"In our world, parallel lines do not meet, and you can't turn an orange wrong side out." --Joseph Krutch
Yet, I see carrier management and agency owners regularly default to wishful thinking in their decision making. In other words, while parallel lines do not meet, these specific people believe the lines should meet. They make decisions on that assumption. Reality, though, does not change. Parallel lines can never meet no matter how much a person wishes the lines did meet. To pretend otherwise and make decisions in this alternative reality can only lead to problems if not disaster. And just because disaster does not happen immediately should not be taken as a sign that it won't.
A famous company once had an executive promoting how he had made parallel lines meet. Because most people did not look too closely and the accounting was opaque, what people did not notice was that a shell con game was being played (not literally a con game). While the line-bending benchmarks were being touted, the results being reported were mostly due to an entirely new part of the business that did not have a true financial reckoning until the credit crisis. Even after that, it took about 10 more years for people to admit they'd been seeing a mirage -- when financial promises were finally and completely broken.
Always remember: Parallel lines never meet. And you can work to see the lines as they are rather than as you wish them to be.
An example or two might help. Take two carriers of equal size. One has an issue causing expenses to be $200 million more than the competitor's. All else being equal, the first carrier's loss ratio needs to be the equivalent of $200 million better. Yet the management of that carrier has proclaimed that its loss ratio only needs to be the same because there is no way its expense ratio is higher than average. So, the carrier loses money the next year, and the next, and the next, and the next. Parallel lines are straight, not warped. The carrier's thinking is warped (true story).
Or, there are agency owners who think that unmotivated producers will become motivated on their own initiative. That is warped. If the producers had initiative, they would already be motivated (true story, multiplied by thousands).
Yet humans are pre-programmed to believe what they want to believe, reality be damned. St. Augustine wrote something to the effect of, "Do not plan long journeys [pilgrimages], (to help you believe more in something like an aspect of religion in this realm) because whatever you believe in you have already seen." I have read one theory that the strong desire of humans to believe in whatever they want to believe is for survival. If they did not believe in the unreal, they might give up hope. That makes some sense to me, so the challenge is to know when to believe in reality and to be disciplined enough to recognize the "when" to believe in reality regardless of how sour that reality may be.
See also: Another Reason for Insurers to Embrace AI
The solution, one of the few solutions actually, is to have someone close to you who will always be brutally straight with you.
Another solution is to be away from your kingdom, your organization, when you seek advice. A human's ability to accept reality often increases the farther one is from home.
Another solution for larger organizations is to always have outsiders on the board and give them extra influence or voice. An entity will begin believing in alternate realities even more rigidly than individuals. This is what happens with groupthink. An example of carrier groupthink is everyone at a carrier thinking it has great claims service even though the agents, based on their customers' experience, almost universally say differently (again, true story).
Reality really can suck. No bones about that. But reality usually wins, so if you want to be a winner, take steps to understand and accept reality on a vigorous basis.