underwriting and rating insurance policies. (See Insurance score)

CRIME INSURANCE
Term referring to property coverages for the perils of burglary, theft and robbery.

CRITICAL ILLNESS (CI) INSURANCE*
A type of individual health insurance that pays a lump-sum benefit when the insured is diagnosed with a specified illness. Also known as critical diagnosis insurance. Contrast with specified disease coverage.

CROP-HAIL INSURANCE
Protection against damage to growing crops from hail, fire or lightning provided by the private market. By contrast, multiple peril crop insurance covers a wider range of yield reducing conditions, such as drought and insect infestation, and is subsidized by the federal government.

CURRENT ASSUMPTION WHOLE LIFE INSURANCE*
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D

DEATH BENEFIT*
(1) For a life insurance contract, the amount of money paid by an insurer to a beneficiary when a person insured under the life insurance policy dies. (2) For an annuity contract, the amount of money paid to a beneficiary if the contract owner dies before the annuity payments begin.

DECLARATION
Part of a property or liability insurance policy that states the name and address of policyholder, property insured, its location and description, the policy period, premiums and supplemental information. Referred to as the “dec page.”

DECLINED RISK CLASS*
In insurance underwriting, the group of proposed insureds whose impairments or anticipated extra mortality are so great that an insurer cannot provide insurance coverage to them at an affordable cost. Also known as uninsurable class. Contrast with preferred risk class, standard risk class and substandard risk class.

DECREASING TERM LIFE INSURANCE*
Term life insurance that provides a death benefit that decreases in amount over the policy term. Contrast with increasing term life insurance.

DEDUCTIBLE
The amount of loss paid by the policyholder. Either a specified dollar amount, a percentage of the claim amount, or a specified amount of time that must elapse before benefits are paid. The bigger the deductible, the lower the premium charged for the same coverage.

DEFERRED ANNUITY
An annuity contract, also referred to as an investment annuity, that is purchased either with a single tax-deferred premium or with periodic tax-deferred premiums over time. Payments begin at a predetermined point in time, such as retirement. Money contributed to such an annuity is intended primarily to grow tax-deferred for future use.

DEFINED BENEFIT PLAN
A retirement plan under which pension benefits are fixed in advance by a formula based generally on years of service to the company multiplied by a specific percentage of wages, usually average earnings over that period or highest average earnings over the final years with the company.

DEFINED CONTRIBUTION PLAN
An employee benefit plan under which the employer sets up benefit accounts and contributions are made to it by the employer and by the employee. The employer usually matches the employee’s contribution up to a stated limit.

DEMAND DEPOSIT
Customer assets that are held in a checking account. Funds can be readily withdrawn by check, “on demand.”

DEMUTUALIZATION
The conversion of insurance companies from mutual companies owned by their policyholders into publicly traded stock companies.

DEPOSITORY INSTITUTION
Financial institutions that obtain their funds mainly through deposits from the public. They include commercial banks, savings and loan associations, savings banks and credit unions.

DEREGULATION
In insurance, reducing regulatory control over insurance rates and forms. Commercial insurance for businesses of a certain size has been deregulated in many states.

DERIVATIVES
Contracts that derive their value from an underlying financial asset, such as publicly traded securities and foreign currencies. Often used as a hedge against changes in value.

DIFFERENCE IN CONDITIONS
Policy designed to fill in gaps in a business’s commercial property insurance coverage. There is no standard policy. Policies are specifically tailored to the policyholder’s needs.

DIMINUTION OF VALUE
The idea that a vehicle loses value after it has been damaged in an accident and repaired.

DIRECT PREMIUMS
Property/casualty premiums collected by the insurer from policyholders, before reinsurance premiums are deducted. Insurers share some direct premiums and the risk involved with their reinsurers.

DIRECT SALES/ DIRECT RESPONSE
Method of selling insurance directly to the insured through an insurance company’s own employees, through the mail, by telephone or via the Internet. This is in lieu of using captive or exclusive agents.

DIRECT WRITERS
Insurance companies that sell directly to the public using exclusive agents or their own employees, through the mail, by telephone or via the Internet. Large insurers, whether predominately direct writers or agency companies, are increasingly using many different channels to sell insurance. In reinsurance, denotes reinsurers that deal directly with the insurance companies they reinsure without using a broker.

DIRECTORS AND OFFICERS LIABILITY INSURANCE/D&O
Directors and officers liability insurance (D&O) covers directors and officers of a company for negligent acts or omissions and for misleading statements that result in suits against the company. There are a variety of D&O coverages. Corporate reimbursement coverage indemnifies directors and officers of the organization. Side-A coverage provides D&O coverage for personal liability when directors and officers are not indemnified by the firm. Entity coverage, for claims made specifically against the company, is also available. D&O policies may be broadened to include coverage for employment practices liability.

DISABILITY INCOME INSURANCE*
A type of health insurance designed to compensate an insured person for a portion of the income lost because of a disabling injury or illness. Benefit payments are made either weekly or monthly for a specified period during the continuance of an insured’s disability. (See income protection insurance)

DISABILITY*
In disability insurance, the inability of an insured person to work due to an injury or sickness. Each disability policy has a definition of disability that must be satisfied in order for the insured to receive the policy’s benefits. (See Residual disability; Total disability)

DIVIDEND
Money returned to policyholders from an insurance company’s earnings. Considered a partial premium refund rather than a taxable distribution, reflecting the difference between the premium charged and actual losses. Many life insurance policies and some property/casualty policies pay dividends to their owners. Life insurance policies that pay dividends are called participating policies.

DIVIDEND ACCUMULATIONS OPTION*
See Accumulation at interest option.

DOMESTIC INSURANCE COMPANY
Term used by a state to refer to any company incorporated there.

DOUBLE INDEMNITY BENEFIT*
An accidental death benefit that is equal to the face amount of a life insurance policy’s basic death benefit and is paid when the insured’s death is the result of an accident as defined in the policy. (See Accidental death benefit/ADB)
------------------------------
E
EARLY WARNING SYSTEM
EARLY WARNING SYSTEM A system of measuring insurers’ financial stability set up by insurance industry regulators. An example is the Insurance Regulatory Information System (IRIS), which uses financial ratios to identify insurers in need of regulatory attention.

EARNED PREMIUM
The portion of premium that applies to the expired part of the policy period. Insurance premiums are payable in advance but the insurance company does not fully earn them until the policy period expires.

EARTHQUAKE INSURANCE
Covers a building and its contents, but includes a large percentage deductible on each. A special policy or endorsement exists because earthquakes are not covered by standard homeowners or most business policies.

ECONOMIC LOSS
Total financial loss resulting from the death or disability of a wage earner, or from the destruction of property. Includes the loss of earnings, medical expenses, funeral expenses, the cost of restoring or replacing property and legal expenses. It does not include noneconomic losses, such as pain caused by an injury.

ELECTRONIC COMMERCE / ECOMMERCE
The sale of products such as insurance over the Internet.

ELIMINATION PERIOD
A kind of deductible or waiting period usually found in disability policies. It is counted in days from the beginning of the illness or injury.

EMPLOYEE DISHONESTY COVERAGE
Covers direct losses and damage to businesses resulting from the dishonest acts of employees. (See Fidelity bond)

EMPLOYEE RETIREMENT INCOME SECURITY ACT / ERISA
Federal legislation that protects employees by establishing minimum standards for private pension and welfare plans.

EMPLOYER’S LIABILITY
Part B of the workers compensation policy that provides coverage for lawsuits filed by injured employees who, under certain circumstances, can sue under common law. (See Exclusive remedy)

EMPLOYMENT PRACTICES LIABILITY COVERAGE
Liability insurance for employers that covers wrongful termination, discrimination and other violations of employees’ legal rights.

ENDORSEMENT
A written form attached to an insurance policy that alters the policy’s coverage, terms, or conditions. Sometimes called a rider.

