This is part 3 of a 4-part-series. Find the other parts here:
Of all the strategies for increasing value and profitability traditionally pursued by property-and-casualty (P&C) insurers, the simplest is the most persistently overlooked: Standardization. Wait, make that increased standardization. The term “standardization” is too broad and ill-defined. Of course, everyone currently believes that insurance work, or any work, is currently standardized—and they are technically correct. But take a closer look and you will discover this current “standardization” is based on informal tribal knowledge and rules of thumb. Think of it as under-standardized rather than unstandardized. In terms of lost revenue and margin leakage, this is not a trivial distinction—closing the overlooked gap delivers a windfall of near-term value.
Better yet, it’s a surprisingly affordable opportunity, for insurers of virtually any size. And it yields transformational business improvements rapidly, in weeks or months—even without technology.
Of course “increased standardization” also paves the way for advanced analytics and automation; see the “Power Trio” below:
Let’s see how this power can slash costs, recoup margin, and turbocharge sales effectiveness in your distribution network.
Time and again, The Lab has found, for P&C insurance carriers of all stripes and sizes, for career and independent agents like, there’s a costly lack of visibility of comparative performance everywhere: between leadership, the field, agencies, and individual producers. That should seem astonishing, given the reams of data available to the insurance industry, its regulators, and consequently, the public (think: competitors). This blind spot scarcely draws a second thought, but the resulting, costly effect on margins and sales effectiveness can draw indignant disbelief.
Start with the basics: Do you know, right now, how much performance (margin, not revenue) varies from individual agent to individual agent? How about the consistency across agency-to-agency performance?
Even on your best day, the variance is two-fold. On your worst day, it’s triple that. This variance alone consumes roughly 30 percent of your revenue-generating organizational capacity.
The first objective is to impose rigor and uniformity on what is typically a “wild west” of sales/distribution practices, without recognition or prioritization of the most effective, i.e., the best practices. When The Lab helps P&C insurers standardize, we begin by mapping out the existing sales process flow, using questionnaires like the one shown below.
Right away, the responses reveal unexpectedly wide variation in producers’ sales practices: business processes, work activities, metrics—and, importantly, producer sales effectiveness. The Lab’s documentation makes it easy for all to see the costs of casual rules of thumb: under-standardization. It also makes it easier to agree on the idea of selecting valuable, best practices to “standardize” the distribution network into a lean, competitive weapon—to tame the “wild west” of individual, under-standardized practices.
What is Robotic Process Automation for insurance companies? Find out by reading our long-form explainer HERE.
Wonder why we’ve mentioned “value vampires” in this article’s title? One glance below will show you. In a mid-sized network of agencies, the bottom 43 percent of career agents fail to earn even their direct costs—forget about the margin they are expected to deliver. This causes the insurer to hemorrhage cash out of pocket, month after month… and no one notices.
Think about that. The bottom 43 percent—nearly half—is draining the productivity and cash from margin generated by the rest of the entire distribution network. It hides in plain sight because the company measures agents solely on premiums. As all the agents diligently sell products at the premiums dictated by the insurer, the company’s lack of margin visibility unwittingly turns nearly half of these agents into value vampires. This is not a one-off case. Across the P&C sector, only the percentage of value vampires and the size of the margin leakage varies.
The implications of inadequate margin visibility—and performance variance—are profound:
• The mid-tier agents expend all their effort just to make up the losses of the lower performers. In other words, if the lower performers weren’t there, the mid-tier would be adding earnings to the bottom line.
• The top performers’ “gold standard” best practices are not being emulated. Instead, these are squandered to subsidize the “wild west” of under-standardized practices.
• It’s not just individual agents that suffer variance—we’re talking five-fold—it’s also agencies themselves. If you can’t see this data, then you can’t take action.
• The more agents and agencies in your network, the bigger the problem.
The left side of that stomach-churning chart is where the “value vampires” roost. And it gets worse: These margin-sucking “value vampires” are also typically the source of capacity-draining rework and data-quality issues.
But you can quickly ratchet up their effectiveness by eliminating cherished rules of thumb and arming them with the best practices of their high-performing peers.
There’s even more to this story, in terms of eye-opening KPIs, decision-empowering business intelligence or BI, and state-of-the-artThe Lab can robotic process automation or RPA. You can read more about that, coming soon.
Slash Those P&C Insurance Costs Now!
But you needn’t wait. If you’re looking to crush distribution costs while boosting performance and policyholder experience, contact The Lab today to schedule your no-obligation 30-minute screen-sharing demo. We’ll answer any questions you may have. We’ll show you how our services self-fund in six months or less, guaranteed. And you’ll also see how we deliver all this power—remotely, from our U.S. offices in Houston.