The Art and Science of KPIs

All businesses today strive to identify Key Performance Indicators (KPI) which help them understand how successfully their operations are performing.  The nature of the business will help dictate what KPIs are meaningful to any given organization; sales companies for example may look at activity in a sale funnel or individual win/loss ratios, while a customer service-based organization may focus on customer satisfaction scores and average longevity with clients.  Regardless, businesses identify and track KPIs as a means to quantify some intangible metric they deem meaningful.  There is a downside to this practice, however: surrogation.

Surrogation by definition is a psychological phenomenon in which the measurement of a construct of interest evolves to replace the construct itself.  In other words, the measurement becomes more meaningful than the thing being measured.  This is a slippery slope which can lead to business practices that serve to undermine the original goal of the metric.  Take sales funnels for example.  If a company pressures its sells staff to maintain a robust funnel and report solely on volume of opportunities within that funnel, staff may divert their efforts from focusing on identifying realistic targets and put more time and energy into filling the funnel with improbable placeholders.

Organizing the data which speaks to a business in a concise and consistent way provides that business with invaluable reporting capabilities that allow KPIs to be tracked and understood.  This is the science of KPIs.  The ability to measure the abstract strategies and attributes that make any given business unique.

The art of the thing is understanding how to use these measurements to the advantage of the organization without inadvertently allowing them to steer the company in the wrong direction.  Data for the sake of data can be as much harmful as it can be helpful.  When data is understood and interpreted properly, however, it is exceptionally powerful.

In insurance, we use many KPIs to understand how a given set of exposures have preformed historically regarding premiums and losses, and use this data to try to understand how these exposures will continue to perform moving forward.  Taking the data at face value, however, can be risky.  This is why we have actuaries; individuals who have spent their lives learning to see past the numbers.  Artists capable of taking the science that is the data, and turn it into a lens which illuminates a reality we would have otherwise overlooked.  For a PEO, nothing can be more valuable in understanding past, present and future performance of their book of clients than an actuarial review.

For additional reading see:


Don’t Let Metrics Undermine Your Business


Thanking, Fast and Slow by Daniel Kahneman

The Value of Human Capital

Being a Professional Employer Organization (PEO), you are in the business of helping others run a successful business.  With the sustained low unemployment rates we have experienced over the past several quarters, human capital has become a precious intangible asset for many companies.  Your clients are among them.

Helping your clients identify, hire and retain employees successfully is a tremendous value add which can help set you apart from other PEOs.  After all, an organization is often said to be only as good as its people.

To this end, I hope you find the following article from the Harvard Business Review on 7 Ways to Set Up a New Hire for Success by Michael D. Watkins both helpful and informative.

For more content on successful hiring and related topics, visit your Libertate myWaive portal, or speak to a Libertate representative.


No one has a bigger impact on new employees’ success than the managers who hired them. Why? Because more than anyone else the hiring manager understands what his or her people need to accomplish and what it will take — skills, resources, connections — for them to become fully effective.

Managers also have the biggest stake in onboarding their new hires effectively. Research has shown that being systematic in onboarding brings new employees up to speed 50% faster, which means they’re more quickly and efficiently able to contribute to achieving desired goals. Effective onboarding also dramatically reduces failure rates and increases employee engagement and retention.

The earlier bosses start supporting their new hires, the better. The time between when someone accepts an offer and comes to work is a precious resource that can be used to jump-start the process. But even if new employees already are on the job, there are many ways to get them up to speed faster.

Of course, the starting point is to take care of the “onboarding basics” — such as documentation, compliance training, space, support, and technology. Fortunately, most companies do a reasonably good job with those elements.

It’s the deeper work of integrating new hires where the real work of bosses begins. Here are seven key ways to accomplish it:

Understand their challenges. 

Onboarding is among the toughest types of job transitions. Why? Because new hires, even if they are experienced professionals, are unfamiliar with the business, don’t understand how things really work, lack established relationships, and have to adapt to a new culture. Research has shown that challenges in the latter two categories are the biggest reasons for quick turnover. New employees have to learn a lot and may be feeling quite vulnerable, even when they seem outwardly confident. That’s even more likely to be the case when people have relocated for their jobs, so also face change in their personal lives, or if they’re moving up a seniority level, so must adjust to a new managerial role.

Some might respond by playing it safe and sticking too much to what they already know; others may overcompensate, behaving like they have “the answer,” rather than asking questions and figuring out how to add value.

So it’s important for bosses to reassure recent hires that learning is more important than doing in the early days.

Accelerate their learning.

The faster a new hire learns about the organization and their role, the more they will be able to accomplish in the critical first months. To accelerate the learning process, managers must first focus on what focus on what they need to learn in three areas. Technical learning is insight into the fundamentals of the business, such as products, customers, technologies, and systems. Cultural learning is about the attitudes, behavioral norms, and values that contribute to the unique character of the organization. Political learning focuses on understanding how decisions are made, how power and influence work, and figuring out whose support they will need most.

