Tag Archives: agents and brokers

How to Avoid Falling for Groupthink

“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.

How Risk Management Differs From Insurance

The new cool lingo and title for producers is “risk manager.” When I interview these “risk managers,” most cannot tell me what risk management actually is — but the title helps increase sales.

Somewhere along the line I’ve realized that many people in the industry do not really understand what insurance does! “It protects in case of an accident” is the most common answer. But what does it “protect” in case of an accident?

Insurance is a subset of risk management. Risk management can be done quite well without any insurance, but insurance can’t really be done well, correctly, without some level of risk management. Insurance is usually sold without any risk management efforts due to many factors, including lack of knowledge among consumers, the difficulty of explaining insurance coverages, laziness on the part of insurance distributors and consumers, incompetency and the fact that selling a complex product like insurance is difficult unless the seller makes it seem excessively simple — hence cartoon animals and bumbling morons selling insurance, and selling it successfully!

Since time began, risk management has always existed, whether definitively or intuitively, in human endeavors. Modern insurance was created when risk managers for banks decided that a financial risk management tool was required to protect the loans they made to ship owners/builders. The banks needed a way to shift the risk of loans not being repaid in the event the ship sank or was pirated. The banks decided they could not cause enough cannons to be added (cannons were the original risk management tool against pirates), nor could the ships of the day be adequately engineered to overcome Mother Nature. So, some people in London created insurance.

Today, most property insurance serves the same function. People buy homeowners insurance policies to satisfy their mortgage company’s requirement. This is why so many people naively quit buying homeowners insurance when they’ve paid off their mortgage, because some insurance agent failed to explain the importance of liability insurance.

Risk management is designed to minimize risk, particularly probable risks. If you look at a normal curve of risk frequency, the large area in between the two ends is where straight, non-insurance risk management solutions shine. For example, in certain environments, the probability of someone slipping and falling is high. Insurance is not the best solution. Fixing the flooring is the best solution.

Insurance is the best solution for known risks that are highly unlikely to occur. Insurance is not designed to be a maintenance policy. Maintenance is known and expected. Insurance is designed for the unexpected and unlikely. Insurance companies would quickly go out of business if insurance covered the expected and likely because their claims would exceed their revenues or the price would be so high no one would buy the policies.

See also: 3 Practical Uses for AI in Risk Management

This reality of insurance leads to huge frustration among consumers because they don’t get to “use” their insurance. Who wants to buy something expensive to protect their property from an event that is highly unlikely and unexpected to occur? (Life insurance and health insurance are true exceptions to the unlikely and unexpected rule because death is highly likely. Life insurance is a death timing insurance for your death occurring at an unlikely, and therefore unexpected, time. Health insurance has morphed into an almost unrecognizable distant cousin of true insurance.)

Most agents do not adequately explain that buyers “use” their insurance daily. Insurance enables them to use their house immediately rather than waiting until they can purchase the house in cash. People get to drive, they get to bid on construction jobs, they get to protect their families. It’s hard to explain these benefits in jingles.

If a person is only selling P&C insurance, then, using a normal curve as an example, they are only addressing around 5% of a company’s risk. The other 95% encompasses more straight risk management solutions outside of insurance. If you call yourself a risk manager when you are really only selling insurance, are you representing yourself truthfully only 5% of the time?

This article was originally published at burand-associates.com.

3 Tips for Increasing Customer Engagement

Customers are rushing to embrace the digital space. Is your business prepared?

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Joseph Jenkins

Director of Professional Services

Kyle Henrie

Regional Director of Sales

Paul Carroll

Insurance Thought Leadership

An Inconvenient Sales Truth

When discussing acquisition strategy with producers, I’ll often hear them say, “Yeah, we compete on price, but we retain on service.”

The fact they even make this statement is a sign they know price alone isn’t enough. Yet, they don’t take the time to build a sales process that takes the decision away from price alone.

Price is always a factor; however, in most instances in this industry it is the level playing ground. With precious few exceptions, brokers have access to the same carriers, same plan designs and same prices. By admittedly competing on price, brokers/advisers never give themselves a fair shot at earning new business. This is why close ratios and new business volumes in most instances are way too low.

At least when it comes to fully insured plans, isn’t getting quotes one of the most basic tasks a broker does? By “basic,” I don’t necessarily mean it’s easy, but being able to get quotes and negotiate the renewal is, undoubtedly, a minimum expectation that business owners have of their adviser.

