Tag Archives: values

Advice for Aspiring Leaders in Insurtech

Starting a company has been likened to jumping off a cliff and building an airplane as you fall through the air. Risky stuff. I mean, really risky stuff. Living in Silicon Valley and around people who do this all the time as though it were normal, you can begin to think it is. Or maybe my brain has always been wired that way.

At least four times now, I have boldly proclaimed to my wife of 21 years, “I have this idea, and I am going to do X.” And “Oh, by the way, we probably won’t be getting paid for a couple of years. And…well, there’s a high degree of risk involved, which means it is highly likely we won’t get paid…at…all.”

In starting our current company, Limelight Health, four of us had an idea, iterated, worked hard and took no salary for over two years. We now now employ 120 people all over the globe and have raised roughly $44 million in venture capital. The journey from a chief executive of four founders haggling over how to get started and what to do, to CEO of a venture-backed company with lots of employees, has been nothing short of amazing. It has required me to do one thing, placing it above all else: exercise the willingness to let go of who I am and embrace constant change. Not in a theoretical way, but in a real, difficult, deep down-in-the-gut and character-changing, emotionally taxing way.

At any company, you have to spend a lot of time talking about values. Who are you as a company? How are you going to treat employees, each other, customers and partners? It’s fun to talk about, yet much more difficult to execute.

To that end, the best advice for an aspiring leader in the insurtech space would be to fearlessly create and live by tenable, actionable values. Talk about them with new recruits, talk about them in interviews, talk about them in All Hands meetings. Be sure to recognize employees who espouse them and call each other out when you’re not living up to the values.

Below are some values that hold strong when leading a new company in this industry.

See also: Key Difference in Leaders vs. Managers  

Humility and Awareness. Leading a startup, it’s easy to think you are right or that your way is the best way. Typically, leaders don’t enjoy being wrong. It’s easy to become angry when someone doesn’t behave in a way that is consistent with your view of how the work environment should be. You want to surround yourself with people and direct reports who will point out problems.

When you are challenged and coached, you become humbled. From there, you can grow. All that is required is the humility to listen and the awareness that sometimes things need to change to set the tone for and build a great culture. If you aspire to lead in the insurtech space, find some humility. One way or another, when you innovate and disrupt, humility will meet you at your doorstep.

Kaizen. A Japanese word for “continual improvement,” kaizen refers in business to activities that continually improve all functions and involve all employees from the CEO to the “assembly line workers.” Sometimes you have to climb into a cocoon, die and come out something altogether different. When you make a mistake, it’s important to jointly work hard to focus not on blame or how badly someone performed, rather, conduct a retrospective to discover how you can improve. If you are aspiring to lead, you have to do just that, and I can guarantee that you will be the one who changes more than anyone else.

Grit.Grit is passion and perseverance for long-term and meaningful goals. It is the ability to persist in something you feel passionate about and persevere when you face obstacles.” You will invariably face obstacles: Everything will take longer, cost more and be more difficult than you can possibly imagine. Simply put, you will need some grit to push through.

See also: Setting Goals for Analytics Leaders  

It is an incredibly exciting time to be in the insurtech space. There are innumerable problems, but with those problems come rich opportunities.

Which Rules Should Insurtech Break?

There’s a lot of attention being given at the moment to the startup firms that are entering the insurance market in the hope of grabbing attention and business by disrupting the established ways of doing things. And some of these insurtech startups are indeed introducing new and exciting ideas to the market. Disruptive thinking has its upside, and customers will benefit from it. Does it have a downside as well, though?

There’s a view that, to be successful, disruptors need to “delight in breaking rules, but not rules that matter.” This view can lend startups a certain piratical air, yet it can also cause them to see the rules that get in their way as the rules that don’t matter. That’s why we’ve seen some high profile insurtech startups crashing into regulatory brick walls: Zenefits is a classic example of this.

Now,  I’m not saying that startups shouldn’t hit problems, even regulatory ones, but what I am saying is that they should at least get the basics right, even if the basics are themselves disruptive to the work of disruptors. The U.K.’s Information Commissioner made this clear to the insurance industry in 2015 when he pointed out that “big data is not a game played by different rules.”

See also: An Eruption in Disruptive InsurTech?  