Bosses should also think about how they can help new employees. This means not only personally providing, as early as possible, the best available information but also thinking about who else is best placed to impart those important lessons.

Make them part of the team.

While it’s possible that new hires will work independently, it’s more likely they will be part of a team (or teams). The sooner they build effective working relationships with their peers, the better, and there’s a lot a hiring manager can do to make this happen.

The starting point is to make sure the team understands why the person has been hired and what role(s) they will play. It’s also important that bosses formally introduce new employees — to everyone — as soon as possible after their arrival and make it clear that teams are expected to help their new colleagues acclimate and move up the learning curve. A small initial investment of time and effort in connecting the new hire with the team will pay long-term productivity and performance dividends.

Connect them with key stakeholders.

Outside of the new hire’s immediate team, there are likely to be many other stakeholders who will be critical to not only their learning but also their success on the job. And it may not be obvious who those people are, why they’re important, or how best to connect with them.

One simple way bosses can facilitate these connections is to make a list of names, including brief notes on each, and then make introductions, explaining why it’s important that they connect. Then schedule a date, perhaps in 30 to 45 days, to check in with the stakeholders to make sure that the new hire’s network is taking shape.

Give them direction.

Employees can’t — or shouldn’t — get to work before bosses set clear expectations.  The right guidance helps them answer three key questions:

  • What do I need to do? This means defining their goals and the timeframes for accomplishing them, as well as the measures that will be used to evaluate their progress.
  • How should I go about doing it? This means being specific about what strategies they should use to accomplish the goals, including what activities they should and should not prioritize.
  • Why should I feel motivated to accomplish it? This means communicating a vision for what the organization is striving to accomplish and helping new hires see the part they play in realizing it.

Even if expectations were discussed during the recruiting process, you need more in-depth conversation as soon as new hires start to make sure they’re not coming in with any misconceptions about what they need to do to be successful.

Help them get early wins.

Early wins are a powerful way for incoming employees to build confidence and credibility. People new to a job and organization often want to prove they can do it all and fall into the trap of trying to take on too much, too soon, thereby spreading themselves too thin.

The manager’s job is to instead keep new hires focused on the essential work they should  prioritize and by pointing them to ways they’ll make rapid progress on these goals. Part of this is teaching them how to “score” wins in ways that are consistent with the organization’s culture. You want employees to get their early wins in the right way.

Coach them for success.

Finally, bosses who are serious about onboarding don’t just provide intensive early support then leave new hires to “sink or swim.” It takes time for new employees to become fully integrated and able to operate 100% autonomously and productively, so it’s important for hiring managers to continue to connect with and coach their people. This can be as simple as scheduling regular “how are things going?” check-ins, perhaps every couple of weeks, until there is nothing left to talk about.

Also, when managers see new hires struggling, they should intervene. It’s a common mistake to treat new hires too gently, thinking it’s best to give them time to adjust and that early issues with, say, peer relationships and cultural fit, will resolve themselves. But this can easily create vicious cycles in which employees unknowingly dig themselves into holes from which they can’t climb out. The longer a negative dynamic persists, the more difficult it is to reverse.

As bosses apply these guidelines, they should keep in mind that “effective onboarding” is not just about helping external hires. Employees making internal moves can face challenges that are as tough or tougher. This is especially the case when they are coming from different units, have been shaped by different cultures, or are moving from different geographies. Managers should can the same approach to accelerate everyone joining their teams.

Michael D. Watkins is a cofounder of Genesis, a professor at IMD Business School,and the author of The First 90 Days and Master Your Next Move (Harvard Business Review Press).

The Age of Continuous Connection

New technologies have made 24/7 customer relationships possible. It’s time to change your business model accordingly.

By Nicolaj Siggelkow and Christian Terwiesch


A seismic shift is under way. Thanks to new technologies that enable frequent, low-friction, customized digital interactions, companies today are building much deeper ties with customers than ever before. Instead of waiting for customers to come to them, firms are addressing customers’ needs the moment they arise—and sometimes even earlier. It’s a win-win: Through what we call connected strategies, customers get a dramatically improved experience, and companies boost operational efficiencies and lower costs.

Consider the MagicBands that Disney World issues all its guests. These small wristbands, which incorporate radio-frequency-identification technology, allow visitors to enter the park, get priority access to rides, pay for food and merchandise, and unlock their hotel rooms. But the bands also help Disney locate guests anywhere in the park and then create customized experiences for them. Actors playing Disney characters, for example, can personally greet guests passing by (“Hey, Sophia! Happy seventh birthday!”). Disney can encourage people to visit attractions with idle capacity (“Short lines at Space Mountain right now!”). Cameras on a various rides can automatically take photographs of guests, which Disney can use to create personalized memory books for them, without their ever having to pose for a picture.

