The September edition of Best’s Review ran an article called, “Slow and Steady”, about the resilience of mutual insurance companies. While the article covered life and health companies, too, it had this to say, in part, about property/casualty insurers:

The April 2023 Best Special Report titled, 2021 US Property/Casualty Impairment Update, says this:

AM Best defines impairments as situations in which a company has been placed, via court order, into conservation, rehabilitation or insolvent liquidation.

As we wondered why mutual insurers are so successful at weathering storms, we couldn’t help thinking about how many of them rely on the Finys Suite to process their business. Then we remembered what we have in common with them.

There Are No Accidents

The more we thought about it, the more we realized how and why we’re so well aligned with mutuals. And a number of parallels occurred to us. Like mutual insurance companies:

1. We build strong cultures. We’re as aligned with our mutual-insurance customers as we are with our people. That makes for good fits solid understandings.
2. We value long-term relationships. Just as mutual insurers’ policyholders are their owners, we empower our people to act like owners. We give them decision-making authority to fulfill their responsibilities.
3. Because #2 is true, we’re built to last. We keep our morale high, our turnover low, and our commitment to our people consistent, just as mutuals do with their policyholders.
4. We’re financially responsible. We carry no debt because we owe it to our people and our customers to be financially stable and fiscally accountable.

That means, in effect, we’re building in our own protections from market and economic storms.

Not All Umbrellas Are Meant for Rain

There are four definitions of umbrella in the Merriam-Webster Dictionary. These are two of them:

• something which covers or embraces a broad range of elements or factors
• something which provides protection

Those seem to sum things up pretty well, don’t they?

Strong cultures. Personal and corporate alignment. Long-term relationships. Longevity built on treating people right. And financial accountability, resilience, and stability.

We don’t know if that’s necessarily a recipe for success. But we do know it’s working for us and for the mutual insurance companies we work with.

An old corporate adage goes like this: “There’s never time to do it right, but there’s always time to do it over.” Needless to say, that applies to systems implementations, among other things. And it’s pretty funny if:

1. You’re laboring in the belly of the beast, and the money isn’t coming out of your pocket.
2. You have all the time (and money) in the world.
3. You’re not accountable to shareholders and policyholders.
4. You have ironclad plausible deniability if anything goes sideways.

If you don’t have any of the conditions in 1 through 4, not getting it right the first time is a clear sign of trouble brewing.

Don’t Take Chances

If you want to make sure you do your system implementation right — and won’t have to do it over and over and … — here are a few simple suggestions:

• Keep one eye on your time, one eye on your budget, and another on your vendor. (If you don’t have three eyes, ask for help.)
• Gather your requirements, document them thoroughly, and define your specifications precisely.
• Don’t underestimate the reach, the complexity, or the duration of the project. (Murphy’s Law exists for a reason.)
• Make sure all of your internal and external systems and data sources are fully integrated with the new core system. (Data is king.)
• Make sure the data from the system you’re replacing is verified, cleansed, standardized, and normalized according to the new system’s specifications. And make sure you have a plan to manage anomalies.
• Examine all of your existing processes before automating them in the new system. A bad process automated is still a bad process.

Keep an Open Mind

Modern systems incorporate workflows derived from evolved and continually refined practices. Those practices will make your organization more efficient from the start; although, they may require some alteration of your present practices. They can, of course, be customized. But be careful. Customization can lead to scope creep, which means elongated timelines and higher costs. Beyond that, deviations from standard configurations can make upgrades more complicated, given the need for more testing, and recycling. Toolsets can help, but they’re not cure-alls for high degrees of customization. The cost, effort, and resources required to implement or upgrade highly customized systems can be unjustifiable. So, most important, be willing to hear what you need to hear, not what you want to hear.

If you find yourself looking at extensive customizations, it’s likely because your business processes are out-of-date, perhaps because you’ve had to keep them to accommodate the limitations of legacy systems. The bottom line is your bottom line will benefit from accepting more standard configurations and/or from your being willing and able to manage some degree of the desired process changes.

Every system implementation contains traps. Vendors are susceptible to them, too. But if your vendor has a verifiable track record of implementation success, it’s likely that experience will help you and the vendor avoid traps. Granted, no one is clairvoyant. But experience is, indeed, the best teacher. And the best-taught vendors are an asset in ensuring time, budgets, resources, and the implementation project will be well managed.

With mutual efforts on the part of you and your vendor, there won’t be any trouble brewing.

The March/April edition of Claims Magazine included an article entitled, “The Top 10 Risks for P&C Insurers in 2023“. If our golf game were better, we might think about it more. But it isn’t. So, we don’t. Nevertheless, key risk factor #1 was digital exhaustion. That made us think about why our golf game isn’t better than it is. The answer, like answer to digital exhaustion, is the approach shot.

Let’s start with the article, which says this about digital exhaustion:

Digital transformation in the industry has been underway for many years. The pandemic and changing customer expectations have further elevated the journey to the digital enterprise. Most in the industry have graduated from thinking that digital is only about customers to recognizing it spans the whole internal and external ecosystem. In practice, this results in dozens or even hundreds of projects to address the process, technology, data and organizational aspects of transformation … Managing the transformation has become a challenge at best and a nightmare at worst. Recent roles such as chief transformation officer, chief digital officer and others are providing strategy, governance, and senior-level accountability for digital initiatives. However, there is a sense of exhaustion among many at the pace of change and implementation challenges.

