In Discussion With Jim Glickman
By Reinsurance News
Reinsurance News, November 2021
Editor’s note: By invitation Reinsurance News is reaching out to past presidents of the SOA as thought leaders of the industry. Jim Glickman was president of the SOA from 2018 to 2019.
Jim Glickman, FSA, MAAA,
SOA past president 2018–2019
Jim Glickman (JG): I had always wanted a business career that would utilize my strong math skills. While still a sophomore in high school, I was lucky enough to be hired for a summer job intended for college sophomores as a stock brokerage data analyst trainee, calculating the daily price of a proprietary mutual fund. The next summer, in what seemed to be an unfortunate turn of events, I could not find a summer stock brokerage job despite my prior experience and job recommendations, primarily due to an economic recession that began in late 1969, causing full time employees to be laid off.
That summer job setback led me to actively search for a more stable career to pursue, as college loomed on the horizon. Fortunately, my dad was a general agent for Connecticut General Life (now morphed to CIGNA with its merger with INA several decades ago) and invited one of their actuaries, Paul Campbell, over to our house for dinner, when he was making a visit to my dad's agency in Chicago from CG’s home office in Bloomfield, CT.
Paul explained the opportunities an actuarial career offered, including how it could combine my interests in math and business while providing job security and how it could potentially someday lead to a senior management opportunity. This was exactly what I was looking to focus on for my future, so I immediately decided to pursue a career as an actuary. Soon thereafter, I picked up some practice exams from the SOA offices in downtown Chicago and sat for my first actuarial exam during my senior year of high school.
Now, 50 years later, I am still heavily engaged in the actuarial field, both professionally and as a volunteer. This is in addition to having spent the past 34 years as the president and CEO of LifeCare Assurance Company, a reinsurer dedicated to the serving the long-term care insurance industry (LTCi). Prior to my role with LifeCare, I spent 15 years working for four different life and health insurance companies in increasingly more senior levels of management.
As I progressed through my career, I found myself presented with several opportunities for advancement. Each one involved developing new skills, many of which were initially well out of my comfort zone. The most difficult, but perhaps most important one for my career progress, was getting comfortable with and improving my communication skills, especially when presenting to non-actuaries in a face-to-face environment.
Probably the next most important skill I have developed during my career, which has proven especially valuable in my reinsurance role, is the ability to negotiate win-win propositions with potential partners that maximize both partners’ results. Of course, this skill is highly correlated with excellent communication and business skills, especially those that encourage each side to understand and relate to the goals of the other side. In particular, understanding that each side’s goals have different levels of importance to their corporate decision makers allows this exercise to avoid being a zero-sum game. If done correctly, it becomes an exercise in maximizing each side’s gains while minimizing each sides give-ups. Yet, without open, honest, and effective communication, together with a genuine interest in identifying each side’s most critical goals, the best results are rarely achieved for either organization.
RN: How did you decide upon starting up a specialty reinsurer focused on LTCi?
JG: More than 30 years ago, the president and other senior officers of my then current employer, first gave me the encouragement and confidence to start my own insurance company, a goal I had often had in the back of my mind, but never seriously considered acting upon. In large part, since I had been in charge of my prior company's reinsurance department, as well as its LTC line of business, it seemed quite natural to me to form an LTC reinsurer, in what was then, a relatively new product line with what appeared to be unlimited upside opportunity.
My wife and I discussed the risks associated with investing all our savings, together with additional funds from other family members and friends, including several of those senior officers of my former company. It was certainly a huge risk to take, but also a big opportunity. This endeavor is not one that most actuaries would typically seek out, but we had the courage to try it, knowing that if for some reason the company was not successful, that my work experience together with my FSA designation would enable me to readily move back into a high-level actuarial position. Perhaps the greatest, often overlooked value of our actuarial credentials, is the opportunity it provides us to take a chance on following our dreams and not let the fear of failure overwhelm the opportunity for success.
RN: What was the perceived opportunity for a specialty Long Term Care Reinsurer and how has that changed over time?
JG: Back in the late 1980s and early 1990s, the LTCi industry was just starting to see growth as the baby boomers started to age into their 40s, 50s and 60s. During the next two decades, many companies entered the LTCi industry, either independently, or with some combination of administrative and reinsurance support. We felt the time was right for a specialty reinsurer, who would also perform the administrative functions to work with large carriers who, in particular, generally found small lines of business difficult to operate on a profitable basis. Also, we found that by seeking our profitability primarily from the insurance risk, rather than from the administrative services and/or the premium income, better aligned us with our direct carrier partners. This has proven to be a good formula, as we have developed 14 strong LTCi partnerships over the past 30+ years.
RN: LTCi has been a challenging line of business. What do you now see as the future for LTCi and LTCi reinsurance?
JG: LTCi has gone through a tough period of inadvertent underpricing producing significant losses for both direct carriers and their reinsurers. Much of this has been due to unfortunate emerging experience, in combination with a lack of regulatory cooperation in some jurisdictions on a timely basis for necessary rate increases.
One of the assumptions that has underperformed is the interest rate assumption, which has been on a nearly continuous slide for the past 40 years, covering virtually the entire history of LTCi. Since LTCi utilizes so much pre-funding with its level premium approach, that the interest rate declines have created a significant pricing shortfall.
