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 To embrace — and benefit from — change, follow these guidelines.
Unrelenting and increasingly rapid change demands that the insurance industry rapidly uncover new ways to evaluate and respond to its marketplace.
I’ve worked with many highly successful insurance companies and agencies, helping them achieve higher levels of profitability through more sales, customer and employee loyalty, and retention. However, in many of these organizations, management remained blind to the dire need to change, despite its apparent desire to achieve higher profits. Managers can’t see the compelling need to change from the ways that allowed the organization to be successful in the first place.
These are smart, astute people. They understand their businesses inside and out. But something is wrong, as illustrated by a recent study in Business Week:
“Two years after In Search of Excellence reported on 43 of the best run companies in America, 14 of them were in financial trouble. After five years, 29 of them were in financial trouble, and only 14 of them were financially solvent. The reason: failure to react and respond to change.”
I believe these companies were less likely to react to change because of the Icarus Paradox. In Greek mythology, Icarus was the son of Daedalus, who had imprisoned by King Minos of Crete within the walls of his own invention, the Labyrinth. Refusing to be held captive, Daedalus made two pairs of wings by using wax to attach feathers to a wooden frame. Daedalus put on one pair and gave the other pair to his son Icarus, warning him not to fly too near the sun. The wings worked, and the father and son flew away from their prison. But Icarus, ecstatic about his ability to fly, forgot his father’s warning. He lost his gift. The sun melted the wax, the feathers came loose, and Icarus plunged to his death into the sea.
Putting this in the context of today’s business environment, the more successful a company is, the more it’s blinded to the urgent need for change. Many companies move into new marketplaces assuming that their past successes will continue. So they continue to repeat what has made them successful until the forces and opportunities of change have passed them by.
It’s human nature to rely on past successes and repeat what worked well in the past. Paradoxically, however, the seeds for failure lie in that very success. Consider Wang, U.S. Steel, Greyhound, New York Stock Exchange, Xerox, Digital, IBM, Zenith, GM, Kodak, AT&T, and Apple. These companies were once the company in their fields. But they kept doing what had made them successful, blind to changes in the market— and were left in the wake of those changes.
The insurance industry has never before witnessed such unrelenting and increasingly rapid changes as are happening today. Like the banking industry, it was heavily regulated, which insulated it from many of the competitive forces of the 1980s and 1990s (which most other industries were addressing to remain competitive). With the lifting of these regulations, the pent-up demand of employees’ and customers’ needs burst forth — an unprecedented situation. The insurance industry has been frantically seeking new ways to evaluate and respond to its marketplace.
Some progress has been made; however, there’s still a long way to go. The insurance industry is behind just about every other industry in its understanding and meeting of customers’ and employees’ needs. This was borne out in “The Quality Scorecard,” an annual survey of risk managers and other buyers and users of commercial P/C insurance, released by The Risk and Insurance Management Society, Inc. and the Quality Insurance Congress. According to its results, which average the customer-satisfaction levels for brokers, carriers, and third-party claims administrators, insurance industry groups scored 67 — a “D.”
Here are strategies for five realities in today’s marketplace. Study them well or your organization may wind up like Icarus:
1. Time is a precious commodity. No one has more free time today than five years ago. Customers are not forgiving when you waste their time, especially when you consider that some other industries can meet — and others can exceed — customers’ time expectations. Yet the insurance industry continues to be remarkably slow. Because customers are willing to pay extra for speed, the fast companies are winning.
Some time absolutes:
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Eliminate or minimize the need for your customers to spend time addressing a concern that your company should have foreseen. Design all your policies and procedures with an eye toward minimizing your customers’ time investment.
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Empower the first person who answers the telephone to answer questions, so that customers don’t need to be transferred to another person.
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Hire only educated, trained, and knowledgeable individuals.
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Record accurate customer information and preferences the first time.
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Produce accurate invoices so that your customers don’t have to spend time comparing their records with your invoices and then call to straighten out discrepancies.
As a rule of thumb, under-promise and over-perform.
2. The insurance business has become the advice business. The insurance industry no longer sells products and services — it offers advice. The profession has become like those of attorneys, bankers, and accountants. Sometimes clients take your advice and sometimes they don’t. This is a dramatic shift, and few understand its vast ramifications. The goal today is to have the largest share of your most valuable customers’ wallet — not to sell X product to as many customers as possible, but to create customers for life.