That’s what led us to wonder: What if insurers had made better approach shots to digital transformation?

Let’s Hit the Links

Simply put, the approach shot in golf is any shot intended to put the ball on the green, typically from a distance of at least 100 yards, and ideally in a position from which you can putt the ball into the hole. Unless you’re Bryson DeChambeau — or you have a Howitzer in your bag — that definition of approach shot typically excludes tee shots on par 4 or par 5 holes. In other words, if you’re expecting to get from the tee into the cup on anything other than a par 3 hole, you’re setting yourself up for disappointment and failure.

To extend the analogy, if you approach digital transformation recognizing you won’t be able to get from Point A to Point Z in one shot, the incremental steps comprising Points B through Step Y will be easier, far less frustrating, and much more likely to succeed. That’s why it makes sense to start with a suite that’s already fully digitized, from which you can then digitalize everything from your distribution channels to your customer experiences.

Bruce Crampton, a PGA Tour pro from 1961 to 1975, once said, “Golf is a compromise between what your ego wants you to do, what experience tells you to do, and what your nerves let you do.” The same can be said for digital transformation in insurance.

If you balance your ego and your nerves, we’ll bring the experience and help you master the approach shot.

The man depicted here was born 200 years ago. What’s that? You don’t know him? If not, don’t worry. It’s not terribly surprising. And it’s okay. History can tend to obscure such people after a while.

His name was James Goodwin Batterson. He was born in 1823 in either Bloomfield or Windsor, Connecticut. The accounts vary. After working for a time at a print shop in Ithaca, New York, Batterson returned to Connecticut, at age 23, to found New England Granite Works. Though the business began as a cemetery monument business in Hartford. But Batterson soon established himself as a stone dealer and a building contractor. He introduced mechanical granite polishing when he created a lathe that produced round, polished stone columns.

Batterson was an artist, a historian, a scientist, and a lover of languages, becoming proficient in Greek and Latin. He spent several years in Egypt, becoming honorary secretary of the Egyptian Exploration Fund. He spent time in Europe, studying art and writing poetry. He was among the founders of the Hartford Arts Union and a trustee of the Wadsworth Atheneum for 40 years. In addition, he served as a member of the committee that created Hartford’s Bushnell Park.

During the Civil War, Batterson was chairman of the Connecticut State War Committee, serving as a construction consultant for the Union. As a result, President Lincoln appointed him building contractor for the Library of Congress building in Washington D.C. He also constructed the Masonic Temple in New York City, the Connecticut State Capitol in Hartford, the Connecticut Mutual Life Insurance Building in Hartford, the Mutual Life Insurance Building in New York, the Equitable Life Insurance Building in New York, and William K. Vanderbilt home, Marble House, in Newport, Rhode Island.

So, What?

Why should we know, let alone care, about James G. Batterson? While traveling in England, Batterson became impressed with the record and the success of the Railway Passenger Assurance Company. As a result, he determined to found a similar business in the United States. The Travelers Insurance company received its charter from the State of Connecticut on June 17, 1863. And Batterson is credited for introducing casualty insurance to the United States. As legend has it, on March 1, 1864, a local banker, James Bolter, jokingly asked Batterson how much it would cost to insure him up to $5,000 against accidental death for Bolter’s journey from the post office to his home. Batterson replied, “Two cents.” Bolter paid what amounted to The Travelers Insurance Company’s first insurance premium. Those coins have been kept by the company ever since. Batterson headed The Travelers until his death in 1901 at the age of 78. He he was posthumously inducted into the Insurance Hall of Fame in 1965.

Given achievements, it’s definitely arguable that James G. Batterson planted the roots of what’s become the property/casualty insurance industry in the United States. Consequently, he’s given the rest of us who fly in and around the industry the wings to do so.

He’s also given us an example of a very full life, very well-lived.

Matteo Carbone, an insurance industry strategist with a specialization in innovation, wrote a post for Insurance Thought Leadership called, “Lemonade: No Sign of Disruption Yet“. In the post, Carbone pointed this out:

Lemonade has written almost $370 million in premiums (showing 42% growth from 2020) … with a combined ratio (gross of reinsurance) above a 150% combined ratio in 2021. This means that, for each dollar of premium paid by the client, the companies’ risk transfer approaches a cost of more than $1.50. Almost the same has happened over the past three years. For each dollar of premium, claims cost 90 cents, including the loss-adjustment expenses … To acquire this (underpriced?) business, Lemonade invested almost 60 cents in marketing for each dollar of premium. All other costs add almost 40 cents. It doesn’t seem that behavioral economics, charity and storytelling have made any dent in the insured risks.

We’re not judging Lemonade, but this is what happens when insurtechs put the tech knowledge before the insurance knowledge.

It Sounds Good on Paper

According to Investopedia:

Insurtech refers to the use of technology innovations designed to find cost savings and efficiency from the current insurance industry model:

Theoretically, that all sounds pretty good. Bring in some new technology to innovate and disrupt a stodgy old industry. But as Albert Einstein said, “In theory, theory and practice are the same. In practice, they’re different.”

The fact is most carriers can’t afford to purchase premium at such high rates. Instead, they need to employ technologies that will work for them and for their particular business models. The good news is we have time, and time will tell whether the Lemonade business model will work. While we’re watching, though, focus on strategies, business models, and technologies that work for you now.

If it sounds too good to be true, it might be … at least until it’s proven.