Thursday, January 8, 2009

(No.6) Wellington's horse & agency rat holes

The life insurance industry's handling of insurance distribution over the past quarter century reminds me of nothing quite so much as the aphorism about the Duke of Wellington's horse at the conclusion of the Napoleonic campaigns: it had been everywhere, seen everything and learned nothing.

I can think of no area of the industry's activity which, in the main, has been mismanaged for so long and so consistently by senior corporate management as the distribution of individual life insurance nor have I seen any aspect of its commercial activity misused more frequently to 'demonstrate' executive leadership, vision and a desire to be seen to have the inclination and the ability to 'think outside the box'. Indeed I have watched agency systems of all sorts victimized by this or that executive's personal career management program.

It is not particularly difficult, as the revelations of the financial services meltdown during recent months have documented, to create a patina of financial success for some activity or process, one that will survive even if it is camouflaging a Ponzi scheme. In the insurance business look no further for cogent examples than the supposed life insurance sales success which is in reality dependent in whole or in significant part upon the sale of under-priced and/or over-compensated policies.

When it comes to pouring corporate funds down rat holes as the result of this or that 'bold and visionary initiative', a skillful executive can always equip such failures with a coat of many colours comprising sincere explanations, forceful excuses and (where necessary) management scapegoats.

Never in my years in the business did I expect to hear an executive willingly admit anything like this even in private:

"I just poured $X millions down a rat hole. I was advised in advance that my plan would not work but I had to demonstrate vision, leadership and a desire to change. I could not afford to be seen to be defending experienced-based wisdom and reality. If I have to change distribution strategy every 6 months to serve my career management plan, I will."