In addition, lapse rates have been much lower than originally anticipated, creating an even larger shortfall for LTCi (which is lapse supported). Interestingly, the industry and the regulators had a chance to get it right back in the late 1980s when an NAIC Ad-Hoc Actuarial Task Force recommended mandatory non-forfeiture values for LTCi. Unfortunately, the industry successfully lobbied the regulators to make these non-forfeitures optional, which consumers had no interest in purchasing. Mortality turned out to be another adverse assumption, as it operates essentially as an involuntary lapse rate on this lapse supported product.
Even morbidity has been somewhat adverse, as length of stay has been longer than anticipated, offsetting what has generally been a better than anticipated incidence rate. Two of the biggest remaining assumption unknowns, which only time will answer, have been attained age morbidity at ages 95 and above, together with the question of morbidity improvement and if it exists, will it be larger, smaller, or about the same as the rate of mortality improvement which is much more well known.
While this creates a potentially bleak picture for legacy LTCi (especially for policies issued more than 15–20 years ago) regulators are starting to realize the importance of appropriate rate increases being considered and approved sooner, allowing losses to be minimized.
For new business being issued today, the opportunity for both the direct carrier as well as the reinsurer, is an entirely different picture. Assumptions for lapse rates are now well under 1 percent and with interest rate assumptions generally presumed to permanently be less than 3 percent, the risk from these two assumptions deteriorating further is minimal. In addition, companies are pricing with a regulatorily required load factor of at least 10 percent and with conservative morbidity and mortality assumptions. For insurance companies looking for new profit sources, this represents an opportunity with little or no competitive pressure. For LTCi reinsurers and administrators, it is a continuing opportunity to help those companies get comfortable enough to enter the LTCi market.
RN: Hybrid life/LTCi policies are becoming an increasing part of the LTCi solution. How is reinsurance playing a part in the hybrid market?
JG: There are four general types of hybrid policies. The two most basic types, acceleration riders and chronic illness riders essentially pre-pay the death benefit for LTCi qualified services associated with a final decline in health, so there is very little extra charge, and virtually nothing worth reinsuring from either the reinsurer or the direct insurer’s perspective. The third type, LTC riders, have somewhat more LTCi risk, as the death benefit can be reduced over many years or even decades prior to death, but it is still a very small benefit compared to the life insurance benefit. The fourth type, extension of benefit riders, are much more comparable to standalone LTCi benefits for the portion of the benefit payable after the death benefit has been exhausted, but there is usually a large disconnect between direct carriers and potential reinsurers on how much the extended benefit should cost, resulting in relatively few reinsurance deals occurring in that space.
RN: What are the most important leadership lessons you have learned in your 34 years as president and CEO?
JG: Running a company as a startup is dramatically different than running a company with 300 employees and $3 billion in assets. However, some of the lessons apply regardless of the company size and history.
- I would consider the most important lesson in being an effective leader, is to lead by example and avoid having two sets of rules, one for the leaders, and one for the rest of the employees. This is critical especially in the startup stage when the leaders need to perform virtually every function (including those that will eventually be done mostly by lower-level employees) and to be especially careful with every dollar. If this theme is ignored at the top, it soon will be ignored throughout the organization, especially as it grows. Once the organization becomes larger, it still remains important, since leaders with separate rules for themselves, encourage a hierarchical set of rules at all management levels, often developing jealousy or ill will from other employees.
- Perhaps an equally important leadership trait is for leadership to provide a clear vision of where the company is headed, how it will get there, and then clearly communicate this vision to all levels of the company.
- Another important lesson is for the leaders to hire people they feel comfortable being able to delegate decision making authority. Often, fear of making a mistake can overwhelm the opportunity to achieve a success if that decision is subject to second guessing if it does not work out as well as expected.
- One of the more important leadership traits that successful leaders have is the ability to remain calm and focused when the company goes through inevitable challenges, as problems emerge. This ability to detach yourself from your emotional response will allow everyone in the company to search for solutions and implement them as needed without undue anxiety.
- Finally, I have found that volunteer work with both the SOA as well as other industry organizations, is surprising valuable to leaders from several perspectives. First, it provides a chance to show your expertise and commitment to the industry directly to other leadership peers, leading to increased opportunities for strategic partnerships. Second, you will inevitable become more of an expert, as you learn from other experts in performing those activities. An unexpected, but equally valuable aspect of your volunteer work is the satisfaction you receive from performing your volunteer work, which is often much greater than the effort you expended to accomplish it.
RN: Any final thoughts?
JG: For those looking to become leaders, I would suggest that in addition to building your technical skills, you also focus on building your communication and business skills, using the opportunities as they become available to stretch your comfort zone by writing articles or speaking at industry events. Also, I would suggest trying to identify a mentor, who is willing to help you objectively analyze your progress and suggest areas of potential improvement.
Statements of fact and opinions expressed herein are those of the individual authors and are not necessarily those of the Society of Actuaries, the newsletter editors, or the respective authors’ employers.
Jim Glickman, FSA, MAAA, is president and CEO of LifeCare Assurance Company. He can be contacted at jim.glickman@LifeCareAssurance.com.