I’m also not asking for insurtech startups to occupy the high moral ground, but I am saying that they cannot reinvent “doing business” in ways that sidestep the ethical values that consumers expect firms to uphold. Nailing business values like “innovative” and “disruptive” to your piratical mast won’t stop inconvenient winds like “honesty” and “fairness” from pushing your exciting voyage toward the hard rocks of reality.

It is with terms such as honesty and fairness that customers often describe what a “good financial services firm” feels like. Yet insurtech start-ups are often being urged to disrupt customer expectations, seeing them as a quaint left-over from an old way of doing things. The future is instead said to lie in insurance providers getting closer to their customers in all sorts of ways. Yet isn’t business success more reliant on customers wanting to get closer to firms? It’s the latter that leads to the former, not the other way around.

The danger is that disruptors’ natural and essential super-confidence in themselves is translated into overconfidence in the ethical correctness of their decisions and judgments. And there’s then the tendency for them to believe that other people think the same way as they do. Both are fairly normal traits that we all exhibit in some form or other in our everyday lives. I certainly do, and my daughters have pulled me up short with one or two of the decisions I’ve made.

See also: The State of Ethics in Insurance  

And that sort of challenge, that sort of “knowing you but through different eyes” is vital for insurtech startups. While insurance needs disruptive startups, they in turn need disruptors of group think, of the wrong sorts of overconfidence. As the folklore of startups fills with tales of disruptors being told they’re not being overconfident enough in their business plans, let’s put out a marker of hope for 2017, that it will see tales of disruptors being told they’re not being ethical enough in their business plans, that they’re not doing enough to earn the trust of consumers. It’s very possible, if the market and those advising them want it.

3 Keys to Achieving Sound Governance

Of the many definitions of governance, the simplest ones tend to have the most clarity. For the purpose of this piece, governance is a set of processes that enable an organization to operate in a fashion consistent with its goals and values and the reasonable expectations of those with vested interests in its success, such as customers, employees, shareholders and regulators. Governance is distinct from both compliance and enterprise risk management (ERM), but there are cultural and process-oriented similarities among these management practices.

It is well-recognized that sound governance measures can reduce the amount or impact of risk an organization faces. For that reason, among others, ERM practitioners favor a robust governance environment within an organization.

A few aspects of sound governance are worth discussion.  These include:  1) transparency and comprehensive communications, 2) rule of law and 3) consensus-building through thorough vetting of important decisions.

Transparency 

Transparency lessens the risk that either management or staff will try to do something unethical, unreasonably risky or wantonly self-serving because decisions, actions and information are very visible.  An unethical or covert act would stand out like the proverbial sore thumb.

Consider how some now-defunct companies, such as Enron, secretly performed what amounted to a charade of a productive business. There was no transparency about what assets of the company really were, how the company made money, what the real financial condition actually was and so on.

Companies that want to be transparent can:

  • Create a culture in which sharing of relevant data is encouraged.
  • Publish information about company vision, values, strategy, goals and results through internal communication vehicles.
  • Create clear instructions on a task by task basis that can used to train and be a reference for staff in all positions that is readily accessible and kept up to date.
  • Create clear escalation channels for issues or requests for exceptions.

Rule of Law

Good governance requires that all staff know that the organization stands for lawful and ethical conduct. One way to make this clear is to have “law abiding” or “ethical “as part of the organization’s values. Further, the organization needs to make sure these values are broadly and repeatedly communicated. Additionally, staff needs to be trained on what laws apply to the work they perform. Should a situation arise where there is a question as to what is legal, staff needs to know to whom they can bring the question.

The risks that develop out of deviating from lawful conduct include: financial, reputational and punitive. These are among the most significant non-strategic risks a company might face.

Consider a company that is found to have purposefully misled investors in its filings about something as basic as the cost of its raw materials. Such a company could face fines and loss of trust by investors, customers, rating agencies, regulators, etc., and individuals may even face jail time. In a transparent organization that has made it clear laws and regulations must be adhered to, the cost or cost trend of its raw materials would likely be a well documented and widely known number. Any report that contradicted common knowledge would be called into question.

