Insurance Weirdness, Part I: Are Your Producers Your Sellers Or Your Suppliers?
This is a question I bet you have not been asked recently. Maybe never. Perhaps you haven’t even thought about the concept, unless, of course, you watched Hee Haw in the 70s and ever wondered if you were “your own grandpa.”
Well, leave it to my “out-of-the-jar” colleagues to come up with this idea while in process of inquiry to help our insurance clients reinvent themselves.
We are not suggesting this as a solution (yet), but thinking differently about the seller/supplier relationship is an excellent start if the outcome is change. Let’s think about this idea here, and then figure out what we may be able to do with it in the context of innovation.
First, let’s talk about the things that make insurance “weird.” When I say weird, I don’t mean just inconvenient, negative, intangible or unengaging. I mean weird, as in totally counterintuitive and things that don’t generally characterize other products, such as:
A) It’s a product that doesn’t work unless many diversified people buy it.
B) It’s a product that you can’t buy if you are already in need of its benefit.
C) It’s a product that money alone cannot buy.
No wonder the consumer doesn’t appreciate insurance like they should.
So let’s go back to the list, specifically A, which provides the basis for the discussion of supplier versus seller. “It doesn’t work unless many people buy it.”
Gotta Be In It To Win It
This is the very essence of how insurance operates. The concept of the “pool” is the cornerstone of insurance. Consumers understand lotto pools, football pools, pooling their money to buy a really great gift for someone, etc. These are the times when their money can have more meaning together than individually.
Insurance works the same way, except you don’t usually know who the winner/recipient is unless it’s you, and that prize comes with a lot of baggage. Specifically, someone has to die, become disabled, lose a couple of activities of daily living, lose a piece of property, or suffer from a health problem.
The pool works because the more diversified people, property, behaviors that are in the pool, the more accurately one can predict how many are going to “win,” and how much is needed to pay out the “prize.”
Tastes Bad, More Filling
So the producer’s role in selling the product is really as a supplier to the pool. He or she is charged with finding the good risks, knowing that bad risks will be rejected. He or she is responsible for making sure consumers give all the information needed to set the rate right. And he or she is responsible for keeping people in the pool for as long as possible. If the producer doesn’t do all of those things, he or she is penalized in the form of no pay, less pay or a charge back in pay. Yikes. No wonder it’s so hard to get people to want to do that for a living.
So what innovative things can happen if you start to think about producers as suppliers?
It’s helpful to think about the public’s perception of the profession to begin with. They often put insurance sellers in the domain of pushing, peddling or transacting something that the consumer doesn’t need or want. While that may be an exaggeration and an emotional response, it is probably more true than not.
A New Elevator Speech
But are suppliers of raw materials in any industry looked at as doing something negative? Not really. If you were at a cocktail party and had two choices of professions to answer the question “what do you do for a living?”, which would you rather say, “I sell ______ to people” or “I am a supplier of ________to the _______ industry”? Which sounds more important? Which sounds like it means you are more successful? Which one sounds less like the other person would want to start looking for the waitress carrying the scallops wrapped in bacon?”
While I don’t suggest that your insurance producers go out and start talking about themselves as suppliers of raw material to the insurance industry (yet), there may be something to learn from thinking this way:
- How might it change the relationship between the home office and producer on a day-to-day basis?
- How might it change the way the producer is paid?
- How might it change the perception of who owns the client?
- How might it change the profile of who could be good at the job of “supplying”?
Here are five major changes to the business model, relative to the above that I can imagine if the industry viewed the producer as a supplier:
- Producers might be paid better if they were out seeking young, healthy risks for the company (as opposed to today where they actually get more for older, substandard risks because of the percent of premium contract structure).
- Producers might be paid better if they bring more lives into the pool versus just more insurance coverage amount/higher premiums (like the way that suppliers give bulk deals to manufacturers).
- Perhaps there would be no battle about who owns the customer and that the compensation paid to the supplier is adequate consideration for the transfer of ownership from supplier to manufacturer.
- Perhaps young people would be more successful in the supplier business because they would have the most access to the best risks, and they could get paid more for bringing them in (per above).
- Perhaps the solicitation to the consumer would look more like an invitation to join a group versus having to convince them to buy something.
Who can we learn from? Recruiters? Country clubs? People who have started their own mutual funds? Actual suppliers of other raw materials like wood, paper and glass?
If we think about the above as being possible in this realm, then it sounds an awful lot like “supplier versus seller” could have a major role in flipping the “Sold, Not Bought” paradigm.