ENDOWMENT INSURANCE*
Life insurance that provides a policy benefit payable either when the insured dies or on a stated date if the insured is still alive on that date.

ENVIRONMENTAL IMPAIRMENT LIABILITY COVERAGE
A form of insurance designed to cover losses and liabilities arising from damage to property caused by pollution.

EQUITY
In investments, the ownership interest of shareholders. In a corporation, stocks as opposed to bonds.

EQUITY INDEXED ANNUITY
Nontraditional fixed annuity. The specified rate of interest guarantees a fixed minimum rate of interest like traditional fixed annuities. At the same time, additional interest may be credited to policy values based upon positive changes, if any, in an established index such as the S&P 500. The amount of additional interest depends upon the particular design of the policy. They are sold by licensed insurance agents and regulated by state insurance departments.

ERRORS AND OMISSIONS COVERAGE / E&O
A professional liability policy covering the policyholder for negligent acts and omissions that may harm his or her clients.

ESCROW ACCOUNT
Funds that a lender collects to pay monthly premiums in mortgage and homeowners insurance, and sometimes to pay property taxes.

EXCESS AND SURPLUS LINES
Property/casualty coverage that is not available from insurers licensed by the state (called admitted insurers) and must be purchased from a nonadmitted carrier.

EXCESS OF LOSS REINSURANCE
A contract between an insurer and a reinsurer, whereby the insurer agrees to pay a specified portion of a claim and the reinsurer to pay all or a part of the claim above that amount.

EXCLUSION
A provision in an insurance policy that eliminates coverage for certain risks, people, property classes or locations.

EXCLUSIVE AGENT
A captive agent, or a person who represents only one insurance company and is restricted by agreement from submitting business to any other company unless it is first rejected by the agent’s company. (See Captive agent)

EXCLUSIVE REMEDY
Part of the social contract that forms the basis for workers compensation statutes under which employers are responsible for work-related injury and disease, regardless of whether it was the employee’s fault and in return the injured employee gives up the right to sue when the employer’s negligence causes the harm.

EXPENSE RATIO
Percentage of each premium dollar that goes to insurers’ expenses including overhead, marketing and commissions.

EXPERIENCE
Record of losses.

EXPOSURE
Possibility of loss.

EXTENDED COVERAGE
An endorsement added to an insurance policy, or clause within a policy, that provides additional coverage for risks other than those in a basic policy.

EXTENDED REPLACEMENT COST COVERAGE
Pays a certain amount above the policy limit to replace a damaged home, generally 120 percent or 125 percent. Similar to a guaranteed replacement cost policy, which has no percentage limits. Most homeowner policy limits track inflation in building costs. Guaranteed and extended replacement cost policies are designed to protect the policyholder after a major disaster when the high demand for building contractors and materials can push up the normal cost of reconstruction. (See Guaranteed replacement cost coverage)

EXTENDED TERM INSURANCE OPTION*
One of several nonforfeiture options included in life insurance policies that allows the owner of a policy with a cash value to discontinue premium payments and to use the policy’s net cash value to purchase term insurance for the full coverage amount provided under the original policy for as long a term as the net cash value can provide. (See Nonforfeiture options)

Ins trg-Review-1st Nine Months 2008

2009-02-27T22:47:00.000-08:00

INDUSTRY FINANCIALS AND OUTLOOK
2008 - First Nine Months Results
Dr. Robert P. Hartwig, CPCU
President
Insurance Information Institute
bobh@iii.org

December 16, 2008

The property/casualty (P/C) insurance industry reported an annualized statutory rate of return on average surplus of 1.1 percent during the first nine months of 2008, down sharply from 13.1 percent during the first nine months of 2007 and by more than half from the 12.3 percent return for all of 2007. The sharp decline in performance during the quarter is primarily due to a broad, rapid and steep deterioration in financial market conditions on a global scale. Even the most conservative of portfolios was impacted significantly during the quarter, which bore witness to some of the most traumatic events in the economic history of the United States, including the largest bank failure ever (Washington Mutual), the collapse of the 158 year-old investment bank Lehman Brothers and the government rescue of insurer American International Group. The turmoil on Wall Street and in the credit markets led to a $9.7 billion realized capital loss on investments for property/casualty insurers through the first nine months. Exacerbating the problem was the continuing spillover of the housing and credit bubble collapse into the mortgage and financial guarantee segments of the property/casualty insurance industry. Profitability was negatively impacted by a substantial deterioration in underwriting performance driven first and foremost by $14.3 billion in catastrophe losses during the third quarter (mostly from hurricanes Ike and Gustav), and second by continued cyclical deterioration. The combination of higher catastrophe losses, cyclical deterioration in underwriting performance and severe stress in the mortgage and financial guarantee segments pushed the nine-month combined ratio up to 105.6, nearly 12 points above the 93.8 combined ratio for the same period last year and fully 10 points above the 95.6 combined ratio for full-year 2007. Excluding mortgage and financial guarantee insurers reveals declines of a more modest and cyclical nature, with return on average surplus coming in at 4.2 percent. Net written premium growth, which turned negative in 2007 for the first time since 1943 (down 0.7 percent), continued on its negative trajectory, falling by 0.4 percent through the first nine months of the year (-0.5 percent excluding mortgage and financial guarantee insurers). Policyholders’ surplus, a measure of capacity, decreased for the fourth consecutive quarter, down $39.4 billion, or 7.6 percent, to $478.5 billion as of September 30 from $517.9 billion at year-end 2007. The results were released by ISO and the Property Casualty Insurers Association of America (PCI).
Financial Crisis: Impacts on the Insurance Industry

Insurers and all other segments of the financial services industry have been adversely impacted by the current economic and financial conditions. While the impact of turmoil in the financial markets affects individual insurers differently, the insurance industry, as a whole, remains fundamentally strong. Moreover, the basic function of insurance—the orderly transfer of risk from client to insurer—continues without interruption. This means that insurers today continue to sell and renew policies, pay claims and develop new products to protect people’s property, businesses and lives, and help support their retirements. The bottom line is that unlike banking, insurance markets are functioning normally.

It is important to recognize that the insurance industry is not suffering from a credit or liquidity crisis. Unlike many of the banks and other financial companies that have struggled, insurance companies, in general, do not borrow to make investments. Nor do they borrow to pay claims. So, even when some investments perform poorly, the effect is not magnified as it is when investments are highly leveraged.

It is true, however, that investment losses incurred by a non-insurance financial products subsidiary of one of the nation’s largest insurers have resulted in it receiving some $150 billion in federal assistance. Its insurance operations remain solvent and continue to operate normally. It is also true that several predominantly life insurance companies have indicated their desire to receive federal funds as well. Other insurers have stated they have no need for federal assistance and do not intend to seek it.

Insurance companies are regulated by state insurance departments that closely monitor the financial strength of insurers domiciled or doing business in their states. State regulators have repeatedly stressed that the insurance system is financially sound. Independent rating agencies also closely scrutinize the financial strength of individual insurance companies and make their rankings available to the public.

Throughout its nearly 200-year history in the United States, the insurance industry has endured every conceivable economic circumstance and crisis and managed to persevere. These include not only events like the Great Depression and numerous economic recessions, but also stock market crashes, gyrations in interest rates and inflationary spikes.