In baseball, the tie goes to the runner. The “runner” in our game is the incumbent broker who will almost always win the spreadsheet game.

You retain on what?

Now, let’s talk about the “we retain on service” declaration. Once again, isn’t this just another minimum expectation a business owner has of an adviser? Don’t they expect you to fix problems, advocate on their behalf and respond quickly?

Now, put both of these back together. If a business owner was working with an adviser who wasn’t able to handle the renewal effectively or who didn’t provide good service, what do you think the owner would do?

No doubt, the owner would fire the adviser in a heartbeat. The owner would fire the adviser because he wasn’t even meeting the minimum expectations.

Service PLUS

Some try to use a capabilities presentation as a tie-breaker. They accumulate a long list of “value-added services” (we prefer to call them non-insurance solutions) and drone on and on about all the extra stuff they provide their clients.

See also: Will COVID-19 Spur Life Insurance Sales?

Guess what? In today’s benefits’ world, that list of stuff is now part of the minimum expectations. If you don’t have the tools, don’t even bother showing up for the job.

Sure, you will occasionally win with the spreadsheet when going against a way-too-traditional broker. You may even catch the incumbent asleep at the service wheel and pick up an account that way from time to time. And, just maybe, you were an early adopter for that very solution an employer wants but hasn’t yet been offered. It does happen, just not often enough.

Don’t find a false sense of security from those occasional wins.

The universe insists on balance

Here’s the reality of client attraction and retention. You will lose every account the same way you won it. This happens because you train clients on how to buy based on the way you sell to them in the first place.

The most hypocritical of all are “spreadsheeters,” who are offended when a client asks other brokers to quote at renewal. Who do you think taught them that?!

Advisers whose value proposition is limited to the price of the insurance product and fixing stuff when it breaks are effectively saying, “Hire me because I can meet the minimum expectations better than your current guy/gal.”

A subtle but profound shift

We’ve already agreed, price is important. However, what is way more important than the price on the spreadsheet is an adviser’s ability to put together an overall cost control strategy. THIS is what should be discussed during the sales process. The spreadsheet is simply a lagging indicator (yes, I know underwriters are predicting future claims) of what has already happened. You should be competing based on your ability to develop a strategy that will help moving forward.

We also agree the non-insurance solutions in your capabilities binder are essential. However, just scrolling through the list of what you have to offer leaves you sounding like every other broker.

It’s time to dig into those solutions the way they were intended to be used. After all, you invested in them because they solve real problems faced by clients. Put yourself in the seat of that buyer. Do you think the buyer is more interested in listening to your we-have-it-too list of resources or in the list of problems they are struggling with that they need to solve? No-brainer, right?!

See also: Crisis Mitigation Beyond COVID-19

Don’t be lazy

This isn’t some profound insight, I know. However, most of your competitors are taking the lazy route to new business. Genuinely solving an expanding list of problems takes work. It is no longer enough to show up with a fancy spreadsheet, promises of better service and a capabilities presentation.

Make yourself the painfully obvious choice. Your new business acquisition strategy must be built on proving you can continually deliver better results than anyone else. When this is the way you acquire new business, when it’s the client experience you provide, you will find yourself losing fewer and fewer clients.

You can find this article originally published here.

Six Things Newsletter | July 28, 2020

Growing Risks of Social Inflation

Paul Carroll, Editor-in-Chief of ITL

“Social inflation,” an on-again, off-again issue for the insurance industry for more than four decades, is on again as a major factor in insurance claims and, thus, rates. The issue, related to beliefs and trends that lead people to expect ever-higher compensation and for juries to grant it, has been growing for several years and seems to have accelerated since last summer.

The pandemic and the economic crisis that resulted may exacerbate the problem for insurers — or may mute it. There are arguments on both sides. Some see social inflation being dampened as financially strapped people and businesses become more willing to settle a claim and as the logistical complications that come with less face-to-face interaction drag out negotiations and judicial proceedings. Some see social inflation increasing as people feel wronged and try to take out their anger on those that they distrust and that have enough assets to make them tempting targets — read, insurers (among others).

Me? I see the pandemic boosting social inflation… continue reading >

Optimizing Care with AI in Workers Comp Claims

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