Each holiday season, we select what we consider to be the year’s most influential business book to share with our clients and partners. This year, we chose Free – The Future of a Radical Price by Chris Anderson as our firm’s 2009 Book of The Year.
 
We have simple criteria when picking our book of the year: 1) it must be published in the given calendar year, and 2) it needs to be both meaningful and enjoyable to read. While the selection formula is straight forward, the process of selecting our book is never easy. There are always varied opinions and good options from which to choose. We have chosen Free because the main idea of the book resonated with our firm’s culture and philosophy. It is the intriguing idea that you can make more money by giving services and products away for free.
 
As a professional service provider, we constantly give away our intellectual property for free. Gone are the days when you can simply say you’re an expert and expect to receive someone’s business. You must now fully demonstrate your value proposition and do it in a way that is both meaningful and economically neutral. The fascinating paradox explored in this book is that the more you give away, the more you receive in return. And the game-changing part of this “free,” is that it is not a twentieth-century marketing gimmick with strings attached. Twenty-first-century “free” really is free.
 
It’s a time-honored holiday tradition that giving is more important than receiving. Can this same principle of giving things away be applied to the business world? Can an economic model that is built around the concept of “free” be sustainable, not to mention a way to build even greater profits for your business? The reason this book struck such a chord with us is that we see this principle proven all the time in our business dealings. Serving others and giving value away does increase returns and there is a multiplier effect.
 
If you get a chance, we’d appreciate your comments on the titles we’ve selected as our books of the year.

2005 The World Is Flat
2006 Small Giants – Companies That Choose to Be Great Instead of Big
2007 Wikinomics – How Mass Collaboration Changes Everything
2008 Outliers – The Story of Success
2009 Free – The Future of A Radical Price

Happy Holidays and Best Wishes in the New Year!
 
Diversified Insurance Group

Modern insurance is a financial product that was developed overseas rather than in the United States. Many insurance contract legal principals were also first developed by English Courts.

So, why do you buy an insurance policy? Sometimes, it is required by a mortgage or a loan. Often, you buy insurances because you view the risk of devastation by a catastrophe to be far worse than “hedging” against this situation by paying a small premium. I think most of us buy insurance for the peace of mind in knowing we will be able to recover should a catastrophe occur. In my own experience, I switched insurance companies because I was very unsatisfied with the approach taken by my previous insurance company in paying out a claim. At the end of the day, I don’t think that my current insurance company, Allied, would have paid more than my previous company, Phoenix Indemnity. The problem was that I had to fight Phoenix Indemnity for every penny paid whereas Allied feels like a partner that is working to help me, not hose me.

Emotional distress damages and consequential damages beyond the insurance policy are often granted to policyholders because the insurance industry contemplates the consequences of wrongfully performing its obligations. Every insurance adjuster knows that the purpose of buying the insurance is defeated if the underwriter wrongfully underpays a claim or fails to pay at all.

Peace of mind is one of the most basic attributes of an insurance product, even though it is never mentioned in the policy. Policyholders intuitively know that this peace of mind is a large part of the bargained-for-exchange. The emotional toll caused by an insurer’s unjust claim delay and denial is lost peace of mind.

Malcolm Clarke, a professor of Commercial Contract Law at Cambridge has written a worthy read for an insurance law book, Policies and Perceptions of Insurance Law in the Twenty-First Century (Oxford Univ. Press 2007). His explanations of insurance are very helpful to consumers of insurance.

Professor Clarke addressed the reason why consumers purchase insurance in the context of risk, risk aversion, stress aversion, and peace of mind:

“To ordinary policyholders, who may well not be models of behavior or rationality, something is risky if loss is relatively likely to happen, or, although it is not likely to happen, if the effect will be disastrous if it does….Policyholders are less concerned with the precise probability than with whether the risk seems probable or bad enough to justify paying (premium) to soften its effect; that depends on their view of things, i.e., what psychologists call risk aversion.

Risk Aversion

In the words of The Economist, risk aversion is the feature of human nature that explains why, ‘when given a choice between, say, losing 1 dollar and a 10 per cent chance of losing 10 dollars, most people would prefer a certain outcome (losing 1 dollar) to a risky one (losing 10 dollars or nothing)’. ‘Prospect theory tells us that people making decisions in uncertain conditions weigh prospective loss twice as heavily as prospective gains. If people know that there is a 1 per cent chance of total loss of their £100,000 house, they may be willing to pay more than £1,000 for insurance, and one of the main reasons is that they are willing to pay to offload anxiety. Such people are ‘risk averse’. The Association of British Insurers (ABI), the organization that speaks for the insurance industry, projects insurance as something that enables people who are insured to organize their household budgets, or plan their business activities, with greater certainty…This raises the question: What is it that makes a risk so unacceptable that people decide to do something about it and, in particular, to buy insurance cover?