Impacts of the Economic Crisis on P/C Insurer Investment Earnings
The economic crisis has so far affected property/casualty profitability primarily through reduced investment earnings—one of only two sources of revenue for insurers (the other being premium income). Insurers are among the largest institutional investors in the world with P/C insurers managing assets totaling some $1.3 trillion as of year-end 2007. Earnings on investments fall into several categories, the largest being investment income (primarily interest generated from bond holdings and dividends from stocks). Capital gains are the second most important source of investment earnings. Both are down through the first nine months of 2008. Given the 20.7 percent decline in the Standard & Poor’s 500 index through September 30, it is no surprise that the opportunity to realize net capital gains on stock holdings has effectively vanished. As noted by ISO/PCI, realized capital gains were nonexistent in the quarter—with the industry instead turning in a realized capital loss of $8.6 billion compared to a $4.0 billion gain in the same quarter a year earlier. The cumulative realized capital loss through the first nine months was $9.7 billion compared to a gain of $8.2 billion in 2007—an unprecedented 12-month swing of $17.9 billion. Continued market deterioration in the fourth quarter (the S&P 500 was down 40.9 percent through December 15) assures that the industry’s realized capital losses in 2008 will be the largest in history, dwarfing the $1.2 billion loss in 2002 in the wake of the tech bubble collapse and the market crash following the September 11, 2001 terrorist attack.

It is interesting to note that realized losses are much larger in 2008 than they were in 2002 for several reasons—but not because the markets were down more through the first nine months of 2008. In fact, the S&P 500 was down substantially more in 2002—off 29.0 percent through September 30 compared with 20.7 percent in 2008. Beyond the current market swoon is the fact that insurers are having to write off or write down billions of dollars in assets. Assets in this case include not only stocks but credit instruments such as bonds and collateralized debt obligations that have lost value.

The subprime mortgage crisis that began in mid-2007 began to seep into other sectors of the economy late in that year. Indeed, the National Bureau of Economic Research recently announced that the U.S. economy fell into recession in December 2007. During the third quarter of 2008 the crisis had exploded into a global credit catastrophe.

Property/casualty insurers, in general, maintain a fairly conservative investment profile. Insurers invest two-thirds of their assets in highly rated bonds (credit sensitive investments). While the actual default rate on most credit instruments remains low, mark-to-market requirements have forced prices down on some assets held by some insurers. The International Monetary Fund estimates that the credit crisis cost financial institutions worldwide $706 billion through September 2008 with insurers (globally) absorbing $106 billion or 15 percent of those losses.

Although stocks in 2008 will record their first losing year since 2002, when the S&P 500 Index lost 23.4 percent of its value, it is important to note that only 17 percent of P/C insurer invested assets are equities (stocks) while two-thirds are bonds. Nevertheless, the weak economy has taken a toll on the stock prices of almost every publicly traded firm and their investors have suffered along with them.

It is also worth noting that stock markets in the United States have experienced unprecedented volatility in 2008. The VIX Volatility Index, also known as the “Investor Fear Index” published by the Chicago Board Options Exchange reached record highs during the year. The index value is typically between 15 and 20, implying low volatility. Values greater than 30 signify extreme volatility. By September, the index value had reached 30.2 and new records were set in both October and November when the index soared to 61.2 and 62.6, respectively.

Interest rates on the safest of assets are headed down, reducing the ability to generate investment income in the future. The Federal Reserve had cut its key federal funds rate on four occasions by the end of March, including twice by three quarters of a point—the first 75 basis point cut by the Fed since November 1994. By the end of the first quarter the fed funds rate stood at 2.00 percent, compared with 4.25 percent on January 1, where it remained through the second and third quarters. Mounting evidence of a rapid deterioration in the economy compelled the Fed to cut the federal funds rates twice in October, to 1.00 percent, the lowest level since early 2004. On December 16, the Fed cut rates below 1.00 percent for the first time ever, targeting a range between zero and 0.25 percent. Because the Fed has now lowered the interest rates it controls effectively to zero, it has essentially reached the limits of what it can do to stimulate the economy by reducing borrowing costs, the traditional antirecessionary policy prescription administered by the Fed for decades. The Fed has not been rendered impotent, however. Chairman Bernanke has indicated that the Fed will engage in “quantitative easing” which means that it will likely purchase agency debt (such as debt issued by Fannie Mae and Freddie Mac) as well as longer-dated Treasury securities. Both efforts would have the effect of pushing down longer-term interest rates in an effort to stimulate mortgage lending and capital investment, thereby adding to the economic stimulus of traditional interest rate policy.

Interest rates are falling not only because the Fed is trying to decrease the cost of credit in an economy where credit markets have frozen, but also because fear has driven a flight to quality in Treasury securities. Interest rates charged to even the most creditworthy of corporate, consumer and municipal government risks soared during the third quarter. On the flip side of this severe dislocation of credit market risk was the stampede into Treasury securities. Because U.S. Treasury securities are assumed to have zero default risk, they are widely viewed as the safest in the world. The immense demand for Treasury debt means that their price at auction was pushed up and that their yield was pushed down. Indeed, the Treasury actually issued $30 billion of one-month bills in early December 2008 with a yield of 0.000 percent. In other words, fear-stricken investors were willing to accept no return on their investment. The yield on three-month bills was actually briefly negative during the month, implying that investors were actually willing to pay the Treasury to hold their money for them.

Lower interest rates are an important consideration for insurers. As large as the realized capital losses are, capital gains (losses) are generally a smaller proportion of investment earnings than investment income, which decreased only modestly through the first nine months of 2008. In fact, because capital gains and underwriting profits are both in negative territory in 2008, investment income will account for all of the industry’s net income (profit) this year. Through nine-months 2008, investment income totaled $38.0 billion, down 4 percent from $39.6 billion during the first nine months of 2008. The decline is largely attributable to lower interest rates in 2008 as well as lower cash flows.

Impacts of the Economic Crisis on P/C Insurer Policyholder Surplus (Capacity/Capital)
Property/casualty insurance is a highly cyclical business. Because the industry’s peak profits in the most recent cycle were achieved in 2006 and 2007, insurers entered the credit crisis and recession from a position of financial strength. Insurers routinely plow back most of their earnings into the business in order to build up their capital positions. The expanded capital cushion not only provides insurers with the necessary resources to pay large scale catastrophe losses such as Hurricane Katrina ($41.1 billion) or the September 11 terrorist attacks ($32.5 billion), but also helps insurers ride out stock market crashes, credit market turmoil, recessions, inflations and every other sort of economic and financial market disruption.

That being said, no investor will emerge from the current economic crisis unscathed and in the end there will be a significant impact on insurance industry capacity. As noted by ISO/PCI, industry policyholder surplus (the industry’s primary measure of capacity—akin to net worth in other industries) continues to trend downward. Policyholders’ surplus decreased in the first nine months by $39.4 billion, or 7.6 percent, to $478.5 billion from $517.9 billion at year-end 2007. The decline is the fourth consecutive quarterly drop in policyholders’ surplus, which peaked a year earlier at $521.8 billion during the third quarter of 2007. The net $43.3 billion decline in surplus represents a reduction of 8.3 percent in the industry’s capital base. In contrast, surplus increased by 6.2 percent in 2007, 14.3 percent in 2006, 8.2 percent in 2005, 13.4 percent in 2004 and 21.6 percent in 2003, following declines in 2000, 2001 and 2002. The return to negative capital accumulation is attributable to several factors, the largest and most obvious being declining prices for financial assets. During the first nine months, insurers recorded unrealized capital losses totaling $31.1 billion in addition to $9.7 billion in realized capital losses and $19.9 billion in underwriting losses. The reduction in capital has led many (though not all) insurers to scale back, suspend or discontinue the return of capital to shareholders through share buybacks. Share buybacks reached a record $23.2 billion in 2007.