New advice absolutes:
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Ask for, record, and understand your customers’ needs, expectations, and preferences. Ask them what they need, what they expect from service and product performance, and how they want to be contacted. Record these for future reference by everyone in your organization.
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Build customer relationships for life rather than merely completing a sales transaction.
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Calculate your average customer’s lifetime value to your company. Then do the same for the customers who you consider your top 20%. These numbers will help you stay on track because you’ll view the relationships through the lens of long term, rather than short-term results.
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Maximize adding value to your relationships rather than selling another type of coverage.
As a rule of thumb, give invaluable advice that helps customers build their businesses. They’ll become so entwined with your organization that, with their shortage of time, they’ll eagerly resolve any problems with your organization rather than sever the relationship and re-forge it with another organization.
3. Technology is the driving force behind the rapid pace of change. You must embrace technology and use it as a tool to serve and retain your clients. Since the insurance industry is furthest behind the technology curve and has a higher cost of rework than just about any other business, there’s a dire need to reduce your heavy reliance on paperwork and to become technologically integrated.
Technology absolutes:
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Realize what technology offers. Banking and insurance are the only two industries in which I hear people referring to computers as “automation’ elsewhere, they’re called” information technology.” Learn to harvest the rich beds of marketing information that are at your fingertips. Offer e-mail to all clients as a mode of regular communication.
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Design and promote a Web site that’s customer friendly, content rich, and interactive.
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Set a goal as to when your company will upload and download all information to all carriers, agents, and insureds.
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Insist that everyone at your company become “computer-competent.” Computer illiteracy is too costly for any company.
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Hire only individuals who are knowledgeable about, and comfortable with, computers.
As a rule of thumb, learn a new technology tool or skill every month to stay current with the technology boom.
4. You’ll need more items in your “tool chest” to solve problem. All industries have sacred, unspoken rules of the game. You know the insurance industry rules extraordinarily well. That’s a strength — but also a weakness. You need to grow your “tool chest” of problem-solving techniques, because if you rely on the insurance industry to provide you with new tools, you won’t be able to keep up.
New solutions absolutes:
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Read Inc. and Fast Company magazines regularly.
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Join trade associations outside the industry to become familiar with how they solve their challenges. I’ve worked with companies in more than 40 industries. Many of the solutions I offer my clients come out of my experiences with other clients in different industries. Frequently, one industry’s approach provides an innovative solution to another industry’s problem.
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Stay hungry for important information. Business strategist Tom Peters recommend that when you travel, you purchase magazines that you know nothing about to enlarge your knowledge of other businesses, hobbies, and interests. Remember, this is the Information Age — those with the most information are ahead.
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Actively ask friends, family members, and other colleagues who don’t work in the insurance industry for their input and ideas for your company.
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Conduct an informational interview with new employees after they’ve been with your company for two months. This is usually when they start to become part of the “culture.” Their fresh perspectives provide fertile ground for improvements that other employees, who have been with your organization for years, might miss. Ask these new staff members what works well, where they see areas for improvement, and where unseized opportunities are.
As a rule of thumb, don’t make a significant decision without speaking to people from other industries and soliciting their input
5. Mass customization is replacing mass production. The rules of mass production were: “We make, you take. We speak, you listen.” The challenge was to create standard products and services and sell them to as many people as possible. The new market rules are: “You speak, we listen. We both will make.”
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Respond to your new market. The sales and service processes have become highly interactive because your new market is each individual customer. To obtain information about your market, you need to ask each customer for their input, wants, and needs — and never stop asking.
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Develop a database to store this marketing information for access by anyone in your organization.
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Create customized products and services that add value to customer relationships.
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Develop tools to be able to manage customer relationships successfully in this new, volatile marketplace. Your company’s top relationships need written marketing and business plans. Keep it simple to start with, but start. For instance, begin this process with your top 10 customers.
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Embrace these new realities. Ponder them. Invite your clients’ and employees’ input. The insurance industry you knew and grew up in is nearly extinct. We all know much less than we need to know to be successful.
CONCLUSION
Now, more than ever, we have to keep pace with change — otherwise, we’ll be left in its wake. A favorite saying of mine is: “When the pace of change inside an organization is slower than the pace of change outside an organization, the end is near.” The most successful people I know in the insurance industry are those who, rather than seeing threats, are seeing the opportunities that the new marketplace offers.
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