Remaining relevant to your customer

Back to basics

QBE recently held an internal leadership event where we invited our customers to tell us about their businesses – about how these are being disrupted by new technologies, the opportunities and threats they see, and going forward, what they need from their business insurance partner.

I’d love to say I didn’t learn anything from them, but I did. I re-learned lots of obvious stuff I used to know but perhaps had forgotten as the world became more complex and competition increased. Listening to our customers talking about their ambitions and their challenges made me just take a step back and remember some business basics. This piece is about the business I know – commercial insurance – but I’m sure the fundamentals are the same for any service industry.

In the good old days of insurance, the world was relatively simple. Insurance goes back several millennia - in the third century BC, Chinese traders used to distribute their cargo across ships, to limit the loss in case of accident. But let me start with the beginnings of the organized insurance market in London, where merchants would meet in Edward Lloyd’s coffee shop in London to share gossip and news, and to bet on what ships and their cargoes would make it safely to their destination. Everyone knew their markets well - the skills and experience of the captain and crew, the local weather patterns and dangers from insurgents. The resulting fundamental principle on which Marine Hull and Cargo insurance was then based – that “upon the perishing of any ship, the loss lighteth rather easily upon many, than heavily upon few” - remains the bedrock of modern risk transfer.

Managing the unknown unknowns

But the world is more complex now, and the speed of change is accelerating. Companies are operating in more difficult and in many cases uncharted waters. Huge advances in digital technology and big data are changing business models, transforming and in some cases destroying the traditional value chain we all understood. 

The business world is increasingly global, offering huge opportunity but also increased political risk and uncertainty. Social change has created a new generation of always connected individuals who trust social media more than they trust companies.

With that degree of change, it is inevitable that many of the new future risks will be, as Donald Rumsfeld famously described, “unknown unknowns” – risks we don’t even know exist yet. As Rumsfeld went on to say “The absence of evidence is not evidence of absence – just because you do not have evidence that something exists does not mean that you have evidence that it doesn’t exist.”

Therein lies a challenge – how can businesses manage the unknown unknowns? How can insurers accept transfer of risks they don’t even know exist? I would suggest we need to elevate our thinking, by supplementing our Risk Transfer duties with a more holistic risk management approach.

Avoiding Marketing Myopia

Way back in 1960 a Harvard Business Review article became a standard in strategy circles for the next 30 years, and the principles of which still hold good. In “Marketing Myopia”, Theodore Levitt posed the now-famous question "What business are you really in?", encouraging business to concentrate on providing solutions to meet customers' needs rather than on selling the products they already have. Obvious then and obvious now perhaps, but do we all do it when the pressure is on to deliver short term results?

We can all quote examples of organisations which have perhaps failed to see the market changes and adjust for them. Who perhaps traded short term performance, for long term business health. Kodak, for example invented the digital camera but kept it quiet for the risk of impacting their sales of film whilst Fuji embraced the change and flourished.

So what exactly is the purpose of an insurance company? Facilitating Risk Transfer is obviously a key part of it, as is all of the attendant support processes (paying claims for example).

Our customers told us they want more. They want help and advice on understanding the risks they face now and emerging risks coming down the line. They want advice on how they can manage or mitigate risk, and then, when the risk is understood, they want to know what choices they have - to simply accept the risks, to retain within their business via their own captive, to utilise capital markets for alternative risk transfer, or they can choose to arrange a traditional insurance contract.

If we think our business is simply risk transfer, surely this is classic marketing myopia? So we took a step back and rethought our purpose – why we exist as a business. Why do customers buy insurance? As a result, we reset our purpose - “We give people the confidence to achieve their ambitions”. 

Nothing new there – Lloyd’s of London has as its motto “Fidentia”, Latin for Confidence. But with that broadened purpose we can elevate our thinking to supplying solutions which will allow our customers to operate in increasingly challenging markets knowing they have a partner standing with them to help them succeed.

So what?

So what do we all have to do to avoid marketing myopia, to remain relevant? 

• Change the way we think. Research our customers’ industry, research their strategy, talk to them and most importantly LISTEN TO THEM! 
• Be one step ahead! Help them understand and manage the unknown unknowns!
• Maximise our touch points - the world is changing too quickly to simply rely on an annual transaction at policy renewal
• Work with customers to jointly develop services to serve their current and emerging needs
• And critically, companies can’t be customer centric unless their people are so we need to recruit and develop the right employees. Of course we need technical experts, but we need to supplement that skillset with people who understand customers’ industries, people who can build strong and lasting relationships and people who are diverse, agile and flexible in their thinking.

If we do that, we can all be a Fujifilm to our competitors Kodak.  

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