Value selling – strategic benefits typically trump financial measures…but should the latter continue to be a laggard?
Many carriers have been diligent over the last few years in setting up strong governance practices over their IT investments and ensuring they are spending their corporate investments wisely in aggregate by comparing large projects at the company level instead of at LoB level (usually projects over a certain threshold such as $250K). But even though their newly minted governance processes focus on the appropriate financial measures (mostly NPV or IRR, sometimes even option value), executive level decision making still lags with understanding & use of these measures playing catch-up and probably needing another 3-5 yrs before becoming fully mainstream.
In light of the above, there are two aspects of the current trends in the insurance industry that have strong implications for carriers that can make a difference in the competitiveness of their business ops
1. Shared service ops across LoBs/ distribution channels- with unified customer service the holy grail across the multiple silos that exist today, companies will need to ensure that their executive level sponsorship and decision making also focuses on enterprise level benefits. These cross- silo efforts typically require foundational investments in the legacy IT infrastructure that can be justified only with financial toolsets that measure the value over a 3+ year horizon (as compared to quick fix solutions that deliver small cost savings in 1-2 yrs but increase costs in the longer term).
2. Revenue focus in the current recessionary environment- there is definitely a strong preference now for investments that can generate higher sales volume and maintain the excitement level within the agent/ sales community. Carriers will need to make fundamental changes in their sales operational infrastructure to enable any real advantages that can deliver benefits beyond the pale of product tweaks and new offerings (such as looking into their claims & underwriting ops for marketing & lead generation potential or even enabling more direct channel sales). Such capabilities will also require very strong financial toolsets to measure the effectiveness of the investments especially given the complexity of measuring returns from revenue enhancements which has been a typical source for double-dipping.
Carriers who are able to execute the right balance within their organizations between strategic and financial measures and focus their scarce resources on the right investments will obviously steal a competitive edge- enabling the right decision making processes within their organization backed by effective use of strong financial toolsets would be a key ingredient for that balance.