Similarly, instead of just selling textbooks, McGraw-Hill Education now offers customized learning experiences. As students use the company’s electronic texts to read and do assignments, digital technologies track their progress and feed data to their teachers and to the company. If someone is struggling with an assignment, her teacher will find out right away, and McGraw-Hill will direct the student to a chapter or video offering helpful explanations. Nike, too, has gotten into the game. It can now connect with customers daily, through a wellness system that includes chips embedded in shoes, software that analyzes workouts, and a social network that provides advice and support. That new model has allowed the company to transform itself from a maker of athletic gear into a purveyor of health, fitness, and coaching services.

It’s easy to see how Disney, McGraw-Hill, and Nike have used approaches like these to stay ahead of the competition. Many other companies are taking steps to develop their own connected strategies by investing substantially in data gathering and analytics. That’s great, but a lot of them are now awash in so much data that they’re overwhelmed and struggling to cope. How can managers think clearly and systematically about what to do next? What are the best ways to use all this new information to better connect with customers?

In our research we’ve identified four effective connected strategies, each of which moves beyond traditional modes of customer interaction and represents a fundamentally new business model. We call them respond to desire, curated offering, coach behavior, and automatic execution. What’s innovative here is not the technologies these strategies incorporate but the ways that companies deploy those technologies to develop continuous relationships with customers.

Below, we’ll define these new connected strategies and explore how you can make the most of the ones you choose to adopt. But first let’s take stock of the old model they’re leaving behind.

Buy What We Have

Most companies still interact with customers only episodically, after customers identify their needs and seek out products or services to meet them. You might call this model buy what we have. In it companies work hard to provide high-quality offerings at a competitive price and base their marketing and operations on the assumption that they’ll engage only fleetingly with their customers.

Often what matters most to customers is the amount of energy they have to expend.

Here’s a typical buy-what-we-have experience: One Tuesday, working from home, David is halfway through printing a batch of urgent letters when his toner cartridge runs out. It’s maddening. He really doesn’t have time for this. Grumbling, he hunts around for his keys, gets into his car, and drives 15 minutes to the nearest office supply store. There he wanders the aisles looking for the toner section, which turns out to be an entire wall of identical-looking cartridges. After scanning the options and hoping that he recalls his printer model correctly, he finds the cartridge he needs, but only in a multipack, which is expensive. He sets off in search of a staff member who might know if the store has any single cartridges, and eventually he locates a manager, who disappears into the back of the store to check.

Much time passes. When the manager at last returns, it’s to report regretfully that the store is sold out of single cartridges. Because he has to get his letters done, David decides to buy the multipack. He grabs one and heads to the checkout counter to pay, only to find himself waiting in a long line. When he finally gets home, an hour or two later, he’s not a happy guy.

We find it helpful to break the traditional customer journey into three distinct stages: recognize, when the customer becomes aware of a need; request, when he or she identifies a product or service that would satisfy this need and turns to a company to meet it; and respond, when the customer experiences how the company delivers the product or service. At each of these stages, David suffered a lot of discomfort, but at no point along the way did the toner company have any way of learning about his discomfort or alleviating it. Company and customer were poorly connected throughout, and both parties suffered.

It doesn’t have to play out that way. Each of our four connected strategies could have helped improve David’s customer experience at one or more of the stages and helped the company strengthen its business.

Let’s explore specifically what each strategy entails.

Respond to Desire

This strategy involves providing customers with services and products they’ve requested—and doing so as quickly and seamlessly as possible. The essential capabilities here are operational: fast delivery, minimal friction, flexibility, and precise execution. Customers who enjoy being in the driver’s seat tend to like this strategy.

To provide a good respond-to-desire experience, companies need to listen carefully to what customers want and make the buying process easy. In many cases, what matters most to customers is the amount of energy they have to expend—the less, the better!

That’s certainly what David wanted in his search for a toner cartridge. So let’s imagine a respond-to-desire strategy that might serve him well in the future.

Say that upon realizing that he needs a replacement, David goes online to his favorite retailer, types in his printer model, and with just a click or two makes a same-day order for the correct cartridge. His credit card number and address are already stored in the system, so the whole process takes just a minute or two. A few hours later his doorbell rings, and he has exactly what he needs.

Speed is critical in a lot of respond-to-desire situations. Users of Lyft and Uber want cars to arrive promptly. Health care patients want the ability to connect at any time of day or night with their providers. Retail customers want the products they order online to arrive as quickly as possible—a desire that Amazon has famously focused on satisfying, in the process redefining how it interacts with customers. Years ago it set up a “one click” process for ordering and payment, and more recently it has gone even further than that. Today you can give Alexa a command to order a particular product, and she’ll take care of the rest of the customer journey for you. That’s responding to desire.

Curated Offering

With this strategy, companies get actively involved in helping customers at an earlier stage of the customer journey: after the customers have figured out what they need but before they’ve decided how to fill that need. Executed properly, a curated-offering strategy not only delights customers but also generates efficiency benefits for companies, by steering customers toward products and services that firms can easily provide at the time. The key capability here is a personalized recommendation process. Customers who value advice—but still want to make the final decision—like this approach.

