Tag Archives: request for proposal

No More Need for Best-of-Breed Solutions?

Every five years or so, the insurance industry changes course. Hard market, then soft market. Keep the lights on, then innovate. Build, then buy. Outsource, then in-house. Best-of-breed, then suite.

Unlike with most politicians, some measure of this waffling is certainly beyond the control of insurers truly in the thick of it. However, other preferences reflect the uncertainty of markets and economies, the fluctuation of consumer expectations and demands and what some may call downright desperation to stay ahead of the curve.

Technology has long been recognized as an enabler, and it definitely fills that role when planned for strategically and implemented well. As the industry has taken up the challenge of providing faster, better, more personalized service to consumers, the demand for technology to facilitate the necessary processes has increased, as well. Core system modernization has become a top priority for insurers across all lines of business (LOBs). This means analyst firms and consultants are being engaged at a staggering (and expensive) rate to help spec out requirements, develop the request for proposal (RFP) and narrow things down to a very short list.

Interestingly, the biggest question for most insurers is not whether all of the core administration systems need to be replaced, but rather how and when is the best time to do it. Enterprise rip-and-replace projects traditionally come with a big stigma, a heavy dose of fear and bit of skepticism. Can it be pulled off successfully? With advances in technology such as the move toward cloud for deployment, the incorporation of configuration tools that promote insurer self-sufficiency and better implementation methodologies, the dark skies are definitely clearing.

Today’s most modern enterprise suites provide better integration, better capability and better results than niche-focused solutions of the past. While suite components can, by and large, all be implemented individually, pre-integration, reliance on a single data repository, use of a common architecture, an ensured upgrade path and common user interfaces mean these solutions still have a serious competitive edge over standalone systems. But does this really mean there is no more need for best of breed?

Better Integration

Once famous for creating silos and building “kingdoms” within the enterprise, insurance technology has come a long way. Recognition that insurance processes could be completed faster, and with greater assurance of accuracy, if every relevant employee was looking at the same information, insurers are turning to enterprise suites as the solution of choice. The core administration (policy, billing and claims) components of most modern enterprise suites offer increased integration and conveniently draw information for customer service representatives (CSRs), agents and underwriters from a single data or document repository. Further, by building on similar workflows, user interfaces (UIs) and processes, enterprise suites minimize change management issues and decrease downtime needed for training.

Better Capability

It’s pretty common to hear technology vendors talk about how their solutions let insurers concentrate on core competencies, but rarely is this turn of phrase actually applied to technology vendors. Insurance suites of the past typically built out full, robust capability for core administration processes, but only invested in the bare minimum when it came to supporting processes, functions and components. The best enterprise suites available today not only handle, but excel at, providing capability for peripheral processes that support core administration, including reinsurance, underwriting, document/content management, accounting/general ledger, agent/producer and consumer portals. This depth of capability was once only available to insurers through best-of-breed solutions, but now only highly customized situations and processes require such niche-focused systems.

Better Results

Even though everyone suspects it’s a much higher number, best guesses throughout the industry say that insurers replace core administration systems only once every eight to 10 years. That low frequency hardly allows internal IT staff to gain any kind of proficiency in implementation methodologies or change management. The tightly integrated nature of suite components eases implementation challenges measurably, and at the end of the day, once you get into a groove, why get out? By taking advantage of teams already established for one replacement project for another, insurers can lessen business interruption significantly. Plus, using an agile implementation methodology that incorporates iterative releases will eliminate the scope creep and missed expectations inherent to waterfall projects.

Conclusion

Five or 10 years ago, it may have been necessary to buy a best-of-breed technology solution to get capability specific to a certain LOB or process. However, modern enterprise suites, whether implemented together or individually, today offer the same robust capability once offered only by best-of-breed solutions, but with better integration, faster access to critical data, significantly easier upgrades and ultimately, better results.

