Thursday, October 18, 2007

Severance Insurance

I find it interesting that on its FAQ's page defines its target market as "Corporations in search of significant new cost efficiencies." Big whoop! Like what corporation isn't looking for new cost efficiencies. But these guys aren't all that stupid. You tell me what else new is there out there that can generate savings over current cost of 25% to 40%?

The FAQ's page also sort of answers the question "why would a corporation buy severance insurance?" The answers make it pretty clear as to where these guys' heads are. Reference to "improved returns on equity" would seem to say that these guys are focusing on private equity, the M&A universe and major activist investors. The use of "improved returns on capital" would seem to say that publicly held companies are on its radar screen. That seems to be confirmed by reference to "smoothing earnings".

I can figure out the attraction for corporations. That's pretty simple. Severance insurance saves money. But I'm still struggling with what the benefits are to the displaced worker and what would get Human Resource executives comfortable with a change in severance policy.

As I've said before the severance insurance guys are obviously not stupid, so I suspect they've got their arms around the worker benefit issue. It's probably pretty obvious, but I'm just a little slow in seeing it.


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