Coaching behavior works best with customers who know they need nudging.

How might a curated-offering strategy serve David? Consider this scenario: He goes online to order his toner cartridge, and the site automatically suggests the correct one on the basis of what he has bought before. That spares him the hassle of finding the model number of his printer and figuring out which cartridge he needs. So now he just orders what the site suggests, and a few hours later, when his doorbell rings, he’s had his needs smoothly and easily met.

Blue Apron and similar meal-kit providers have very effectively adopted the curated-offering strategy. This differentiates them from Instacart and many of the other grocery delivery services that have emerged in recent years, all of which are guided by a “you order, we deliver” principle—in other words, a respond-to-desire strategy. The Instacart approach might suit you better than spending time in a supermarket checkout line, but it doesn’t relieve you of the burden of hunting for recipes and creating shopping lists of ingredients. Nor does it prevent you from overbuying when you do your shopping. Blue Apron helps on all those fronts, by presenting you with personally tailored offerings, creating an experience that many people find is more convenient, fun, and healthful than what they would choose on their own.

Coach Behavior

Both of the previous two strategies require customers to identify their needs in a timely manner, which (being human) we’re not always good at. Coach-behavior strategies help with this challenge, by proactively reminding customers of their needs and encouraging them to take steps to achieve their goals.

Coaching behavior works best with customers who know they need nudging. Some people want to get in shape but can’t stick to a workout regimen. Others need to take medications but are forgetful. In these situations a company can watch over customers and help them. Knowledge of a customer’s needs might come from information that the person has previously shared with the firm or from observing the behavior of many customers. The essential capabilities involved are a deep understanding of customer needs (“What does the customer really want to achieve?”) and the ability to gather and interpret rich contextual data (“What has the customer done or not done up to this point? Can she now enact behaviors that will get her closer to her goal?”).

Here’s what a coach-behavior strategy for David might look like: Perhaps the printer itself tracks the number of pages it has generated since David last changed the toner and sends that information back to the manufacturer, which knows that he will soon need a new cartridge. So it might email him a reminder to reorder. At the same time, it might encourage him to run the cleaning function on his printer—a suggestion that will help him avoid later inconveniences. Coached in this way, David will have his new printer cartridge before the old one runs out; he’ll lose almost no time in replacing it; and he’ll have a clean printer that performs at its best.

To implement coach-behavior approaches well, a company needs to receive information constantly from its customers so that it doesn’t miss the right moment to suggest action. The technical challenge in this sort of relationship lies in enabling cheap and reliable two-way communication with customers. Traditionally, this had been difficult, but it’s getting easier all the time. The advent of wearable devices, for example, allows health care companies to hover digitally over customers around the clock, constantly monitoring how they’re doing.

Nike’s new business model incorporates coach-behavior strategies. By making its customers part of virtual running clubs and tracking their runs, the company knows when it’s time for their next workout, and through its app it can offer them audio training guides and plans. This kind of timely and personal connection builds trust and encourages customers to think of Nike as a health-and-fitness coach rather than just a shoe manufacturer, which in turn means that when the company’s app nudges them to run, they’re more likely to do it. This serves customers well, because it keeps them motivated and in shape. And it serves Nike well, of course, because customers who run more buy more shoes.

Automatic Execution

All the strategies we’ve discussed so far require customer involvement. But this last strategy allows companies to meet the needs of customers even before they’ve become aware of those needs.

In an automatic-execution strategy, customers authorize a company to take care of something, and from that point on the company handles everything. The essential elements here are strong trust, a rich flow of information from the customers, and the ability to use it to flawlessly anticipate what they want. The customers most open to automatic execution are comfortable having data stream constantly from their devices to companies they buy from and have faith that those companies will use their data to fulfill their needs at a reasonable price and without compromising their privacy.

Here’s how automatic execution might work for David. When he buys his printer, he authorizes the manufacturer to remotely monitor his ink level and send him new toner cartridges whenever it gets low. From then on, the onus is on the company to manage his needs, and David is spared several hassles: recognizing that he’s low on toner, figuring out how to get more, and buying it. Instead, he just goes about his business. When the time is right, his doorbell will ring, and he’ll have exactly what he needs.

If someone wearing the bracelet slips and is knocked out, it will summon help.

The growing internet of things is making all sorts of automatic execution possible. David’s printer cartridge scenario isn’t just hypothetical: Both HP and Brother already have programs that ship replacement toner to customers whenever their printers send out a “low ink” signal. Soon our refrigerators, sensing that we’re almost out of milk, will be able to order more for delivery by tomorrow morning—but naturally only after checking our calendar to make sure we’re not going on a vacation and wouldn’t need milk after all.