The diminution of capital, combined with reduced investment earnings, implies that insurers will need to be very disciplined in their underwriting if they hope to earn risk appropriate rates of return. In effect, this involves a return to the way property/casualty insurance companies were managed for many decades before the era of high interest began in the mid-1970s. Prior to that time insurers managed their operations with the intent of earning underwriting profits every year and were generally successfully at doing so in most. Investment earnings were considered helpful but were certainly not viewed as a reliable source of significant earnings.
Underwriting Performance: Not as Bad as It Seems

The combined ratio through the first nine months was 105.6, up 11.8 from the same period a year earlier. Despite the jump, the results are not as poor as they might initially appear to be. In fact, two of the three key factors that drove underwriting performance during the first nine months were either unusual ($24.9 billion in catastrophe losses) or not reflective of the business mix of most insurers (mortgage insurance and financial guarantee operations). Virtually all insurers, however, continued to experience deterioration in underwriting performance due to flat or falling prices for many types of insurance. Each of these factors is discussed in detail below.

Catastrophe Losses: Nine-Month Total Exceeds All of 2007—By Far
As noted by ISO, insured catastrophe losses reached $24.9 billion during the first nine months, their highest level since 2005, the year of Hurricane Katrina. The nine-month total for 2008 is higher than the full-year totals for both 2006 and 2007, at $9.2 billion and $6.7 billion, respectively. The nine-month total alone secures 2008’s place as the fourth most expensive year ever for catastrophe losses (behind 2005, 2004 and 2001). ISO states that higher catastrophe losses through the first nine months of 2008 added five points to the industry combined ratio above the level of catastrophe losses experienced over the same period in 2007.

Catastrophe losses during the first half of 2008 were fueled primarily by record-breaking tornado activity and severe hail and wind losses (apart from tornadoes). The third quarter, however, is historically the most expensive for insurers due to the fact that the peak of hurricane season occurs in September. The most significant catastrophe in 2008 was Hurricane Ike, which roared ashore in Galveston, Texas, on September 13 as a strong Category 2 storm. Official PCS insured loss figures put total insured damages at $10.655 billion, making Ike the fourth most expensive hurricane in U.S. history. Ahead of Ike (stated in 2007 dollars) are Hurricane Katrina ($43.6 billion), Hurricane Andrew ($22.9 billion) and Hurricane Wilma ($10.9 billion). A significant share of the loss in Texas will be borne by the Texas Windstorm Insurance Association, which insures the majority of properties in the state’s coastal counties.

Hurricane Ike was not the only severe hurricane of the year. Hurricane Gustav caused $2.1 billion in insured losses, according to PCS, when it struck the Louisiana coast on September 1.

Underwriting: Separating Mortgage and Financial Guarantee Impacts
The first nine-months' underwriting performance was influenced significantly by underwriting losses reported by many mortgage and financial guarantee insurers. This category of insurer generated a negative 130.6 percent rate of return during the first nine months of 2008. While it is not unusual for results in any given quarter to be driven by the experience in a small number of lines or by a specific event (such as home and commercial property coverage after a major catastrophe), it is rare for lines that account for just a sliver of industry premiums to produce large-scale impacts on industry performance. The mortgage and financial guarantee lines—with $6.4 billion in net written premiums during the first nine months—accounted for just 1.9 percent of the $336.0 billion industrywide total. Nevertheless, according to ISO, the loss and loss adjustment expenses of this segment ballooned to $17.9 billion through September 30—an increase of 352.1 percent—propelling its combined ratio to an unprecedented 279.4 through the first nine months compared to 93.1 during the same period in 2007. That was enough to add 3.7 points to the industrywide combined ratio, which finished the first nine months at 105.6—its highest level since 2001.

Cyclical Considerations
Another important factor influencing the nine-month underwriting performance was the continuation of the soft market, now well into its fourth year. As previously discussed, stripping out the mortgage and financial guarantee insurer results yields a combined ratio of 101.9, up from 93.8 in first half 2007 and 95.6 for all of 2007. The deterioration is generally in line with expectations and reflects the effects of a sustained, highly competitive pricing environment for most types of insurance, particularly commercial lines, as well as adverse claim frequency and/or severity trends in some key lines—not to mention higher catastrophe losses. According to the Council of Insurance Agents and Brokers, commercial renewals for larger brokered accounts were down 13.5 percent during the first quarter, 12.9 percent during the second and 11.0 in the third. Of course, actual changes experienced by individual insurers can vary substantially and few commercial insurers are actually reporting premium declines of this magnitude. In contrast, pricing in personal auto insurance, which accounts for one-third of industry premiums, appeared to become somewhat firmer during the first nine months of 2008. According to the U.S. Bureau of Labor Statistics, auto insurance prices averaged 2.1 percent higher during the first nine months of 2008 compared with the same period in 2007. This contrasts with an increase of 0.4 percent for all of 2007 relative to 2006. The pace of increase appears to be quickening. Through the first 11 months of 2008, auto insurance prices averaged 2.4 percent higher than during the same period one year earlier. In fact, auto insurance prices were up 0.9 percent in January 2008 compared with January 2007, but were up 3.7 percent in November versus a year earlier. Pressure on auto insurance rates is driven primarily by rising claim cost severity (average cost per claim) and increasing claim frequency for some coverages in some states.

Premium Growth Remains Negative
Net written premiums declined by 0.4 percent during the first nine months. Excluding mortgage and financial guarantee insurers produced a net decline of 0.5 percent. The premium decline is larger when mortgage and financial guarantee insurers are excluded because of that segment’s 4.5 percent increase in premiums written through the first three quarters. The overall decline comes on the heels of a 0.7 percent decline in calendar year 2007. Last year’s decline was the first in 64 years, when premium growth fell in 1943 in the midst of World War II. It appears likely that 2007-2008 will become the first consecutive years of negative premium growth since the Great Depression, when industry premiums fell for four consecutive years (1930 through 1933, inclusive) after peaking in 1929.
Summary

Economic turbulence has had an impact on the financial and underwriting performance of the P/C insurance industry during the first nine months of 2008. The sharp decline in profitability is primarily attributable to poor investment market performance, high catastrophe losses and a spillover of the housing and credit bubble collapse into the mortgage and financial guarantee segments of the property/casualty insurance industry. Excluding this segment and normalizing catastrophe losses reveals a much more modest decline in profitability more in keeping with the pace normally associated with cyclical downturns. One continued cause for concern in 2008 is that premium growth remains in negative territory, though there are some early signs of a reversal of this trend.

Fundamentally, the property/casualty insurance industry remains quite strong financially, with policyholders’ surplus close to all-time record highs.

A detailed industry income statement for the first nine months of 2008 follows:
First Nine-Months 2008 Financial Results*

($ Billions)

$
Net Earned Premiums $330.40
Incurred Losses 258.8
(Including loss adjustment expenses)
Expenses 90.5
Policyholder Dividends 1
Net Underwriting Gain (Loss) -19.9
Investment Income 38
Other Items 0.7
Pre-Tax Operating Gain 18.9
Realized Capital Gains (Losses) -9.7
Pre-Tax Income 9.2
Taxes 5.1
Net After-Tax Income $4.10
Surplus (End of Period) $478.50
Combined Ratio 105.6**

Mediclaim case-study

2009-02-27T21:35:00.001-08:00

CONSUMER AS KING
Insurance firms in dock for loading mediclaim premium
Jehangir B Gai

