CPCU ejournal. Insurance, Risk Management and Financial Services at Indiana State University

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1 CPCU ejournal Published by the CPCU Society April 2011 Insurance, Risk Management and Financial Services at Indiana State University by Terrie E. Troxel, CPCU, Ph.D., CLU The American Risk and Insurance Association (ARIA), the premier academic organization devoted to the study and promotion of knowledge about risk management and insurance, lists on its website 55 colleges and universities offering risk management and insurance (RMI) programs. Recent issues of the CPCU ejournal have profiled RMI programs at several leading universities. These include Florida State University and Appalachian State University (January 2010), and Temple University and Illinois State University (June 2010). An ARIA position paper written in 1990 argues, The integrity of the higher education system demands that students who study business be given a solid grounding in those areas that are essential for responsible, full participation in both business and society. Students lacking an understanding of risk management are not fully prepared to assume leadership roles in most organizations. Their deficiency of knowledge may serve to undermine not only the achievement of basic organizational goals but also the survival of the organization itself. In an era of management accountability, business students can no longer afford to be graduated without some proficiency in a subject so essential to themselves and others. As the economic, legal, political and social climates are evolving, it is of even greater importance that risk management be incorporated into updated business curricula as a vital, integral element of business school preparation for the challenges ahead. 1 Given the adverse consequences resulting from poor management of both pure (hazard) and speculative (business) risks witnessed in the intervening decades since this ARIA paper, the essential need for risk management education is apparent. Having RMI taught at the collegiate level is important not only because it provides the insurance business with fresh talent but of equal or even greater consequence because society needs a better understanding of decision making involving risk. Identification, analysis, control and financing of risk are required for successful management of business and personal resources. Purchasing insurance is often the appropriate risk-financing tool used to protect against losses caused by common perils and employee obligations. But other risk management tools including noninsurance contractual risk transfer and alternative risk financing techniques have become increasingly important and need to be understood by future managers of risk. Rather than being viewed as overly specialized and vocational, instruction in risk management and the contractual and operational nature of insurance and markets for risk need to be viewed as vital parts of an integrated management education. While each collegiate RMI program is similar in that principles and practices are taught, exclusively or mostly to undergraduate students, the programs also are unique to the circumstances of their institutions and communities. This certainly is true of the Terrie E. Troxel, CPCU, Ph.D., CLU, is associate professor and executive director, Gongaware Center for Insurance and Financial Services, and executive director, Networks Financial Institute in the Donald W. Scott College of Business at Indiana State University. He is the former president and chief executive officer of the American Institute for CPCU/Insurance Institute of America and ex officio member of the Board of Directors of the CPCU Society. He earned his Ph.D. from Wharton at the University of Pennsylvania. He currently is a member of the Board of Trustees of the S.S. Huebner Foundation for Insurance Education at Wharton. APRIL

2 Insurance and Risk Management (IRM) and Financial Services (FS) programs available in the Scott College of Business at Indiana State University (Terre Haute, Ind.). As an institution accredited by the Association to Advance Collegiate Schools of Business, International (AACSB), the Indiana State University s IRM and FS programs fit within an integrated curriculum that seeks to achieve rigorous learning objectives. These include assurance that students will be: Knowledgeable about current business practices and concepts. Able to make prudent business decisions by employing analytical and critical thinking. Effective communicators. Competent in applying relevant technology to business problems. Competent in ethical decision-making. Able to function effectively in professional settings. Cognizant of the complexities of operating in a global business environment. In order to achieve these objectives, all students in the Scott College of Business must successfully complete a set of general education requirements plus pre-business courses in accounting, economics, information technology, mathematics and statistics. Once these are completed, typically prior to a student s junior year, the student selects one of 11 areas of study to declare as a major. In addition to satisfying requirements of the major, the student must successfully complete a series of functional business courses plus a capstone experiential course to be taken during the student s final semester after completion of all functional courses. The IRM program at Indiana State University offers one of the broadest arrays of risk management and insurance courses as both major and minor areas of concentration. Majors in IRM must complete 27 credit hours in the discipline, typically meaning nine courses. Six courses (18 credit hours) are obligatory and include a principles course, a life insurance course, employee benefits, commercial property insurance, commercial liability insurance and a capstone risk management and insurance course. These students also must complete nine additional credit hours of electives. Three credit hours may be earned in a marketing course (personal selling) and three credits may be earned in an additional finance course, depending on the student s career orientation. Students who minor in IRM have the same menu of courses available to them but need only complete a total of 18 credit hours in the field, five courses (15 hours) being IRM courses and one a management or information technology elective. A popular elective is a senior seminar, which can focus on selected topics, often geared to prepare students to challenge professional examinations from the The Institutes such as the CPCU, ARM or ASLI exams. In recent years, students have successfully completed The Institutes examinations and have gone on to obtain professional designations. Other recent elective offerings have included a senior-level course for students coming from different business majors whose prior coursework does not include a common background in the specialized area of Enterprise Risk Management. The course also has been offered to math (actuarial) majors from arts and sciences not having a business program background. By introducing the concept of Enterprise Risk Management using a problem-based learning approach with realworld examples, the necessary background to provide the entire class with a common 2 CPCU ejournal

