What business are you in? Examine this question carefully in this document by Chris Burand. A paradigm shift in focus from selling insurance to helping clients protect all their assets, especially their most critical ones, will be a shock to many agencies and insurers. But for those who accept this challenge, the future holds great opportunities!
Herb Kelleher, former CEO of Southwest Airlines, one of the best-managed companies in the U.S., once stated that 'Southwest is in the people transportation business, not the airline business.' His distinction is essential. Being in the people transportation business means expanding the definition of 'the competition' beyond other airlines to include private autos, buses, and trains. Southwest focuses on maintaining a cost structure low enough to attract customers who would otherwise drive, take a bus, go by train, or not travel at all. As a result, it's the most consistently profitable airline in the nation.
When he started his company, entrepreneur Norm Brodsky thought he was getting into the record storage business. He soon learned that he could only succeed by offering his competitor's customers significantly lower prices to break their contracts and that meant getting into real estate. Since the main cost of storing records in New York City (where he located his operations) is storage space, Brodsky needed to use real estate more efficiently. Because space is leased on a square footage basis regardless of the ceiling height, by leasing only buildings with tall ceilings his company was able to acquire more storage space for minimal additional cost and pass the savings along to his competitor's customers. The key was finding the right buildings, which put Brodsky in the real estate business.
At a Small Business Administration seminar a few years back, I met a minister who had concluded that his business was not just saving souls, but entertaining minds by drawing more people to his church. His goal was the creation of a marketing plan to convince people that attending his church would be more beneficial and enjoyable for their eyes, ears, bodies and souls than channel surfing, watching Sunday sports (especially football and NASCAR), fishing, golf, and a wide variety of other weekend activities.
What business are you in? As these examples show, the answer might be far from obvious. If you believe that you're 'selling insurance,' prepare your agency for a slow demise. Traditional P/C coverages are becoming less and less important by the day. According to some estimates, almost 50% of all Commercial P/C premium bypasses the traditional market, and conventional P/C products cover only 2% of corporate risks. In the past, every company needed a Fire policy because the risk of a fire was high and might have had a severe impact on the financial health of the firm. Today, the risk of a fire to a business is often minimal and its effects much reduced. The most important asset of many corporations is their data and customer records, which can be stored off site. Although computers and office space can be replaced relatively easily, too few insurers offer adequate coverage for data loss.
Conventional insurance protects only some assets not necessarily those that are most important or most at risk. A paradigm shift in focus from selling insurance to helping clients protect all their assets, especially their most critical ones, will be a shock to many agencies and insurers. But for those who accept this challenge and know what business they're in, the future holds great opportunities!