Automatic execution will make people’s lives easier and in some cases will even save lives. Consider fall-detection sensors, the small medical devices worn by many seniors. Initially, the companies who made them did so using the respond-to-desire model. If an elderly person who was wearing one fell and needed help, she could press a button that activated a distress call. That was good, but it didn’t work if someone was too incapacitated to press the button. Now, though, internet-connected wearable technologies allow health care companies to monitor patients constantly in real time, which means people don’t need to actively request assistance if and when they’re in distress. Imagine a bracelet that monitors vital signs and uses an accelerometer to detect falls. If a person wearing the bracelet slips, tumbles down the basement stairs, and is knocked unconscious, the bracelet’s sensor will immediately detect the emergency and summon help. That’s automatic execution.

We’re excited about automatic execution, but we want to stress that we don’t see it as the best solution to all problems—or for all customers. People differ in the degree to which they feel comfortable sharing data and in having the companies serving them act on that data. One family might be delighted to receive an automatically generated personal memory book after a visit to Disney World, but another might think it’s creepy and invasive. If companies want customers to make a lot of personal data available on an automated and continuous basis, they will need to prove themselves worthy of their customers’ trust. They’ll need to show customers that they’ll safeguard the privacy and security of personal information and that they’ll only recommend products and services in good faith. Breaking a customer’s trust at this level could mean losing that customer—and possibly many other customers—forever.

A final important point: Given that companies are likely to have customers with different preferences, most firms will have to create a portfolio of connected strategies, which will require them to build a whole new set of capabilities. One-size-fits-all usually won’t work.

Which Connected Strategies Should You Use?

Respond to desire Customer expresses what she wants and when Fast and efficient response to orders Customers are knowledgeable Customers who don’t want to share too much data and who like to be in control
Curated offering Firm offers tailored menu of options to customer Making good personalized recommendations The uncurated set of options is large and potentially overwhelming Customers who don’t mind sharing some data but want a final say
Coach behavior Firm nudges customer to act to obtain a goal Understanding customer needs, and ability to gather and interpret rich data Inertia and biases keep customers from achieving what’s best for them Customers who don’t mind sharing personal data and getting suggestions
Automatic execution Firm fills customer’s need without being asked Monitoring customers and translating incoming data into action Customer behavior is very predictable, and costs of mistakes are small Customers who don’t mind sharing personal data and having firms make decisions for them


Earlier, we mentioned that we like to think of the individual customer journey as having three stages: recognize, request,and respond. But there’s actually a fourth stage—repeat—which is fundamental to any connected strategy, because it transforms stand-alone experiences into long-lasting, valuable relationships. It is in this stage that companies learn from existing interactions and shape future ones—and discover how to create a sustainable competitive advantage.

The repeat dimension of a connected strategy helps companies with two forms of learning.

First, it allows a company to get better at matching the needs of an individual customer with the company’s existing products and services. Over time and through multiple interactions, Disney sees that a customer seems to like ice cream more than fries, and theater performances more than fast rides—information that then allows the company to create a more enjoyable itinerary for him. McGraw-Hill sees that a student struggles with compound-interest calculations, which lets it direct her attention to material that covers exactly that weakness. Netflix sees that a customer likes political satire, which allows it to make pertinent movie suggestions to her.

Second, in the repeat stage companies can learn at the population level, which helps them make smart adjustments to their portfolios of products and services. If Disney sees that the general demand for frozen yogurt is rising, it can increase the number of stands in its parks that serve frozen yogurt. If McGraw-Hill sees that many students are struggling with compound-interest calculations, it can refine its online module on that topic. If Netflix observes that many viewers like political dramas, it can license or produce new series in that genre.

Both of these loops have positive feedback effects. The better the company understands a customer, the more it can customize its offerings to her. The more delighted she is by this, the more likely she is to return to the company again, thus providing it with even more data. The more data the company has, the better it can customize its offerings. Likewise, the more new customers a company attracts through its superior customization, the better its population-level data is. The better its population data, the more it can create desirable products. The more desirable its products, the more it can attract new customers. And so on. Both learning loops build on themselves, allowing companies to keep expanding their competitive advantage.

Over time these two loops have another very important effect: They allow companies to address more-fundamental customer needs and desires. McGraw-Hill might find out that a customer wants not just to understand financial accounting but also to have a career on Wall Street. Nike might find out that a particular runner is interested not just in keeping fit but also in training to run a first marathon. That knowledge offers opportunities for companies to create an even wider range of services and to develop trusted relationships with customers that become very hard for competitors to disrupt.

We can’t tell you where all this is headed, of course. But here’s what we know: The age of buy what we have is over. If you want to achieve sustainable competitive advantage in the years ahead, connected strategies need to be a fundamental part of your business. This holds true whether you’re a start-up trying to break into an existing industry or an incumbent firm trying to defend your market, and whether you deal directly with consumers or operate in a business-to-business setting. The time to think about connected strategies is now, before others in your industry beat you to it.

