The ARMThe ARM

Bob Uhorchak, CSP, ALCM, ARMBob Uhorchak, CSP, ALCM, ARMreuhorchak@mindspring.comreuhorchak@mindspring.com

[ No LEG(S) ! ]

Questions to consider:

Why can the VP of Operations be pleased Why can the VP of Operations be pleased with a declining OSHA Incident Rate, yet the VP with a declining OSHA Incident Rate, yet the VP of Finance be displeased ??of Finance be displeased ??

or

What is “Enterprise Risk Management” and What is “Enterprise Risk Management” and how does it apply to EH & S ??how does it apply to EH & S ??

How can insurance possibly be related How can insurance possibly be related to radiation safety, especially since to radiation safety, especially since “radioactivity” is “radioactivity” is excludedexcluded in virtually all in virtually all property & casualty policies ??property & casualty policies ??

or (for HPS members)

Associate in Risk Management (ARM)Associate in Risk Management (ARM)Sponsoring organization:Sponsoring organization:

American Institute of Chartered Property & American Institute of Chartered Property & Casualty Underwriters/Insurance Institute of Casualty Underwriters/Insurance Institute of AmericaAmerica, (AICPCU / IIA), (AICPCU / IIA)

Translation:

An independent, continuing education organization(s) for the property & casualty insurance industry

General Requirements for DesignationsGeneral Requirements for Designations- no specific prerequisites; guidelines only - no specific prerequisites; guidelines only - interest in property & casualty insuranceinterest in property & casualty insurance- desire to show qualifications to current and/or desire to show qualifications to current and/or

prospective/future employersprospective/future employers- ability to pass a national, multiple choice, ability to pass a national, multiple choice,

examination; each ARM course exam is 2 examination; each ARM course exam is 2 hour, 85 questionshour, 85 questions

Note: The Certified Risk Manager (CRM), designation is offered by another insurance, continuing education organization; the National Alliance for Insurance Education and Research

Examples of Designations from AICPCU/IIAExamples of Designations from AICPCU/IIA

Certificate in General InsuranceCertificate in General Insurance:: 3 course sequence: P & C; 3 course sequence: P & C; Personal; Commercial; good basic coursesPersonal; Commercial; good basic courses

CPCUCPCU:: Chartered Property & Casualty Chartered Property & Casualty Underwriter; 8 courses; the “standard” for Underwriter; 8 courses; the “standard” for insurance professionalsinsurance professionals

ALCMALCM:: Associate in Loss Control Associate in Loss Control Management; 5 courses [Note: No Management; 5 courses [Note: No longer offered]; the CSP or CIH are now acceptedlonger offered]; the CSP or CIH are now accepted

ARMARM:: Associate in Risk Management; 3 Associate in Risk Management; 3 courses; strong foundation courses, but generally courses; strong foundation courses, but generally at a “management” level, not detail level; widely at a “management” level, not detail level; widely recognized & accepted – recognized & accepted – standard for risk standard for risk managersmanagers

AUAU:: Associate in Underwriting; favored by underwritersAssociate in Underwriting; favored by underwriters

Why pursue the ARM?Why pursue the ARM?

“ “Chance favors the prepared Chance favors the prepared mind” Louis Pasteurmind” Louis Pasteur

“… I took the one less traveled by, and that has made all the difference” Robert Frost

“… from technical nerd to administrator…” Bob Uhorchak

i.e. potential for promotion/more $$$

… recall the alchemist’s goal was to turn lead into gold …

The ARMThe ARM3 courses:3 courses:

Risk AssessmentRisk Assessment, ARM 54, ARM 54

Risk ControlRisk Control, ARM 55, ARM 55

Risk FinanceRisk Finance, ARM 56, ARM 56

Courses can be taken in any orderNo previous “insurance” experience

requiredHigh degree of memorizing &

understanding new terminology Basic Algebra skills needed

My Observations From Teaching Review My Observations From Teaching Review Sessions For Each CourseSessions For Each Course

Risk AssessmentRisk Assessment, ARM 54:, ARM 54:

Introductory; Overview of Risk Management; Overview of 4 primary loss concerns [property; liability; personnel; net income] & risk control concerns; Basic concepts of probability & statistics & application to risk management (forecasting); Basics of evaluating insurance costs using Present Value concepts

Probability & statistics applied to scenarios can be confusing if never exposed to these topics before

… … from ARM 54) from ARM 54) Educational Objective 3Educational Objective 3

Present Value, (PV), calculationsPresent Value, (PV), calculations using PV tables: using PV tables: text Appendix A (p. 13.32 – 13.33) & Appendix B (p. 13-text Appendix A (p. 13.32 – 13.33) & Appendix B (p. 13-34 – 13.35); [also using formula’s]34 – 13.35); [also using formula’s]

3 Types of PV Calculations:3 Types of PV Calculations:

1.1. Single Future PaymentSingle Future Payment; use App’x ; use App’x AA; ;

also: PV = Future Value x (1 + r) also: PV = Future Value x (1 + r) -n-n

2.2. Stream of Equal Future PaymentsStream of Equal Future Payments; use App’x ; use App’x BB;;

PV =1PV =1stst Annual Am’t +2 Annual Am’t +2ndnd Annual Am’t +..+ n Annual Am’t +..+ nth Ann. Am’t Ann. Am’t

