What is “Fiduciary Responsibility” for a Mo Mutual Board Member or Officer and how might it apply to managing your cash flow?

Let’s start with what is a Fiduciary? Here is what Investopedia has to say:

A fiduciary is a person or organization that acts on behalf of another person or persons to manage assets. Essentially, a fiduciary owes to that other entity the duties of good faith and trust. The highest legal duty of one party to another, being a fiduciary requires being bound ethically to act in the other’s best interests.

What is Fiduciary Responsibility for a MO Mutual Board Member of Officer? Again, Investopedia:

  • A fiduciary duty can be held by directors, as they can be considered trustees if on the board of a corporation. Specific duties include:
    • The Duty of Care: This applies to the way the board makes decisions that affect the future of the business. The board has the duty to fully investigate all possible decisions and how they may impact the business; If the board is voting to elect a new CEO, for example, the decision should not be made based solely on the board’s knowledge or opinion of one possible candidate; it is the board’s responsibility to investigate all viable applicants to ensure the best person for the job is chosen.
    • The Duty to Act in Good Faith: Even after it reasonably investigates all the options before it, the board has the responsibility to choose the option it believes best serves the interests of the business and its shareholders.
    • The Duty of Loyalty: This means the board is required to put no other causes, interests or affiliations above its allegiance to the company and the company’s investors. Board members must refrain from personal or professional dealings that might put their own self-interest or that of another person or business above the interest of the company.
  • If a member of a board of directors is found to be in breach of their fiduciary duty, they can be held liable in a court of law by the company itself or its shareholders.

Breach of fiduciary duty sounds serious…What are the consequences?

Does your investment policy statement address how you are to keep non-interest bearing company surplus at a minimum? Do you have an investment policy statement?

Paying claims is thought of as an expense for most insurance companies, but there are institutional investment tools available through Legacy Wealth Management to Mo Mutual’s that allow for claims checks to be written and to earn interest  until they are cleared. Sometimes clearing is a quite lengthy period of time for the claims checks to clear due to them being mailed, and then forwarded to countersigning parties (mortgagee’s and divorce situations) and returned and finally deposited and cleared.

In a recent call with Jay Buschmann of the MO Department of Insurance, there are funds sitting in Unclaimed Property from un-cleared claim checks.

This float time can cost your Mutual thousands of dollars each year in lost earnings. What is your outstanding claims checks balance and how much would interest earned on that float help your company surplus?