Subject: Fighting against unjustified loading of Mediclaim premium
Backdrop: Insurance firms willingly accept premium and issue mediclaim policies and renew them year after year. But as soon as you lodge the first claim, their attitude changes. The insured, who was a valued customer, is now a liability. The insurance company either refuses to renew the policy, or attempts to reduce the sum insured, or loads the premium. Such acts are not contemplated under the Mediclaim insurance policies, which only stipulate that in case of a claim there will be a reduction in the “no claim bonus’’.
The Consumer Welfare Association (CWA) took up three such cases before the Consumer Disputes Redressal Forum for South Mumbai District, which has now ruled in favour of the consumer. These judgments, delivered on February 25, should help lakhs of people.
Case Study 1: Amina Sheikh, an octogenarian, was insured for Rs 1.5 lakh for a decade by the National Insurance Co. Ltd. under its Mediclaim Policy. When her policy was due for renewal in 2007, the company increased the premium from Rs 5,305 to Rs 32,787. This was done to make it financially unviable to continue with the policy. Her daughter protested, so the premium was brought down to Rs 23,845, which too was very high. She was forced to pay this premium and renew the policy to avoid a break in insurance. Her daughter wrote to the company demanding an explanation for the arbitrary increase. The divisional manager replied that the policy now stood cancelled as Amina did not seem happy with the firm. He also clarified that the premium doubles
immediately when a person crosses 80 years of age and for her, the premium had been loaded by another 100% in anticipation of claims arising due to advanced age.
CWA then filed a consumer complaint. Rendering the judgment on behalf of the bench, the forum president observed: “Managers of public sector undertakings are dutybound to take decisions based on facts and not in an arbitrary and irresponsible manner based on their emotions.’’
The Forum held that the loading of the premium was arbitrary, unjustified, and contradicted the terms of the policy, which is deficiency in service and unfair trade practice. The forum directed the firm to continue the policy by charging Rs 13,112 and to refund the excess premium collected. It also directed the company to continue renewals
without loading as long as the insured paid regular premium in time. Also, compensation of Rs 15,000 for mental agony and Rs 2,500 as costs were granted.
Case Study 2: In Dr Rupali Shirke’s case, the insurance company loaded her premium by 50%, increasing it from Rs 7,727 to Rs 11,824 and decreased the sum insured from Rs 5 lakh to Rs 2.5 lakh. This was done because of two claims lodged by her, which were genuine and settled by the company. This was considered as an “adverse claims ratio’’ by the firm. When she protested, the insurance firm ignored it.
CWA filed a complaint challenging loading of premium and reduction of the sum insured by United India Insurance Co. Ltd. The Forum held that the firm was bound to renew the policy on the same terms and conditions. It directed the firm to restore the sum insured and charge regular premium without loading. A compensation of Rs 5,000 and costs of Rs 5,000 were also awarded.
Case Study 3: In the case of Hoshang Khan, after a claim was lodged, the insurance firm imposed a loading of 400%, increasing the premium from Rs 10,558 to Rs 55,952. Khan could not afford the high premium, so he sent the premium cheque without the loading, but the insurance company returned it. CWA filed a complaint against United India Insurance Co. Ltd. The Forum held that loading of premium was arbitrary and unjustified. It directed the company to accept the premium without loading. On receipt of the basic premium, the firm was directed renew the policy with retrospective effect from 2006 onwards to maintain the policy’s continuity.
Impact: Insurance companies must realise that Mediclaim policies are for the welfare of the citizens and not for profit.
(The author has won the Govt. of India’s National Youth Award for Consumer Protection. E-mail jehangir_gai@indiatimes.com)

10 Emerging Technologies

2009-02-27T05:35:00.000-08:00

Nanopiezotronics

Zhong Lin Wang, a materials scientist at Georgia Tech, is pioneering the field of nanopiezotronics.

Wang is creating piezoelectric nanowires that generate electricity using tiny environmental vibrations; he believes they could power implantable medical devices and serve as tiny sensors.

Dr. Z.L. Wang received his Ph.D in Physics from Arizona State University in 1987, and he is a now a Regents Professor, COE Distinguished Professor and Director, Center for Nanostructure Characterization (CNC), at Georgia Tech.

Dr. Wang has authored and co-authored four scientific references and textbooks, published over 530 peer reviewed journal articles on nanotechnology. He has 20 patents and provisional patents.
---------------------------------
Software-defined networking

Stanford computer scientist Nick McKeown developed a standard called OpenFlow that allows researchers to tap into Internet switches and routers to easily test new networking technologies with the click of a mouse - all without interrupting normal service.

McKeown researches on techniques to improve the Internet. Most of this work has focused on the architecture, design, analysis, and implementation of high-performance Internet switches and routers.

More recently, his focus has been on network architecture, backbone network design and how the Internet might be redesigned if we were to start with a clean slate.
------------------------------------
Intelligent software assistant

Adam Cheyer, cofounder of the Silicon Valley startup Siri, is leading the design of powerful new software that acts as a personal aide.

This virtual personal-assistant software helps users interact more effectively with Web services to complete tasks such as booking travel or finding entertainment.

Siri, Inc aims to fundamentally redesign the face of the consumer internet experience. Cheyer is is also a Founding Member of Change.org, the premier social network for positive social change, and a Founder of Genetic Finance, LLC.
Cheyer has more than 15 years experience in a variety of roles, including executive, software engineer, research scientist, consultant, lecturer, and technical manager.

A pioneer in the areas of distributed computing, intelligent agents, and advanced user interfaces, he is the author of more than fifty peer-reviewed publications and nine patents.
---------------------
HashCache

Vivek Pai, a computer scientist at Princeton University, has created a new method for storing Web content that could make Internet access speedier and more affordable around the world.

Before joining Princeton in Spring 2000, Vivek Pai received his PhD from Rice University in 2000, under the direction of Willy Zwaenepoel and Peter Druschel. His research focused on OS, application, and cluster-level techniques for improving server performance.

At Princeton, he continues working in server performance, but has also addressed issues related to security and reliability in wide-area systems, such as content distribution networks.

He is one of the founders of iMimic Networking, where he helped architect and develop the fastest Web proxy server in the world.
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Racetrack memory

IBM fellow Stuart Parkin has created an entirely new type of data storage using magnetic nanowires.

This 'racetrack memory' could eventually replace all other forms of computer memory and lead to tiny, rugged, and inexpensive portable devices.

Dr. Stuart S.P. Parkin is an experimental physicist at IBM�s Almaden Research Center in San Jose, California. His discoveries into the behavior of thin-film magnetic structures were critical in enabling recent increases in the data density and capacity of computer hard-disk drives.

He joined IBM in 1982 as a World Trade Post-doctoral Fellow, becoming a permanent member of the staff the following year.
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$100 genome

Han Cao, founder of BioNanomatrix, has designed a nanofluidic chip that could dramatically lower the cost of genome analysis.

Combined with the right sequencing technology, Cao's chip could allow doctors to tailor medical treatment to a patient's unique genetic profile, map new genes linked to specific diseases, and quickly identify new viruses and outbreaks.

Han Cao founded BioNanomatrix in 2003 as a spin out of the Princeton University laboratory where he was working on a multi-million dollar project funded by the U.S. Defense Advanced Research Projects Agency (DARPA).

Dr. Cao is a co-inventor of the company�s core single-molecule nanoscale whole genome analysis technology. His diverse scientific experience includes molecular biology, microarray and genomics technology development, as well as micro and nanofluidics design and fabrication.

Dr. Cao leads multiple federal government funded projects at BioNanomatrix and is a member of the study section of the Innovative Molecular Analysis Technologies (IMAT) Program of the National Cancer Institute.
----------------------------------------
Biological machines

Michel Maharbiz, an assistant professor at the University of California, Berkeley, has developed a wirelessly controlled beetle that could one day be used for surveillance or search-and-rescue missions.

Maharbiz received his Ph.D. from the University of California at Berkeley for his work on microbioreactor systems under Professor Roger T. Howe and Professor Jay D. Keasling.

Dr. Maharbiz has been a GE Scholar and an Intel IMAP Fellow. Professor Maharbiz's current research interests include building micro/nano interfaces to cells and organisms and exploring bio-derived fabrication methods. Michel�s long term goal is understanding developmental mechanisms as a way to engineer and fabricate machines.
---------------------------------------
Paper diagnostic test

George Whitesides, a professor at Harvard University, is using paper to create easy-to-use medical tests that could make it possible to quickly and cheaply diagnose a range of diseases in the developing world.

Professor Whitesides and his group work in four areas: biochemistry, materials science, catalysis and physical organic chemistry.