Insurers Remain Cautious About Marijuana Insurance Market

A.M. Best recently completed a special report contemplating the opportunities and potential liabilities for insurance companies looking to take on risk affiliated with the emerging marijuana market. Similar to the advent of cyber liability, it will likely take some time before participating carriers develop a sound understanding of the exposures, corresponding coverages, and appropriate limits the players in the industry will need.

Insurance Journal released the following exam of the A.M. Best report.

Insurers Remain Cautious About Marijuana Insurance Market

March 14, 2019

The marijuana industry is an opportunity for insurers as more states have legalized the drug. But there are still risks in play that could limit wider carrier participation, A.M. Best said in a new report.

One of the key barriers is the federal government still classifies it as a controlled substance, continuing its status as an illegal drug even as individual states increasingly legalize its use.

“Those directly and tangentially involved in the industry need insurance that addresses the specific needs of growers, retailers, distributors, property owners and lab researchers,” the A.M. Best report says. “However, despite growing demand from both producers and retailers alike, many carriers are reluctant to embrace the industry, owing to its classification as a Schedule I drug in the eyes of the U.S. federal government, under the Controlled Substance Act of 1970.”

Because marijuana is not legal at the federal level, some carriers see marijuana insurance as a “debatable” move, A.M. Best said.

Legality Grows

The market for marijuana is as wide as it’s ever been in the United States, with 33 states and the District of Columbia now allowing the use of medical marijuana. Out of that number, 10 states plus D.C. also legalized recreational marijuana use (Canada made it legal as well in late 2018).

The A.M. Best report identifies a number of marijuana-related market segments that need insurance coverage. They include cultivation, dispensaries and retailers, infused products and landlords. Some insurers have responded. Approximately 25 carriers (mostly non-admitted) provide coverage in the space in both the U.S. and Canada, A.M. Best said. The Lloyd’s Market offers coverage in Canada but doesn’t offer coverage to businesses in the U.S., because the federal government still considers it illegal.

Carriers that have entered the market are typically partnering with “agencies and producers that have a better understanding of the industry and the needs of cannabis businesses,” A.M. Best said. One example: Topa Insurance Group, which supports Cannasure, an Ohio-based MGA and wholesale brokerage solely focused on the cannabis industry.

Existing Coverage Limited

Insurers that are just entering the market offer basic policies that typically cover: commercial general liability, with limits of $1 million per occurrence/$2 million aggregate; property liability and product liability, both with limits of $1 million per occurrence/$2 million aggregate, A.M. Best said. The ratings agency warned that these limits may not be enough for marijuana business owners, who may need higher aggregate limits.

Even insurers that jump in remain cautious.

“Because this is an emerging market for insurance companies, insurers believe that their risk in these businesses is best managed with their current limits. Another reason for the low limits is the challenge of finding reinsurers to back marijuana-related books of business, as reinsurance is typically a separate book or tower to cover these risks,” A.M. Best said.

A.M. Best warned that shared limits between general liability and product liability, plus non-stacking endorsements and policies that often lack a duty to defend remain problems for marijuana businesses.

Insurers, if they can address these obstacles, stand to gain plenty by embracing coverage in the marijuana space. A.M. Best noted that the industry (medical and recreational) produced $8 billion in sales in 2017, while sales of illegal marijuana hit the $42 billion mark.

Some projections call for legal marijuana sales to reach $22 billion by 2022, with illegal sales of the drug to drop to less than $5 million over the same period, as more states legalize use of the drug.

A.M. Best’s full report is “Cannabis: New Opportunities for Insurers, But with Burgeoning Risks.”

Source: A.M. Best

NCCI Reveals Its Focus on 5: Insurance Executives’ Top Concerns for Workers Compensation in 2019

Focus on 5: Top Challenges for the Workers Compensation Industry

Every year for the past decade, the National Council on Compensation Insurance (NCCI) has surveyed carrier executive leaders* in the workers compensation industry to better understand their market perspectives, needs, and challenges.

Key findings from NCCI’s survey of 109 insurance company leaders are included in our Focus on 5—a list of top carrier concerns viewed as impactful to our industry.

2019 Focus on 5 Topics

This year’s Focus on 5 is made up of familiar, interrelated topics from years past:


Adapting to the Changing Workforce and Workplace

What they said: More than half of insurer executives interviewed saw adapting to the changing workforce and workplace as a challenge for 2019. They expressed concern not only over new and changing risks associated with an aging workforce, unskilled workers, independent contractors, and new technology, but with assessing these and other unknown risks.

What they’re doing: Insurers spoke of addressing these changes through underwriting and analytics, by developing new products, and by adapting pricing and underwriting. Some mentioned reaching out with public campaigns and employer education programs to promote a safer workplace.

Maintaining Profitability and Premium

What they said: Insurers are concerned about their ability to maintain profitability and premium levels that may be affected by changes in loss cost trends, legislation, and the economy.

What they’re doing: Many insurers are taking a hard look at premium levels and underwriting to remain competitive. Some are seeking opportunities to develop new products and new markets. Others are putting tighter controls on expenses and looking for greater efficiencies through technology.