3 and basic framework of ERM is established during the first two weeks of the semester. The course also involves quantitative and qualitative modeling methods including loss development, regression, curve fitting, theoretical models and simulation using Crystal Ball for a decision-model group project. Insurance Advisory Council One of the major factors contributing to the growth and success of Indiana State University s IRM Program has been the involvement of industry members serving on the Insurance Advisory Council (IAC). Leading members of the Indiana insurance community originally formed this active advisory body committed to the advancement of the IRM Program. Currently 23 individuals serve on the IAC drawn from national and international brokerage firms, national and regional underwriting companies, reinsurance intermediaries, insurance regulators and risk management consultants. Each IAC member agrees to support the IRM program by mentoring, speaking at student events, funding scholarships, providing paid summer internships and/or offering career placement. Two IAC meetings are held each year; the fall meeting is on campus and the spring meeting typically is hosted by an IAC member in Indianapolis to accommodate members travels. The IAC members are also active organizers and major participants in the IRM Program s fall Oktoberfest Golf Outing at the Terre Haute Country Club. This is a major source of funding for IRM student activities throughout the school year. The Gongaware Center for Insurance and Financial Services A distinctive aspect our IRM and FS programs is the support provided by the Gongaware Center for Insurance and Financial Services. The Center is named for Don Gongaware, retired chief operations officer and executive vice president of Conseco, Inc. Don is a Chartered Life Underwriter (CLU) with more than 30 years of industry experience. During his career, he was instrumental in implementing innovative management concepts and practices at Conseco. In 1998, he retired from the company and, with wife Pat, established a center dedicated to the development of leaders in the insurance and financial services industries at Indiana State University s College of Business. At the time, their generous gift was the largest the University had received. The Gongaware Center has a valued reputation for providing unique and challenging student development and support opportunities. It is recognized for preparing students well for future leadership roles and careers in the insurance, risk management and financial services industries. The Gongaware Center recruits top caliber high school students into the Scott College of Business to major in IRM and FS by offering them attractive scholarships. Gongaware Scholars receive $6,500 in scholarship support each year, a laptop computer and a professional development account for study abroad or other educational opportunities. The total value of the Gongaware Scholarship currently is $30,000. Gongaware Scholars are selected every year based on leadership potential, academic achievement and interest in a financial services career. At any time, there are a dozen or more Gongaware Scholars in residence. These students enthusiasm and high level academic achievement boost the overall level of our program, the College, and the University. Gongaware Scholars are campus leaders and typically earn additional scholarships and honors during their collegiate experience. They have been active in their student chapter of Gamma Iota Sigma, the national insurance and actuarial science fraternity, and the ISU Insurance and Risk Management Honors Corp. They are frequently recognized by the Risk and Insurance Management Society, Inc. (RIMS) with the Anita Benedetti Student Involvement Award and other university distinctions honoring their academic achievement and service. Gongaware Scholars typically complete two or APRIL

4 more paid summer internships in insurance, risk management or other financial services positions during their collegiate careers. These experiential learning opportunities give students both real world applications of what they have studied and also enhance their confidence and poise through personal interactions so important in understanding institutions and society. Gongaware graduates have gone into insurance brokerage, underwriting, banking, advanced degree programs and law school. (For additional information, see: Networks Financial Institute Networks Financial Institute (NFI) at Indiana State University was founded in 2003 with the help of a grant from the Lilly Endowment, Inc., an Indianapolis-based, private philanthropic foundation. NFI strives to facilitate broad, collaborative thinking, dialogue and progress in the evolving financial services marketplace through a threepart program of thought leadership and research in insurance and financial services, financial literacy research and education and student professional development. The Networks Scholars program is intended to develop tomorrow s hardworking, dedicated, knowledgeable and inquisitive financial industry professionals. The program is a fouryear scholarship for qualified freshmen accepted to Indiana State University, who enroll in the Scott College of Business to pursue a career in the financial services industry. Professional Development Program With NFI s creation, the student professional development activities that had originated within the Gongaware Center were broadened and now include business students who have been awarded Presidential, NFI, Gongaware and 21st Century scholarships. The Networks Professional Development Program is a four-year progressive program of formal and informal enrichment experiences that advance the knowledge, skills, behaviors and dispositions that students need to enter the financial services industry as successful business and community leaders. The program offers leadership and career development through: Personalized Professional Development Planning. Experiential Learning. Student Leadership and Team Projects. Professional Development Seminars. Personalized Career and Educational Planning. Mentoring and Networking with University and Corporate Professionals. As a formal capstone learning experience of the Networks Professional Development Program, each spring junior scholars are responsible to design, organize and execute a conference on ethical decision-making and corporate social responsibility. The conference provides a rich opportunity for students to stretch, grow and develop practical leadership, managerial and teaming skills while addressing a major educational need identified by industry leaders. Hundreds of students and professionals participate in this annual conference, and each year new levels of success are reached. Ethics Week Networks Professional Development Program and Indiana State University s Scott College of Business collaborate to incorporate ethical awareness and corporate social 4 CPCU ejournal