He was a member of the faculty of the Massachusetts Institute of Technology from 1963 to 1982. He joined the Department of Chemistry of Harvard University in 1982, and was Department Chairman 1986-89, and Mallinckrodt Professor of Chemistry from 1982-2004.
------------------------------
Traveling-wave reactor

John Gilleland, manager of nuclear programs at Intellectual Ventures, is leading the development of a reactor that would run on depleted uranium, making nuclear power safer and less expensive.

Intellectual Ventures has been involved in inventions since August 2003. The company has filed hundreds of patent applications in more than 30 technology areas. Intellectual Ventures currently ranks in the top 50 among companies who file patents worldwide.

IV�s inventions span across computer software and hardware, UI design, semiconductors, biomedical devices, advanced medical procedures, digital imaging, nanotechnology and advanced particle physics.
--------------------------------------------
Liquid Battery

Donald Sadoway, a materials chemistry professor at Massachusetts Institute of Technology (MIT), has developed a liquid battery that could store enough electricity to allow cities to run on solar power at night.
A faculty member in the Department of Materials Science Engineering, he is a noted expert on batteries and has done significant research on how to improve the performance and longevity of portable power sources.

His research aims to establish the scientific underpinning10 emerging technologies to watch out for

February 27, 2009

This is technology at its best: miniature and massive. From fast, cheap, capacious computer memory to batteries that can store enough energy to power a city. . .

MIT's Technology Review has announced the annual list of 10 emerging technologies with the potential to shape the way we live and do business. These revolutionary innovations�each represented by a researcher whose vision and work leads the field�promise fundamental shifts in areas from energy to health care, computing to communications.

The 2009 TR10 includes some technologies that should reach the market within a year, such as paper-based medical tests and virtual personal-assistant software. Others, like biological machines and traveling-wave reactors, could take a few years longer.

Check out how these innovations could change your lives.s for technologies that make efficient use of energy and natural resources in an environmentally sound manner.
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General Insurance International Trends

2009-02-26T15:03:00.000-08:00

GENERAL INSURANCE PREMIA MARKET TO STABILISE IN 2-3 YEARS; CONSUMERS GIVE A THUMBS DOWN
TO BROKERS, REVEALS NATION-WIDE FICCI SURVEY

NEW DELHI, January 3, 2007. As the general insurance market gears itself up to the new detariffied, free-pricing regime that took effect from January 1, consumers, in a nation-wide survey conducted by FICCI, expect premium rates to nosedive, with almost 80% of the respondents giving two-three years for the market to stabilise; a big majority (92%) preferring to deal with insurance companies directly and 60% opting for companies for expert advice, rather than insurance brokers.
The FICCI survey reveals that brokers as intermediaries are still not wholly acceptable for the corporate or individual clients in India. This fact has been noted by the Insurance Regulatory Authority of India which is framing new guidelines for brokers. Unhealthy competition in the market has also affected the professional image of brokers. Post-free pricing, markets would need expert advisory services which can be provided by the brokers, however, 60 percent of respondents would like to deal with the insurance company directly rather than dealing with the brokers and only 40 % would prefer to deal with brokers for expert advice post- free pricing.
There is a special discount given by the insurance company to brokers on the business procured by them. When the consumers decide to deal directly with the insurance company rather than the broker, 52 % of the respondents were in the favour of not continuing the special discount. More than the discount, there are other factors which are considered important by the consumers.
The Survey findings show that on an average more than 92 % was quite aware of the incoming free pricing regime and 51.3 % had awareness on the products that would move under the free pricing regime.
Since the opening up of the insurance sector several private players including foreign players have entered Insurance business in India. In totality, India has about 16 players in life and 15 in general insurance sector. To a question on whether need to have more competition in terms of number of insurers, 88 % answered in negative. They felt that there were adequate number of insurers operating in the market. Only 12 % felt the need for more competition in this sector
The following are the major highlights the FICCI Survey:
• 92% of the respondents are aware of the move towards free pricing regime
• 60 % of the respondents felt detariffication related to ‘change in insurance costs’
• 44 % of the respondents indicated that that detariffication meant ‘change in scope of cover’.
• ‘Regulatory control coming down’ was associated with detariffication by 40% of the respondents, while 24% and 4% of the respondents associated detariffication with ‘change in insurer’s attitude’ and ‘improved claim settlement’
• 8% of the respondents were of the view that premium rates, post-free pricing, would go very low
• 52% felt that the prices would go low
• 24% held that rates would be marginally less than at present
• 84% of respondents felt that the sudden fluctuation that may happen in the premium post-free pricing would be a temporary phenomenon
• 79%felt that insurance companies should be allowed to change terms and conditions post-free pricing.
• 72% stated that the choice of an insurer would depend on a combination of factors such as pricing, level of coverage, service levels, risk management techniques and ability of insurance companies to understand the need of the consumers
• 96% of the respondents were of the view that detariffication would open new vistas for long awaited customization of the insurance products.
NOTE: Detailed Survey findings attached

8 Effective Sales Strategies for a Tough Economy

2009-02-25T06:03:00.000-08:00

8 Effective Sales Strategies for a Tough Economy

by Kelley Robertson
author of Stop, Ask, and Listen

Times are tough. Companies are cutting back, people are tightening their belts, and many decision-makers are holding off on major purchases. However, your company has not reduced your sales quotas. Selling in a difficult economy requires a different approach than during a robust one. Let’s look at what you need to do to actively compete and keep your sales afloat.

First and foremost, don’t believe everything you hear. Just because the media says that the economy is sliding downward does not mean that your sales will be affected. Your mental mindset plays a tremendous role in your success. While it is difficult to maintain a positive perspective during times like this, it is essential to keep focused on your main objective. Associate with positive, like-minded people and avoid naysayers like the plague.

Tighten your prospecting. Too many sales people cast a wide net when prospecting with the intent of catching anything that comes their way. However, this approach is simply not a good use of your time. Instead of cold calling one hundred companies, determine your ideal customer and target businesses or organizations that more closely match this description. If you don’t know who your ideal customer is, look at your existing clients. Who generates high revenue with high profit margins? What problems do you help them solve? Why do they do business with you? If you don’t know, ask.

Do not, under any circumstances, say, “…and I will sell to anyone.” This is the equivalent of selling to no one. In a difficult market, it is critical that you focus your efforts. Sales guru, Lee Salz recommends that you limit your prospecting efforts to exactly twenty-five new customers.

Use an account-entry campaign. Jill Konrath, author of Selling to Big Companies, suggests that you use a multi-touch campaign in your prospecting once you identify your top prospects. Use a combination of email, telephone, targeted letters, trigger events, and networking to connect with key decision-makers. This takes planning and time which means you cannot effectively prospect to more than twenty-five companies. Once again, this reinforces the importance of narrowing your prospect list rather than using a shotgun approach.

Focus your presentations. Anytime you meet with a prospect or existing client, make sure that your presentation is directly focused on their problem. Skip the nonsense about your company, how long you have been in business, blah, blah, blah. Instead concentrate on showing your prospect EXACTLY how their business will benefit from using your product or service. If your product will save them money, tell them EXACTLY how much. If what you sell will improve productivity or reduce errors, show your prospect EXACTLY how. Decision-makers don’t stop making purchases; however, they do expect more in terms of value.

Get closer to your customers. Hopefully you already have a great relationship with your existing clients. Now is the time to strengthen that relationship. Aggressively look for ways you can help them solve problems they may be experiencing in their business. This does not necessarily mean selling more of your products. It could mean connecting them with experts in different fields, helping them on a project or recommending other resources.

Become more visible. Resist the temptation to crawl into a cave and hide until the economy recovers. Your customers may forget about you and you may die. Now is the time to increase your networking activities—make sure that you network at the appropriate events. You can also increase your visibility by writing articles for industry trade magazines, speaking at industry conferences, and volunteering at your association’s events. Your prospects may not have the money to make a buying decision right now, but when you increase your visibility you may just give them a reason to buy from you versus a competitor.