Medical Costs, Advances, and Determining Appropriate Care

What they said: Medical costs, advances, and determining appropriate medical care are mentioned as major concerns and challenges by more than a quarter of the leaders interviewed. While rising costs remain a concern, insurers have somewhat “baked them in” to their expectations.

What they’re doing: Industry stakeholders closely monitor medical advancements to help maintain appropriate care for injured workers and improve return-to-work outcomes. Some insurers are introducing a variety of programs that go well beyond just paying for injuries, with an enhanced focus on workers’ overall health.

Political, Regulatory, Legislative, and Legal Environment

What they said: Insurers continue to be concerned about political volatility and the impact of new legislation. Compared to years past, however, there were fewer mentions of concern over federal involvement in the industry.

What they’re doing: The executives and their organizations stay close to the issues by monitoring legislative activity and working closely with trade groups.

The Future of the Workers Compensation Industry

What they said: Most of the challenges and concerns expressed going into 2018 remain relevant in 2019. The future of the workers compensation industry, opioid abuse and medical marijuana, and advancements in technology are all top of mind. New concerns for worker safety are tied to the hiring of more unskilled workers, distracted drivers, and the challenge of “under the influence” workers.

NCCI Insights—Exploring Our Focus on 5

NCCI prides itself on fostering a healthy workers compensation system. NCCI’s research, publications, and events offer content that anticipates and responds to the needs of insurers, regulators, and other key industry stakeholders.

Throughout 2018, NCCI addressed many of the challenges and concerns that make up this year’s Focus on 5:

Changing Workforce/Workplace

Maintaining Profitability and Premium

Medical Costs and Advances

Political, Legislative, Regulatory, and Legal Environment

The Future of Workers Compensation and Related Topics

NCCI plans to expand on its Focus on 5 topics and more at its Annual Issues Symposium 2019—Powered by Insight, May 13–15, in Orlando. We hope to see you there!

Visit NCCI’s recently enhanced INSIGHTS portal at for additional information and to access the full inventory of the organization’s research.

*NCCI’s Annual Carrier Executive Study is conducted by an independent survey provider. Interviews are conducted with Workers Compensation Insurance Carrier or State Fund executives and senior managers. The 2018 interviews that contributed to these 2019 results reflect responses from 109 such leaders.​This article is provided solely as a reference tool to be used for informational purposes only. The information in this article shall not be construed or interpreted as providing legal or any other advice. Use of this article for any purpose other than as set forth herein is strictly prohibited.

Subsidiary or Affiliate? Don’t Wait For a D&O Claim to Find Out.

From contributor Lisa Burbage, director and professional broker with CRC’s Seattle, WA office.

When insureds own multiple companies, they may assume that all the entities in their portfolio are covered by their corporate management liability policy. That can be an expensive mistake. The reality is that it comes down to the actual wording on their policy.


Confusion often arises over whether a company is a covered subsidiary or a potentially non-covered affiliate. This is particularly true for industries such as real estate, restaurants and healthcare that frequently create single-purpose entities to manage the liability risks of separate ventures. Newly created corporations or limited liability companies (LLCs) may be owned in whole or in part by the same owners of the first Named Insured whose name is on the insurance policy, but not by the named insured itself. That distinction is crucial.


Because companies are not static, gaps in coverage may arise when an Insured assumes their newly created affiliates are covered under their policies. Over the course of a year, it’s quite possible that insureds have created or invested in new LLCs or corporations. Further heightening the risk, more and more carriers send out automatic renewal quotes, putting the burden on the insured to update their organizational structure with the underwriter.

To avoid finding out that the policy doesn’t provide coverage after a claim is made, it’s important to explain the difference and the potential consequences to clients. This can help clients understand the distinction and to provide more detailed information. Clients should be asked to list every company they want covered along with its ownership structure at every renewal. Uncovered affiliates can usually be added to the policy by endorsement for no charge as long as the rating exposures are included on the application. Not knowing when an entity is an affiliate means that affirmative coverage can’t be granted by endorsement.


It pays to know your clients’ businesses. Don’t wait for a claim to be denied to discover that a client’s affiliate company isn’t covered by the corporate D&O or EPL policy. Brokers should educate clients on the difference, make sure they properly identify all of the subsidiaries and affiliates they want covered at every renewal, and add them to the policy. Taking a proactive approach now can prevent an expensive claim denial later.


Small Business Is Booming: Building a Bigger Team Will Take It Further

Please enjoy the below article published in the Times Square Chronicles.

Small Business Is Booming: Building a Bigger Team Will Take It Further

Despite the trade war, rising interest rates, and other economic issues, the small business is looking good. The National Federation of Independent Businesses Small Business Optimism Index reached a record high in September. The rate of job satisfaction is also growing nationwide, indicates a survey from The Conference Board. In the light of this, small businesses that want to expand are currently facing a great opportunity.