Stress Aversion and the Purchase of Peace of Mind

Risk aversion grows from stress aversion. One of the causes of stress in human Beings–in the motor car, the work place, or anywhere else–is a sense of not being in control of their situation, or of themselves. For many of those who avoid flying, the reason is not only fear of an air crash but also fear of losing control of themselves, as a result of stress. Research also shows that, in a given risk situation on the roads, the anxiety levels among passengers are higher than among drivers. Drivers feel in control; passengers do not…

One of the ways in which people seek to regain control of their lives, to reduce stress and to move towards some kind of peace of mind, is by taking out insurance. That is why some insurers send their sales staff on courses to learn about the ‘emotional needs’ of the customer. That is also why some insurers advertise life insurance for ‘life-long peace of mind’ and travel cover ‘to give you peace of mind when travelling’ . A major bank has offered ‘a free home insurance review to ensure peace of mind’. Insurers also point to peace of mind when underlining that the cheapest insurance is not always the best insurance. Advertising of this kind has an enduring appeal, and even the courts have recognized this–in other countries.

Associated with the wish for peace and certainty is a desire for security. Sociologists tell us that on a descending scale of priorities, just after people’s basic needs for food, clothing, and shelter, comes the need for security. Insurers know this too, and security is another prominent feature of the image that insurers project of their products to the insured.

…An important feature of insurance contracts is that a significant part of what policyholders are paying for is peace of mind.”

So who’s most likely to be a victim?

• People with incomes over $75,000 were more likely to be hit than those with lower earnings.
• By age, the highest fraud rate is among people between 35 and 44.
• Ethnically Hispanics were hit the most followed by African-Americans, Caucasians and Asians.

These results were pulled from research performed by the Javelin Strategy and Research Group.Other worthwhile tidbits include the following ways to avoid identity theft:

Avoiding Identity Theft

* Don’t give out your Social Security number to anyone who calls you unless you do know the caller and were expecting the call.

* Don’t give out any personal identifying information on social networking websites and in chat room discussions. Always be sure to verify the identity of the person asking for the information.

* Keep your sensitive documents secure. A safe deposit box at your bank is your best bet.

* Shred any documents you want to throw out that have your account numbers or other identifying information on them. Shredders today are pretty cheap and a lot cheaper than cleaning up an identity fraud mess.

* Choose hard to guess passwords and pin numbers. Most people use a part of their name or a pet’s name. Be more creative. Also, change up your passwords and pin numbers so you don’t use the same one with several accounts.

“. . . a surprising number of the most powerful and successful corporate lawyers in New York City have almost the exact same biography: they are Jewish men, born in the Bronx or Brooklyn in the mid-1930′s to immigrant parents who worked in the garment industry. Now, you can call that a coincidence. Or you can ask—as I do—what is about being Jewish and being part of the generation born in the Depression and having parents who worked in the garment business that might have something to do with turning someone into a really, really successful lawyer?”

“It’s those who lie outside ordinary experience who have the most to teach us.”

“We’ve been looking at tall trees, and I think we should have been looking at the forest.”

– from an interview of Malcom Gladwell about his new book Outliers

Diversified Insurance Group has a holiday tradition of sending an influential business book to our clients and partners at the end of every year. This year we’ve selected Outliers – The Story of Success by Malcolm Gladwell as our firm’s 2008 Book of the Year.

We have simple criteria when picking our book of the year: 1) it must be published in the given year, and 2) it needs to be both meaningful and enjoyable to read. This year we reviewed 10 books that fit this description and were all worthy of consideration. Outliers stood out, pun intended, because it was the most enjoyable. It is highly entertaining and readable. And given the economic challenges this country is currently facing we thought a little light reading would be appreciated.

Outliers helps us look at success in an entirely different way and explains various factors that contribute to extraordinary performance. Gladwell provides some fascinating and interesting examples to demonstrate his theories by examining the wealthiest people in the history of the world, from Nobel laureates to Junior Hockey All-Stars in Canada. Sharing his anecdotes, lists and conclusions will help enliven any holiday party or dinner conversation.

As a professional service provider, we are constantly working at ways to differentiate our firm and to stand-out from our competition — to be a true outlier in the most positive sense. One of the ways we’ve been able to do this is to associate with highly successful partners and clients. If it is true that you’re known by the company you keep, then we’re well on our way to accomplishing this goal.

We hope you enjoy this book as much as we did. If you get a chance, we’d appreciate your comments on the titles we’ve selected as our books of the year.

- Spence Hoole