understanding opportunity and risk

minimising future risk       creating sustainable advantage       creating opportunity

The Drive to Maintain Mediocrity.                  July, 2011

The world is changing. The pace of change is increasing. Commercial pressures are increasing. Costs are increasing. Everywhere we look, prices are going up - none more so than the increasing cost of insurance premiums. The average increase in the last year seems to be in the region of 15-30% ... with sometimes more being seemingly acceptable.

Insurance companies will all give seemingly important reasons for these horrendous price increases. But are they reasons or are the excuses? Excuses to hide the real turmoil behind the slick marketing facade?

Take a peek behind that slick marketing facade and you will see quite clearly that many (be kind, probably not all) insurance companies must surely be among the laziest companies ever in existence. People, organisations and even countries need insurance. In many instances they are legally bound to carry insurance. This means insurance companies have in essence a captured market. No matter what they do, they make money. They don't have to try. Money comes flooding in through the network of regulatory burdens and imposed moral dilemma's on individuals and companies. The commercial pressures severely affecting the rest of the normal world are not really in existence to the same extent within the insurance industry. Insurance is cotton-woolled.

And as money comes flooding in to these companies, as they don't have to try too hard, what they call commercial organisations, have in fact grown up piece by piece, bolting new areas on to the main body of the insurance company without going to much trouble to integrate. From a business sense, this means grossly inefficient and highly silo managed areas of business with significant disconnects that increase risk and cost and often cause such an obscene resistance to change protected only by the legal need for people and other companies to carry the cost of insurance.

No matter what happens, we have to carry the cost.

The inherent inefficiency of the laziest insurance companies can be shocking to discover. There seems little control over processes or budgets, little accountability and even less internal communication - underpinned by the risk averse cultures adopted by inappropriate management petrified they may have to change from their cosy world and actually emerge into the commercial harshness the rest of us have to survive within. This culture of "business as usual" and the nepotism of internal promotion within some companies creates only that slow, creeping ascension towards mediocrity, the drive to maintain mediocrity. This is so because no matter what they do, the money will keep coming in. No matter the serious, serious mistakes made, the money will keep coming in. Such is the commercial laziness we all pay for within the increasing cost of insurance premiums.

My advice to you - shop around ... and then shop around again. Especially if you are a business forced to carry the heavy burden of insurance in this day and age of financial pressures. Do NOT put up with ridiculous price hikes. Do NOT put up with poor service. You can and should receive better than this.

And, if you are from an insurance company reading this, I also have a message for you. It really is time you offered something better than high cost and poor service. Because if you don't, your competitors will wake up to the rewards to be gained from doing so. Your competitors are starting to wake up to the rewards gained from internal efficiency, from streamlining, from alignment, from end to end information management, from automation - and importantly from innovation and the type of evolutionary change that drags lumbering 19th century companies kicking and screaming into the sharpness of the 21st century.

Insurance companies are ripe for efficiency based change. They could save a small fortune ... well, actually, in a number of cases quite a large fortune. They could stop the premium price rises - and gain significant market share. They could start working smarter.

Yes, I know, at the mere mention of organised, structured, benefits driven change complete with visibility, accountability and responsibility, there will be some within the insurance industry who will be reaching for their own fat private health care insurance while clutching their chests in shock. But it has to happen. You cannot continue to be lazy, untrying, oblivious to the inefficiencies and absurd mistakes within your own companies that increase your own internal costs beyond reasonable levels. If you think you can continue the way you've been doing so for so long, then you are a dinosaur. And we all know what happened to the dinosaurs.

So, while insurance companies could gain much from efficiency based change and development (because it's almost always easier to increase profitability through internal change than through external revenue generation) ... will they actually bite the bullet and do it? Hmm ...

Regards

JS

If you don't understand the risks, how can you prepare? Can you afford to let the issues be blurred?

The turbulent 21st century

life isn't black and white

central@alt3.co.uk