Thursday, April 2, 2009

(No.21) Speaking to business audiences

Within the past few weeks I met with a life company's board of directors and senior management in Ontario and spoken to Professor Bill Rabel's insurance studies classes in Culverhouse College at the University of Alabama. While these audiences were certainly different I was invited to speak to each of them in order to share some frank opinions on business, especially as it involves life insurance companies and agency distribution in its various forms.

A particular focus of my remarks to these disparate audiences, as it has been to many audiences, was the reality of the life insurance business. One might well suppose that this reality is automatically understood by all those who are in the life insurance business for any length of time. That has not been my experience. What so often prevails is a combination of what is 'politically correct' and serves career management objectives within the corporate milieu.

One reality, too often either misunderstood or not understood in any meaningful way, involves the fact that for the life insurance business the PLACING of profitable individual insurance products successfully and in quantity is at root about selling and distribution, not advertising or brand awareness or call centres, etc. etc. That reality is a cornerstone of the business but one often ignored or even denied by many senior executives and misunderstood by numerous others (however sincere) who are simply unequipped with any real grip on the sales-based world they inhabit. 

One need look no further to identify a leading factor contributing to the decline in both Canada and the U.S. of the career agency distribution system. In terms of its inadequate care and feeding within so many companies the situation has been analogous to having illiterates in charge of the teaching of English composition.

At the end of the day 'selling stuff' successfully is what the business is about, certainly in terms of individual financial products. Yet I have watched again and again negative distribution system decisions in various companies made for irrelevant reasons, almost as if successfully 'selling stuff' was somehow incidental to a healthy life insurance business.   

I have certainly encountered more life company people than I care to recall who, unburdened by any real understanding of or experience with agency distribution, were able intuitively to pronounce with authority and decide with conviction on effectiveness in life insurance distribution systems. In some cases their confidence was based on the advice of consultants who, almost by definition, are skilled at providing conclusions they are expected to provide by those who hire them. But that's another subject. 

As Warren Buffett declared recently about those who precipitated the Wall Street meltdown: "Beware of geeks bearing formulas". 

Alastair Rickard