(1 + r)(1 + r)1 (1 + r)(1 + r)2 (1 + r)(1 + r)n

Risk ControlRisk Control, ARM 55, ARM 55

Descriptive, no math; primarily understanding Descriptive, no math; primarily understanding definitions; generally familiar territory for definitions; generally familiar territory for

most safety folksmost safety folksCourse outline explores risk control concepts Course outline explores risk control concepts for 4 primary loss exposures [property; for 4 primary loss exposures [property; liability; personnel; net income] with some liability; personnel; net income] with some detail regarding each detail regarding each

Risk FinanceRisk Finance, ARM 56, ARM 56

New territory for most “safety” professionalsNew territory for most “safety” professionalsVarious risk finance concepts are explored and Various risk finance concepts are explored and

contrasted e.g. retrospective & contrasted e.g. retrospective & prospective prospective financing plans – cash flow financing plans – cash flow advantages & advantages & disadvantages of each; the use disadvantages of each; the use of “captive” of “captive” insurers; present value issuesinsurers; present value issuesBasic familiarity with balance sheets & income Basic familiarity with balance sheets & income

statements is helpfulstatements is helpful

OtherOther::

Cost: [per course]Cost: [per course]Basic package: Text, CD, Course Guide Basic package: Text, CD, Course Guide ~ $160; Additional aids available~ $160; Additional aids availableExam: $170 - $380 depending on timing & Exam: $170 - $380 depending on timing & one exam or segmented examone exam or segmented exam

Exam:Exam:AICPCU/IIA currently uses Prometric as the AICPCU/IIA currently uses Prometric as the examiner; Some insurance companies will host examiner; Some insurance companies will host the examthe exam

Preparing for ARM ExamsPreparing for ARM Exams

Options are available:Options are available:- self study at home- self study at home- on-line tutorials/trial exams- on-line tutorials/trial exams- join a study group, either formal or informal- join a study group, either formal or informal

Also:Also: AICPCU/IIA offers many study aidsAICPCU/IIA offers many study aidsOther companies, e.g. Keir, offer study aidsOther companies, e.g. Keir, offer study aids

Why can the VP of Operations be pleased with Why can the VP of Operations be pleased with a declining OSHA Incident Rate, yet the VP of a declining OSHA Incident Rate, yet the VP of

Finance be displeased ??Finance be displeased ??Answer:Answer:

Because of “the disconnect” 1 that can occur between IR and Loss Costs

i.e. IR can be declining, but loss costs can be increasing

Enterprise Risk Management is an example of a management system that attempts to integrate the organization to solve this problem

Question: Question: What is “enterprise risk management”?What is “enterprise risk management”?

Enterprise Risk Management is: Enterprise Risk Management is: ““an approach to managing all of an an approach to managing all of an

organization’s key business risks & opportunities organization’s key business risks & opportunities with the intent of maximizing shareholder value”with the intent of maximizing shareholder value”

- it encompasses both hazard risk and business risk

- it focuses on the organization as a whole

- from the ARM 56 text, page 1.14, Exhibit 1-6

Interest Rate Risk (Business Risk)

good - good good - bad

No Loss Loss

Possible outcomes from two sources of risk (Interest Rate Risk i.e. Business Risk & Hazard Risk i.e. Pure Risk)

Hazard Risk (Pure Risk)

Gain [good]

Loss [bad]

bad - good

[Quadrant 1] [Quadrant 2]

[Quadrant 3] [Quadrant 4]

bad - bad

How can insurance possibly be related How can insurance possibly be related to radiation safety, especially since to radiation safety, especially since “radioactivity” is “radioactivity” is excludedexcluded in virtually all in virtually all property & casualty policies ??property & casualty policies ??

Answer:

Because several “radiation” endorsements (additions which have been court tested) can be added to a basic property policy that give some coverage for radiation related accidents

Useful Websites & ReferencesUseful Websites & Referenceswww.aicpcu.org; www.aicpcu.org; thethe website for additional information website for additional information

regarding many certifications, examination regarding many certifications, examination information, practice exams, etc.information, practice exams, etc.

www.asse.org; web site for the American Society of www.asse.org; web site for the American Society of Safety Engineers; their “Risk & Insurance” specialty Safety Engineers; their “Risk & Insurance” specialty practice is particularly helpfulpractice is particularly helpful

www.rims.org; web site for “Risk & Insurance www.rims.org; web site for “Risk & Insurance Management Society”; the professional society for Management Society”; the professional society for risk managersrisk managers

Glossary of Insurance & Risk Management TermsGlossary of Insurance & Risk Management Terms, , International Risk Management Institute, Dallas, TX; International Risk Management Institute, Dallas, TX; a must have referencea must have reference

FootnoteFootnote

1 “Beware the Disconnect: Overcoming the 1 “Beware the Disconnect: Overcoming the Conflict Between Measures & Results”, Daniel Conflict Between Measures & Results”, Daniel Zahlis & Larry Hansen, Zahlis & Larry Hansen, Professional SafetyProfessional Safety, , November 2005, ppgs. 18 - 24November 2005, ppgs. 18 - 24

A similar article:

“Employee Injury: Effects on a Company, Workers’ Compensation & OSHA Compliance”, Robert Ray, RM/Insight, 2007, Vol. 6, No. 3, ppgs. 1, 8 - 10

Any Questions ??