Adding to the team is one of the main elements of success when taking this step. Using data from the abovementioned survey can show one the way to making their company more attractive. Technology and specialized services will be the main tools in the quest of recruiting valuable talent.

4 Ways a Small Business in the US Can Use to Attract New Talent

1.    Choose telecommuting

Ease of commute to work is the second most important factor for job satisfaction. Other data also shows that the number of freelancers is growing (Small Business Trends). That’s because no commute at all is the easiest and most comfortable option.

Offering this option to prospective employees gives small businesses a chance to recruit outstanding talent. Not only does this make the job more attractive for many people. Hiring freelancers also gives the business owner a chance to find higher-qualified professionals in other cities or even countries. Online communication tools and software that allows teams to work remotely but stay in synch makes such collaboration easy. The small business also gets to save on the need to rent a bigger office.

One shouldn’t forget that hiring freelancers doesn’t mean ‘making all employees work from home’. The owner should develop the best employee scheme to maximize productivity.

2.    Offer important benefits

Paid vacation, good health plan, retirement plan, and maternal/paternal leave are close to the top of requirements that make people satisfied with their jobs. Many of these even outweigh the salary. This gives small businesses an opportunity to be competitive when fighting for the top talent.

Small companies cannot offer many benefits in most cases. However, they can use Professional Employer Organizations (PEOs), which can do this and more. Using this option also allows small businesses to avoid additional taxes because new recruits are employed by the PEO. The trick is to find the right kind of organization, but this can be arranged with the help of PEO consultants. These services can compare the existing options taking into account the company’s requirements, status, and growth potential.

3.    Change the parental leave policy

Paid parental leave is one of the most important employee benefits today. Big corporations are acknowledging this and offer great terms to their employees. Microsoft even goes as far as to demand the same attitude from their suppliers.

Using a PEO might help small businesses to find a way to provide paid parental leave. However, it may only be short-term. The solution is to change the terms of parental leave to make it more beneficial. For example, one can provide their employees with a year of flexible schedule and an ability to work from home. Short hours are also an option and one should also develop a support network within the team so that the young parent can leave at a moment’s notice to attend to an emergency.

4.    Provide recognition and potential for development

Getting recognition for their work and efforts is important for everyone. This is the matter where small businesses can win over big corporations in the battle for talent. Small companies can have a much closer and friendlier team. Seeing one’s boss be close to the employees and acknowledging their input is a great seller for a potential recruit.

However, to achieve maximum effect, one should also ensure their employees can grow and develop professionally. Arranging training courses and offering challenging projects will pay off because as employees improve, the business as a whole benefits.

NAPEO Presentation: The PEO Industry Footprint in 2018

After many hours and much hard work, the folks at NAPEO, with their research partners at McBassi & Company, have completed a detailed analysis of the PEO industry footprint as of 2018.  Because there is no government entity which tracks data specific to PEO, NAPEO takes it upon itself to gather and maintain this data for the benefit of all every few years.  I recently had the pleasure of attending a webinar during which they reviewed and discussed their findings published in their latest white paper titled An Economic Analysis: The PEO Industry Footprint in 2018.  Much of the results of this research effort are very exciting for the PEO industry and are summarized below.

Key Points:

  • Total PEO WSEs (Work Site Employees) is greater than the collective total employment of many of the largest and most successful companies in the US
    • Despite this impressive statistic, still only 12.1% of all WSEs employed by a small business (firms with 10-99 employees) are currently using a PEO
      • This leaves room for significant continued growth in the PEO sector in the coming months and years

  • Rate of growth of PEO WSEs is significantly higher than growth rate of employment in US economy as a whole

Additional details:

  • It is estimated that there were 907 PEOs operating in the US in at the end of 2017
  • This includes 175,000 PEO clients, and
  • Approximately 3.7 Million WSE (Work Site Employees)
    • This employee count is equal to the combined employee count of some of the largest and most notable companies in America

  • Total estimated payroll paid in 2017 for these employees was approximately $176 Billion
  • Growth rate of the PEO industry was approximately 14 times higher than the growth rate in employment in the US economy overall in 2017

  • That being said, only 12.1% of small businesses in the PEO “Sweet Spot” are current PEO clients
    • PEO “Sweet Spot” is defined as companies with 10-99 employees
  • 2017 PEO industry growth rate correspond to a sustained rate of the industry doubling every 9-10 years

  • Below is a list of PEOs counts by state at the end of 2017

You can review a copy of the complete power point from with webinar as well as a copy of the published white paper by clicking on the following links:

The PEO Industry Footprint in 2018 – Power Point


To view a recording of the webinar, follow the below instructions:

  1. Follow this link to view the webinar:
  2. Select Playback

Many good questions were asked during the presentation, so the video is well worth the watch (runs about 45 minutes).

We extend a sincere Thank You to NAPEO for all the great work they do to advocate for and substantiate our industry on behalf of all PEOs.