Consider the dramatic uptick of companies being brought to task under the Foreign Corrupt Practices Act (FCPA) for everything from outright bribes to granting favors to highly placed individuals from other countries. In a transparent organization that has clearly articulated its position on staying within the law, any potentially illegal acts would likely be recognized and challenged.

How likely is it that a highly transparent culture wherein respect for laws and regulations is espoused would give rise to violations to prominent laws or regulations? It would be less likely, thus reducing financial, reputational and punitive risks.

The current increase in laws and regulations makes staying within the law more arduous, yet even more important. To limit the risk of falling outside the rule of law, organizations can:

  • Provide in-house training on laws affecting various aspects of the business.
  • Make information available to staff so that laws and regulations can be referenced, as needed.
  • Incorporate the legal way of doing things in procedures and processes.
  • Ensure that compliance audits are done on a regular basis.
  • Create hotlines for reporting unethical behavior.

Consensus-Building

Good governance requires consultation among a diverse group of stakeholders and experts. Through dialogue and, perhaps some compromise, a broad consensus of what is in the best interest of the organization can be reached. In other words, important decisions need to be vetted. This increases the chance that agreement can be developed and risks uncovered and addressed.

Decisions, even if clearly communicated and understood, are less likely to be carried out by those who have not had the chance to vet the idea.

Consider a CEO speaking to rating agency reviewers and answering a question about future earnings streams. Consider also that the CFO and other senior executives in separate meetings with the rating agency answer the same question in a very different way. In this scenario, there has clearly not been consensus on what the future looks like. A risk has been created that the company’s credit rating will be harmed.

To enhance consensus-building, companies can:

  • Create a culture where a free exchange of opinions is valued.
  • Encourage and reward teamwork.
  • Use meeting protocols that bring decision-making to a conclusion so that there is no doubt about the outcome (even when 100% consensus cannot be reached).
  • Document and disseminate decisions to all relevant parties.

During the ERM process step wherein risks are paired with mitigation plans, improved governance is often cited as the remedy to ameliorate the risk. No surprise there. Clearly, good governance reduces risk of many types. That is why ERM practitioners are fervent supporters of strong governance.

Healthy Disrespect for the Impossible

When people are extraordinarily successful, examining their characteristics, values and attitudes can be instructive. The rest of us can learn from them and possibly adopt some of them to advance our own goals. Larry Page, co-founder of Google is an example of one who has achieved exceptional heights. Peering into his thought process can be enlightening.

Page says, “Have a healthy disrespect for the impossible.”

To conceive and develop the Google concept and then the massive company, its young founders had to have a very healthy disrespect for the impossible. Others besmirched the idea of collecting all the information in the world and then making it available to everyone in the world. Not only was it a bold idea, it was thought by most to be ridiculous and impossible. But Larry Page and Sergey Brin had a very healthy disrespect for the impossible. They made it happen.

The concept of disrespecting the impossible could be entertained by those of us in the workers’ compensation industry. True, few of us are likely to reach the pinnacle level of Larry and Sergey, but we can borrow some of their bold thinking to get past the assumptions and barriers that keep us from achieving more.

Everyone agrees workers’ compensation as an industry needs a healthy nudge to try new things. The industry is known for its resistance to change. Maybe the way to change the industry, to be an industry disruptor, is to begin with an attitude of disrespecting the impossible.

Many people, including those in the workers’ compensation industry, focus on why something cannot be done. Reasons for this notion are many, but probably cultural tradition plays a role. Inventiveness is not expected or appreciated. Too often, the best way to keep a job in corporations is to keep your head down and avoid being noticed. Spearheading a new ideas is risky.

Stonewalling new ideas or doing things differently or adopting new technology in an organization thwarts creative thought and certainly diverts progress. I was once told that to incorporate a very good product would mean doing things differently in the organization. So the answer was automatically no!

We all know the old saying about the word “ass-u-me.” It actually packs some truth. To avoid the trap, check assumptions for veracity. Incorrect assumptions can be highly self-limiting.

Begin the process of problem-solving with new thinking — disrespect the impossible. What could be done if the perceived barriers did not exist? What could be accomplished if new methods were implemented.

Probably the most important ingredient for achievement in any context is tenacity. It’s easy to quit when the barriers seem daunting. Tenacity combined with a disrespect for the impossible might be unbeatable.