3 Sales Myths That Are Killing You (And You Probably Don’t Even Know It)

You don’t have to sell everyone and you don’t have to serve everyone. The idea that companies should chase every piece of business out there and that if they don’t they’re leaving money on the table is antiquated. The negative impact of chasing the wrong prospects and serving the wrong customers is huge. To change your approach you may have to remove the myths that you may believe. Here are three:Myth #1: The Law Of Large Numbers
“More means more” is the core of this myth. More prospects means more sales … The only time that I see this myth become truth is not when you are a salesperson, but when your role is truly just order taking. Order taking means that the purchasing energy is driven by customer demand, not salespeople demonstrating value and securing new customers and contracts. All prospects are not created equal and the most successful salespeople who truly sell are successful in part because they prune their list, reducing the number of prospects regularly.Myth #2: The Funnel (Hotel California) “You can check in any time you like, but you can never leave…” These lyrics from The Eagles song “Hotel California” are just as true for CRM and sales tracking systems. There is a belief that once a prospect has been added to the list of qualified targets that companies should continue to communicate, sell, participate in RFPs and generally pursue those companies. I was in a session recently during which a company’s leadership bragged about chasing a deal for a decade. What a waste. Think of it: Ten years of newsletters, trade shows, prospecting campaigns, RFP participation and so on. How much margin would there need to be above regular business margin to pay for the huge investment made?

Myth #3: Money Is Money (Even When The Client’s A Jerk)
Some clients are just not worth having. I see companies clinging to the old idea that “the customer is always right,” allowing low-profit and bad-cultural-fit clients to eat away at their businesses. A great quick read is Robert I. Sutton’s book, “The No Asshole Rule.” It was written about employees but is every bit as true for customers. The negative blast zone in a company that a bad employee or a bad client creates is far more damaging than the revenues they produce.

Here are quick reality checks for you to test how your company is doing in regards to these myths:

  • How many prospects in your pipeline have been there longer than 15 months without an order? Fifteen months may be the wrong window, but there is a period after which the prospect is just an expense, not a real opportunity.
  • How many of your clients violate “The No Asshole Rule?” Determine how they became customers and then figure out how to avoid those prospects in the future.
  • Do you have a threshold for your salespeople as to how many prospects they can have active in their pipeline at any one time? Salespeople can be blocking real activity by “claiming” prospects when they haven’t made progress after a defined period. They can’t land the opportunity and your company is not landing another client either because your salesperson is tied up in a dead pipeline.

Myths are fiction passing as facts. Clean out the myths and you can refocus your sales efforts.

Hiring Your Insurance Advisor

Hiring an insurance advisor to handle your insurance is a critical necessity for a business owner. While many business owners know this, unfortunately, others default to a personal friend, a relative in the insurance business or the sales person that is friendly and wants to save you money. While there is not really anything terribly wrong with this (after all, you should work with someone you like), it is often better to work with someone you respect. That respect should be based upon experience and knowledge. The problem with that sentence is that since you do not understand insurance in all of its complicated glory, how do you select your broker?

Well, nothing is a perfect science, but if we put aside personalities for a little bit, there are some basics that you can follow that will help you make an appropriate decision based upon facts and then can factor in the personalities.

Some Basic Truths

First: Interview a prospective insurance agent/broker and qualify them according to your own needs.

Second: Insurance is a large portion of your annual expenses.

Third: You have a significant potential for uncovered losses that can put you out of business or cause you to lose capital and/or assets.

Fourth: All insurance policies are not created equal.

Fifth: There is no such thing as coverage for every type of loss.

Any insurance broker that starts the conversation by offering to reduce your insurance premium should be shown the door — immediately. If that is all they have to offer, move on.

It's All About Price, Right?
Purchasing insurance is a very serious consideration for the preservation of your business capital and should never be just about price. Every agent/broker will attempt to get the lowest possible premium so that they are competitive. Many businesses have purchased insurance only to find out at the time of a loss, that the insurance was inexpensive because it did not provide proper coverage. Although agents and brokers are licensed, there are great differences of education, knowledge and market understanding among them. An insurance advisor that is at the top end of that scale is an invaluable resource to you and your business.

For illustration purposes, here's a classic example: An underground water pipe breaks and the business owner has to remove a significant portion of paving as well as the pipe and replace both. The cost is $500,000. The insurance coverage placed by their insurance broker paid not a dime. Why? Underground pipes and pavement are often excluded types of property. Here's the pitiful part: Coverage can be provided for these items and at no additional premium (the limit of insurance, however, must include these values).