Fine-tune your sales skills. As a sales trainer, I always come back to this and with good reason. The skills you currently possess got you where you are today but they won’t get you much further. During times of economic uncertainty, it is essential to refine your questioning skills and learn to ask some tough questions. How has your customers’ buying process changed? What new challenges are they facing? What needs must your customers have satisfied now as opposed to later?

In addition to death and taxes, the one thing you can count on is that the economy will fluctuate. Right now, it is considerably more challenging than it was two years ago. However, that doesn’t mean you can’t reach your sales targets. Get smarter. Get focused. Get busy. Get ready to succeed in a tough economy.

Health Insuance and slowdown

2009-02-23T16:47:00.000-08:00

Compare And Select Best Health Insurance
Tuesday, February 17, 2009 7:23 PM
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Slowdown: insurance sector may feel the pinch

R. Ramabhadran Pillai

‘About 40 % of the policyholders are postponing payment’

‘People not showing much interest in new policies’

General insurance sector may feel the brunt more

KOCHI: The Ernakulam region of Life Insurance Corporation of India has been retaining the topmost position in terms of first premium receipts for several years. A boom in economy had prompted employees and businessmen to take insurance cover on a large scale. But the situation is not so bright now as the slowdown in the economy is taking its toll on the industry also.

About 40 per cent of the policyholders are postponing payment, says R. Sahasranaman, a senior member of the agency network of the LIC. The payment can be postponed for six months and will be accepted with interest. But there are many customers who want to surrender the policies as they are not confident of being able to remit the premium after a few months. The trend is more visible among those employed in the IT sector. About 20 per cent of his clients are interested in surrendering the policies, according to him. The policy-holders were being advised to hold the policies at least for a year so that the surrender value would be more, he said.

The people are not evincing much interest even in new policies. Jeevan Astha, a policy announced recently which had a minimum premium of Rs.25,000, could not get the expected support from clients, he said.

Development Officer N. Muraleedharan too aired a similar view. The business generally goes up in March every year, but the expectations are moderate this time because of the meltdown, according to him.
Growth rate

But Divisional Manager of LIC’s Ernakulam Division, M. Jagannathan, does not think on the same lines. There is a general shift from the unit linked insurance policies to the conventional policies, according to him. “The growth rate (in conventional policies) is terrific and the company is going ahead with expansion programmes,” he said. Jeevan Astha had done well in metros, but not so well in rural areas. There is reason for some top-scorers among the agents to feel a downslide; nevertheless, about 6,000 more agents have been added during the financial year, he points out.

The general insurance sector registered a growth of 6 per cent as per available figures for the period up to November last, but the slowdown had affected the sector as the figures for the corresponding period of the previous year were higher, according to C.B.Venugopal, a leader of the All India Insurance Employees’ Association. There is a drastic reduction in the number of new vehicles being sold which bears a proportion to the amount of new premium received by the general insurance companies.

With the construction sector facing a downturn, the insurance cover for fire too has come down. The general insurance sector’s growth is directly linked to the performance of industries. As such, the segment will feel the pinch more in comparison to the life insurance wing, according to him.

There could be retrenchment in the private sector insurance companies owing to the lesser amount of premium receipts. Neither is the public sector feeling comfortable. The government has introduced a Bill to reform the insurance sector, much to the disappointment of the employees. The move to dilute the government share in public sector insurance companies through public offers and to raise foreign direct investment would ultimately harm the interests of the workforce, he said.
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Investment = RJ

2009-02-14T21:39:00.000-08:00

RJ
Qualities critical to Investing
• Be an optimist.
• Be realistic. Expect a realistic return.
• Think independently & not like crowd.
• Don’t have herd mentality.
• Be patient & have conviction.
• Assess risk & don’t forget the black swan.
• Have an open mind. While investing pursue no religion. Pursue opportunity wherever visible.
• History is a guide, but in a dynamic world- new horizons, new prices , new realities , -Times change every day.
• Think of the broad parameters & the larger picture.No analysis-paralysis pl. Robust performance , future prospects do not make necessarily good profitable investing.
• Most unpopular ideas may be most profitable.
• React to value dimensions & long term history rather than to recent experiences.
• Don’t be afraid to make mistakes.Only make one which you can afford so that you can live to make another.
Investing the RJ way

1) Efficient asset allocation.:What % of assets to each class.
Depends upon growth prospects , risk profile ,valuations
3 steps: Selecting asset classes , deciding weightage of each asset class,
Level of leverage.

2) Correct stock selection. External opportunity , Demand or potential demand for product/services.
Strong competitive ability , Technology , Mktg skills , Locational advantages, network size ,
Capital availability , & size , skilled people.
Scalability : Small caps that can grow in large caps
Challenges of scalability include capital vision,risk appetite , hunger for success , ability to
change , meritocracy , people , Mkt size , Processes & systems ,
People : Ability , integrity , sharing
Price-value divergence :M Imp criterion in Investment stress test. 2 most difficult adjectives, Beauty in woman & value of stock. Both lie in the eyes of beholder & are transitory in nature .
EPS predicting is science & an art.
Predicting P/Er is more of an art. Practiced by experience. Like cooking & sex it cannot be taught.
When I look at entry price , I look for margins of safety & price in a scenario where assumptions go wrong. Crux of choosing a good stock : Identifying factors that will drive Co’s future eco performance,
Assessing current valuations , & estimating its effect on profitability.

3) Exit horizon. Independent decision , not driven by profit or loss.If I have better competitive opportunities
If EPS or expectations about EPS are coupled with unreasonable P/E Ratios. Since value & valuation are both transitory & have no definite benchmarks. I try to sell not on top , but aspire to capture overshooting Beyond fair value..

4)Disciplined leveraging – Mos t investors never take Debt , never leverage. I believe in magic of of emotionless & disciplined leveraging. Started with little capital & trading profits was only source. Leve. Allowed me to magnify investments & earn meaningful returns. I leveraged only to the extent of servicing my debt. Dividends were enough to pay interest.
Leve could be a value-conscious decision. Liquidity is key to leveraging. Hlold liquid shares 5 times greater than amt taken for leveraging. , so unwinding can be done any time. Agility & speed are imp but these are double edged swords.

5)Constant reviews. We invest in dynamic & uncertain world.
Also we don’t take invest decisions at one time.. we do it in phases.

PORTFOLIO:
Agro tech foods 15
Alphageo 1
Aptech 19
Autoline industries 7
BEML 8
BHUSHAN STEEL 24
BILCARE 81
CRISIL 128
DWARIKESH SUGAR IND. 2
GARWARE WALL ROPES 2
GEOJIT FIN SERVICES 42
GEOMETRIC 6
HIND OIL EXPL 35
INDAGE VINTNERS 5
INFOMEDIA 18 10
ION EXCHANGE 5
JB CHEM 4
KAJARIA CERAMICS 4
KARUR VYSYA BANK 52
LUPIN 163MID-DAY 3
NAGARJUNA CONST 52
PANTALOON RETAIL 38
PRAJ IND 84
PRIME FOCUS 9
PROVOGUE 8
PUNJ LLOYD 51
RALLIS 7
RISHI LASER 1
TITAN IND 327
VADILAL1
VICEROY HOTELS 11
ZEN TECH 4
ZENOTECH LAB 34 TOTAL 1,245 CR.
----------------------------------------------------
TOP 20 STOCKS – BUSINESS TODAY
AVENTIS PHARMA
MNC Pharma-drugs-dia & cardio vascular
Zero debt & a negligible capex will generate cash-piles
AXIS-
Robust business model
Advances growing despite lackluster credit offtake
BHARAT ELEC Defence sector
Consistent increase in turnover & net profit. Big beneficiary of increased defence expenditure