5 responsibility in the classroom for an entire week, known as Ethics Week. The week begins with a daylong student-led and student-focused conference followed by day and evening events throughout the week. Students and professors engage in classroom discussions throughout the week. Also, student organizations host special evening events including lively ethical discussions, featuring various industry and faculty speakers, and presentations on key ethical issues in the business world. In the area of thought leadership, NFI sponsors an annual insurance reform summit in Washington D.C. Through its research fellows think-tank NFI not only examines critical issues but offers viable solutions. NFI has emerged as a national even an international leader in the financial services industry and in education. On Sept. 14, 2010, NFI partnered with the CPCU Society s Central Indiana Chapter to offer a one-day regional perspective on implications the Dodd-Frank bill has on insurance operations and regulation. Program of Distinction In 2007, two of Indiana State s programs financial services and teacher education were recognized as Programs of National Distinction for achieving a national reputation for the quality of their work and reflecting the values of Indiana State while meeting state and national needs. Each program received financial support from funds provided by a special grant from the Lilly Endowment and other University funds. Recognition of distinctive programs is directed internally and externally, and serves a twofold purpose. Internally, it fosters appreciation for the quality of the university s academic programs and accomplishments of faculty, students and alumni; and encourages and supports programs in their achievement of excellence. Externally, it broadcasts the pride the university feels to external stakeholders, promotes public awareness of specific outstanding accomplishments and invites investment in the institution. This is a capacity-building initiative that is intended to promote collaboration, mentoring and external funding. Both of the programs selected for the top level of support already have earned national reputations as leaders in their disciplines. The financial services program encompasses several areas including the university s nationally recognized IRM program, the Networks Financial Institute, the Gongaware Center, and the Minas Center for Investment and Financial Education supported by an endowment from Randy and Nancy Minas to enhance the quality of investment and financial education programs. One initiative undertaken with the Distinctive Program support has been sponsorship of a series of executive-on-campus visits labeled our Leader in Action series. Visiting executives have included Mark Henderson, Executive Vice President and Chief Operating Officer-Property and Casualty Division, The Lockton Companies, Inc., former CPCU Society President James L. Britt, CPCU, managing partner, Britt Leadership Partners, LLC, and Bob Jones, President and Chief Executive Officer of Old National Bancorp, Indiana s largest domiciled banking and insurance holding company. These executives give of their time to join in classroom discussions of vital issues faced by their organizations and the clients they serve. Our visiting leaders generously offer guidance in keynote addresses at campus social functions that are open to both the campus and community. Global Perspective Insurance, risk management and financial services are recognized as an integral part of the global economy and marketplace. Cultural sensitivity and language proficiency have assumed new, higher levels of importance in business education. Consequently, APRIL

6 Indiana State University encourages both faculty and students to directly engage the global environment. Study abroad is an effective way to accomplish internationalization of faculty and students. The NFI Professional Development Program helps champion study abroad by allowing scholarship students to use up to one-half of their personal development account to help fund a semester abroad and many students are taking advantage of these opportunities. In addition, NFI has helped fund several student trips to Europe and the Far East. In conjunction with the IRM seminar focusing on excess and surplus lines insurance, students have visited Lloyd s of London, the London underwriting and broker market and major insurance organizations in Zurich, Switzerland. With the support of prominent ISU alumni, students also have visited Taipei banking and securities organizations. These global opportunities foster intellectual development, tolerance toward others, self-confidence, coping with ambiguity, critical thinking, understanding and appreciation of the world and one s place in it. Although limited to top students by resource constraints, international involvement is seen as a critical component of the IRM and Financial Services curriculum. People, Programs and Money The Insurance and Risk Management Program at ISU has achieved growth and success because three essential building blocks have existed. People have made it happen. There exists a dedicated faculty devoted to excellence and innovation in classroom instruction. The University administration recognizes the discipline s distinctive nature. A dedicated core of industry leaders contribute their time and talent to encourage continued growth and success. Unique programs for student learning and professional development have been created and implemented. Funding of Centers, scholarships and special events has enabled educational opportunities, research and thought leadership, community outreach and student development to be nurtured and grow. With the expansion of our IRM Program to our new Financial Services major, we continue to integrate teaching, research and creative activity in an engaging, challenging and supportive learning environment to prepare productive citizens for our community, state, nation and the world. Endnote 1. American Risk and Insurance Association, Risk Management: An Essential Part of the Common Body of Knowledge for Business, (November 1990), pp CPCU Society CPCU ejournal, Vol. 64 No. 4 April (800) 932-CPCU, option 4 6 CPCU ejournal