It is important that you understand which losses you are insuring and which losses you are retaining. A knowledgeable insurance advisor will help you identify your normal as well as unique exposures to loss, offer coverage and, most importantly, be able to explain that coverage in terms that make sense to you as a business owner without a lot of insurance techno-babble.

Think about the many complexities of various contracts you enter into. Insurance is another contract that is just as complex and detailed as your other business agreements.

Keep 'Em Honest
If you are sending your insurance out to quote to “keep your insurance agent honest,” get another insurance agent because clearly you do not trust your current agent.

You should have a trusted advisor that has demonstrated their skill and depth of knowledge, who understands you and your business by asking for information and providing insurance or other risk guidance to you on an ongoing basis. If your business generates significant premium, interview competing agents and select one in addition to your incumbent agent and obtain a coverage review and quotation every three years.

You should create a Request For Proposal in order to provide the same information about your company to each competing broker. Assign them insurance markets. Allow your current advisor first choice for their top three or four insurance companies and have the competing broker identify the three to four insurance companies they will be using. The competing broker cannot use the same markets as those of your current broker. Your current broker should always bring their proposal to you after the competing broker.

Don't Shoot Yourself In The Foot
Never provide one broker's proposal or reveal information to the other. If the competing broker brings significant coverage issues and solutions to the table that your current advisor has never talked about, then perhaps you need to reevaluate your choice. One of the business practices that is the most aggravating to insurance professionals and is just plain wrong is to send everything that a competing broker has developed as risk exposures and solutions over to the existing broker by the owner. If the exposures are significant and the coverage analysis has been performed and specifics given to you, why would you do this?

Let's see if this makes sense: Give someone else's work to the person that has been mishandling your coverage and tell them to fix it. That is not buying insurance based upon real solutions — that is simply buying insurance either from someone you like or because you think they are the cheapest game in town.

Ask And Tell Policy
The relationship between you and your insurance advisor must be based upon proper communication. Tell your broker everything about your business and ask questions about your insurance program. Never assume that “your agent is handling” it. Ask your insurance advisor to become involved in contract negotiations or buy-sell agreements before you sign them. Their job is critical to your continued viability as a business: standing between you and your loss of capital and assets. As President Reagan famously said: “Trust, but verify.”

Important Terms

Agent Places your insurance coverages through an insurance company with which they have a contract (called an agency appointment). An agent legally represents the insurance company to the buying public. Note that in some states, the state regulations use the term “producer” and may encompass both an “agent” and “broker” in a legal capacity.
Independent Insurance Agent Often represent many insurance companies with which they place insurance. Although legally representing the insurance company, they also represent the insurance buyer and have a different status than agents that represent only one company.
Broker Places your insurance coverages with one or more insurance companies. A broker legally represents the insurance buyer to the insurance company and is not required to have a contract with any insurance company. A broker can go directly to certain insurance companies or may access insurance companies through a surplus lines broker.
Surplus Lines Broker Also known as a “wholesaler”. This is a company through which difficult lines of insurance are written. State laws control how the insurance delivery scheme is enacted. Your broker goes to the wholesaler who places your coverage through an insurance company. The insurance company could be “admitted” or “non-admitted”. You will pay fees to both and these should be completely disclosed to you, in writing. The premium for a non-admitted insurance company does not include taxes and fees; those must be disclosed in writing along with the actual premium.
Insurance Market Access The type of insurance professional that has the widest market access is an independent insurance agent who is also licensed to act as an insurance broker. Although the license name varies by state, the critical question is: Can you only write business through insurance companies with which you have a contract or do you have access to a wide variety of insurance companies directly or through surplus lines brokers? This allows the widest insurance market access to properly transfer your exposures on a competitive basis.
Insurance Consultant / Risk Manager An independent person who works exclusively for the hiring party. This person will provide guidance for managing your risk and will work directly with your agent/broker (or prospective agent/broker) for proper insurance placement. An independent consultant should never actually place your coverage. This person should create insurance specifications that are extensive, provide those to your agent/broker and review the insurance placed and received for conformance. Verify that your consultant does not, in any manner, receive payment or share in the commission from the insurance agent/broker. This creates a conflict of interest and the consultant is no longer acting exclusively for you. A consultant should also never promise to reduce your premium and receive a fee for doing so. This also reduces the altruistic nature of the relationship.

Download an interview sheet that you can use that may be of help to you in this endeavor.