BHARTI AIRTEL Telecom
Market leader in mobile telephony
Scaling up operations in telemedia business
BHEL-Power Plant
Strong balance sheet, cash pile, big order book ,
ENGINEERS INDIA-Engg
Leading Design & engg , order book,debt-free
GMDC-Lignite Mining
Lig volumes to grow 13 %
HCL TECH IT
Wide portfolio,R & D, Enterprise, BPO & Infra Mgt
Strong presence in High growth , high end , low competition business
HDFC-Hsg Fin
Largely untapped market, asset quality improved
HERO HONDA-AUTO
Mkt leader, debt free.
IDFC-Infra lending
Sound management ,sound mgt
INFOSYS- IT
Best corp gov practice, Offshoring Increase
IOC-Oil & Gas Crude prices fall.
Profitability protected because of pipeline

MAHA SEAMLESS – Pipe Mfg
Orders , Lucrative Intl Orders, Low debt
MARUTI SUZUKI-Auto
Vols to grow, Expansion capacity & R & D
NESTLE –FMCG –Brand Esta , Tier 2 & 3
RALLIS INDIA – Agro chemicals
Thrust on exports ,
SBI- no cash crunch
UBI-High op. efficiency, good asset quality

Strategic Intuition Vs Blink

2009-02-13T00:45:00.000-08:00

BLINK:

Malcolm Gladwell’s book about human spontaneity.Talks about how brain makes snap judgements.Football field-How to outwit rivals.Art experts who can tell fake pieces from Real ones.

Straetgic Intuition=William Duggan.Published by Colins Business

Is about how ideas come to people.Receiver gets it only after he chews on the issue or problem for days.Buddha spent 6 yrs before enlightenment
-------------------------------------------------------------
Jomini’s 3 steps: vis-à-vis Clausewitz’s 4 steps.
Objective Vs. Decisive

They both do as per Napoleon
For Jomini , you win ebcause you have greater force than your enemy at Objectie point.

For Clause you win ebcause you have greater strength at decisive point.

In Jomini’s theory you try to reach Objective point first & then plan to reach it..

In Clause’ s stra. Intuition , decisive point arises as part of the picture that comes together in your mind.
In Toulon Example: General had his objective point.

In contrast , Napo would move his army from place to place , he would pass many objective points. Enemy could not figure out & preferred to chase him.

-----------------------------------------

In strategic Intu , there are AHA Points Napo, Gates so many examples.
All of them had a unique recipe, for good strategic insights that turned them into sure winners.

Examples of history , which you must have in mind; presence of mind , where you expect the unexpected & don’t prejudge which examples you draw on; the flash of insight itself, which selects & combines right examples ; & resolution , where you follow ythro’ despite uncertainities & obstacles ahead.

Clause- More open minded approach

Jomini’s = Goal oriented planning.

Jomini’s approach is more prevalent in organizations Today.

Buddha’s example were elemnts of Hindu philosophy plus the hindu tradition of wandering Gurus.

It would be difficult to find anyone who breaks completely from past to do anything new. Where would you find someone whose new ideas are not rooted in some way to a historical idea.

“

6 Financial Mistakes

2009-02-11T01:57:00.001-08:00

6 most common financial mistakes

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February 11, 2009

It is indeed a material world. When it comes to spending, the U.S. is a culture of consumption. The result: rising levels of consumer debt and declining household savings rates. But in 2008, this culture was hit hard by economic reality.

According to the Federal Reserve, US household debt grew steadily from the time the Fed started tracking it in 1952. It declined for the first time in the third quarter of 2008. As a result of the credit crisis and ensuing economic recession, savings rates also rebounded. For those who had been living beyond their means for years, it suddenly got a lot harder to make ends meet. And, although the government tends to encourage spending during economic downturn and statistics may lead us to think that overspending is normal, it is often a risky choice.

Here we'll take a look at seven of the most common financial mistakes that often lead people to major economic hardship. Even if you're already facing financial difficulties, steering clear of these mistakes could be the key to survival.

Mistake No. 1: Excessive/frivolous spending
Great fortunes are often lost one dollar at time. It may not seem like a big deal when you pick up that double-mocha cappuccino, stop for a pack of cigarettes, have dinner out or order that pay-per-view movie, but every little item adds up.

Just $25 per week spent on dining out costs you $1,300 per year, which could go toward an extra mortgage payment or a number of extra car payments. If you're enduring financial hardship, avoiding this mistake really matters - after all, if you're only a few dollars away from foreclosure or bankruptcy, every dollar will count more than ever.

Mistake No. 2: Never-ending payments
Ask yourself if you really need items that keep you paying for every month, year after year. Things like cable television, subscription radio and video games, cell phones and pagers can force you to pay unceasingly but leave you owning nothing.

When money is tight, or you just want to save more, creating a leaner lifestyle can go a long way to fattening your savings and cushioning your from financial hardship.

Mistake No. 3: Living on borrowed money
Using credit cards to buy essentials has become somewhat normal. But even if an ever-increasing number of consumers are willing to pay double-digit interest rates on gasoline, groceries and a host of other items that are gone long before the bill is paid in full, don't be one of them.

Credit card interest rates make the price of the charged items a great deal more expensive. Depending on credit also makes it more likely that you'll spend more than you earn.

Mistake No. 4: Buying a new car
Millions of new cars are sold each year, although few buyers can afford to pay for them in cash. However, the inability to pay cash for a new car means an inability to afford the car. After all, being able to afford the payment is not the same as being able to afford the car.

Furthermore, by borrowing money to buy a car, the consumer pays interest on a depreciating asset, which amplifies the difference between the value of the car and the price paid for it. Worse yet, many people trade in their cars every two or three years, and lose money on every trade.

Sometimes a person has no choice but to take out a loan to buy a car, but how much does any consumer really need a large SUV? Such vehicles are expensive to buy, insure and fuel. Unless you tow a boat or trailer, or need an SUV to earn a living, is an eight-cylinder engine worth the extra cost of taking out a large loan?

If you need to buy a car and/or borrow money to do so, consider buying one that uses less gas and costs less to insure and maintain. Cars are expensive. You might need one, but if you're buying more car than you need, you're burning through money that could have been saved or used to pay off debt.

Mistake No. 5: Buying too much house
When it comes to buying a house, bigger is also not necessarily better. Unless you have a large family, choosing a 6,000-square-foot home will only mean more expensive taxes, maintenance and utilities. Do you really want to put such a significant, long-term dent in your monthly budget?

Mistake No. 6: Treating your home equity like a piggy bank
Your home is your castle. Refinancing and taking cash out on it means giving away ownership to someone else. It also costs you thousands of dollars in interest and fees. Smart homeowners want to build equity, not make payments in perpetuity. In addition, you'll end up paying way more for your home than it's worth, which virtually ensures that you won't come out on top when you decide to sell.

Living Paycheck to Paycheck
In 2007, the US household savings rate fell below one per cent, but other countries had considerably higher rates of personal savings. For example, the Netherlands, Italy, Norway, Germany and France personal savings rates average 10 per cent or more according, to the OECD Factbook 2005. Clearly it is possible to enjoy a high standard of living without financing it with debt. Countries in Asia boast savings rates of as much as 30 per cent!

The cumulative result of overspending puts people into a precarious position - one in which they need every dime they earn and one missed paycheck would be disastrous. This is not the position you want to find yourself in when an economic recession hits. If this happens, you'll have very few options. Everyone has a choice in how they live, so it's just a matter of making savings a priority.

Making a payment vs affording a purchase
To steer yourself away from the dangers of overspending, start by monitoring the little expenses that add up quickly, then move on to monitoring the big expenses. Think carefully before adding new debts to your list of payments, and keep in mind that being able to make a payment isn't the same as being able to afford the purchase. Finally, make saving some of what you earn a monthly priority.