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to To The Point list To the Point/November/2004 • The insurance industry situation. You’ve seen the headlines and probably read a number of stories about what’s happening in the insurance industry. ‘Rigged bids and cheated customers’: Eliot Spitzer takes aim at the insurance industry. That was the headline on a full-page story in the Financial Times (London) a few days ago. We can argue that there’s more smoke than fire, and much debate about which practices are legal and which are not. We can try to brush it all off by saying that the Attorney General of New York is just out to make a name for himself as he prepares to run for governor, as some in the insurance business have done. Denying wrongdoing would be a serious mistake. “…They used fraudulent, coercive and dishonest practices,” stated the New York Insurance Commissioner referring to one of the large insurance brokers. When that happens, there’s a cloud over everyone’s head in the insurance business. Once client confidence is jeopardized, it’s tough to get it back, as the accounting profession has learned. Conflicts of interest, either real or perceived, are the problem. And it always happens when we take our eye off the customer. As an independent insurance agent, illegal and unethical practices anywhere in the insurance industry place my business at risk. That’s why I was so pleased that our trade association, The Independent Insurance Agents and Brokers of America stepped right up and condemned the use of illegal practices. Every industry needs a whack to the side of the head every so often. Almost always, the issue is the same—losing the customer focus. This is a good lesson for the insurance industry. As I hope our customers know, our single objective is to protect their business assets properly. You can’t always do the right job and still come up with the lowest price. The right program obtained from financially solid, customer-responsible insurance carriers has value, particularly when it comes to claims. Selling “stripped down” programs from less than solid carriers just to make the sale is irresponsible. We won’t do it! As insurance people, we have our knowledge and our independence. Those two qualities keep us in business. If we fail to use either one, we fail our customers. Because the issue is trust, we welcome the opportunity to share how we’re paid—and what we do for customers to earn the right to justify our compensation. All of which is to say that we take seriously the current charges and criticisms of our industry. You won’t hear us try to brush them off or explain them away. Like everyone else in business, we know what’s right––and it’s our job to do it. I invite you to discuss any of these issues with me. Please contact me at 715-693-2100 or tomh@mosineeins.com. • Reduce auto insurance costs: enforce driver standards. “The profit is in the overhead,” as someone has said. It’s a good point. The bottom line benefits from reduced overhead expenses. Business auto insurance is a good example. If you were an insurance company underwriter charged with the task of pricing auto insurance coverage, you would take into account a number of factors—type of use, miles per year, type of driving conditions, previous record and so forth. But wouldn’t you also want to know the driving records of those who operate the vehicles? Wouldn’t those records give you a fairly accurate picture of what to expect in terms of possible losses? Sharing this information with underwriters can make a difference, up or down. Making sure your drivers have good records is essential. And it starts with a check with the proper authorities. Here is one example of a company driving policy: • One moving violation in the past three years requires further consideration and evaluation. • Two moving violations in the past three years are grounds for not tendering or withdrawing driving privileges. • One moving violation of significance (speeding in excess of 15 mph beyond the posted speed limit, for example) is grounds for not tendering or withdrawing driving privileges. If you would like help with a company policy, please contact us. What we say we want is not always what motivates us. Ask salespeople what motivates them and you will probably hear one word: “Money.” While that may be what they say, what improves results is another story. In fact, a quite different one. A case in point is a study from the University of Chicago’s behavioral laboratory. Seventy-eight percent of an employee group said they preferred a cash incentive over a comparably valued incentive such as a vacation or a therapeutic massage. A word game was used as the mechanism for the participants to pursue incentives. One group received a cash reward for good performance, while a second group could earn therapeutic massages of varying lengths depending on how they performed. Results: The cash incentives improved performance by 14.8%. But it jumped to 38.6% when the goal was a non-cash prize. Why does the non-cash reward work? The participants gave two reasons: 1) the reward was desirable; 2) it was something they couldn’t justify spending their own money on. In fact, the participants who indicated that they “strongly agreed” with not being able to justify spending the money showed a 40.9% performance improvement. The key seems to be finding desired incentives that people indicate they would not spend their personal money to buy. It also appears the most effective incentives are non-cash luxury items. This concept makes sense. Having the opportunity to get what we can only dream about can be a powerful motivator. Best regards,  Tom Helbach Back to To The Point list |
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