The Five Dysfunctions of Insurance Renewal

Trust, honesty, commitment, accountability and measuring results are as critical to good coverage as the right premiums and deductibles.

by Don E. Vance, CCM (editor@clubandresortbusiness.com)
January 2008
 

Summing It Up • Approach insurance renewal discussions in the spirit of partnership, not as adversarial wrestling matches. • Try not to settle for the first quote you get from an insurance supplier. • Check the references of new suppliers, to make sure they can deliver on their promises.

I recently read The Five Dysfunctions of a Team, which identified these factors as the biggest contributors to poor team performance: Absence of Trust; Fear of Conflict; Lack of Commitment; Avoidance of Accountability; and Inattention to Results. After reading this book, I realized that these dysfunctions can be applied to almost any management matter.
As I thought about the “management matter” that is always foremost on our minds at the beginning of a new year—the insurance renewal process—it was clear to me that these very same dysfunctions parallel the mistakes that all of us, as managers of clubs and resorts, are prone to make when we approach the annual task of reviewing how to provide the best insurance coverage for our properties and people. We may not all experience these dysfunctions in the same way, but they all usually do exist in some form.

1 From Foe to Friend
Personally, I have always struggled with the trust factor whenever I’m dealing with anyone selling anything. So I know that always makes me hesitant to begin insurance renewal discussions, especially if it’s with a new company. My approach has always tended to be cautious, cynical, and reluctant.

So step one for me in improving the effectiveness and efficiency of insurance renewal has been to eliminate the Absence of Trust. I’ve had to learn to remind myself that I need to gain confidence in the knowledge of what I’m buying—and that doing so requires getting comfortable with the people I’m buying from, and then seeing the process as one of working with them in an ongoing partnership that will seek to create mutual benefits, rather than always deteriorate into an annual wrestling match.

There is no doubt that learning the details of the many types of insurance we now need our properties to carry—be it property/casualty, liability, medical, or other forms—has become ever-more complicated and daunting, because of how coverage is constantly changing. Keeping up with these changes is a full-time job in itself. So that’s why we need good partners we can trust.

In many cases, this now involves finding and using a good insurance broker who can help you sort through all of the various available products and options. But even if you prefer to deal directly with carriers, you should still be able to develop the proper degree of trust needed to forge a true partnership. After all, if you can’t gain confidence in who you’re working with, it’s probably not the right partnership.

2 Agreeing to Disagree
Once this trust is gained, the next step is to get past the Fear of Conflict. Just because you have a partner you trust, that doesn’t mean you can’t still “agree to disagree.” We shouldn’t fear, or forget, how healthy conflicts—which are really just part of being honest with each other—can help us make sure we always get the best possible products for the best possible price. And that, after all, is our primary responsibility as managers.

So if it takes “conflict” to get to the bottom line, I say, Bring it on! I always enjoy this challenge, and would feel irresponsible if I didn’t always try to use “conflict management” techniques to achieve the best results.

Over the years, I’ve learned that if you don’t ask, you don’t get. So my approach is to never automatically accept the first quote I receive. I like to ask the question, “Can you do better with the price?” After stating this, I expect my partner to say, “Let me see what I can do for you.” Usually this leads to a discussion of how an insurance plan could be restructured with a higher deductible, or a slight plan change, so we could receive a substantial reduction in premiums.

When we recently went through the renewal process at our club for employee medical insurance, our insurance broker originally came to us with a 9% increase in premiums for this year. We stated that we cannot live with this increase, and asked that he please get back to us with some alternatives that included lower premiums.

After a period of time, we met again, and the brokerage group came back with a 2.3% increase in premiums for the exact same product. The key was that they shopped around to find the same product for a better price. Sure, we had to change insurance carriers, but dealing with the same broker has made the changeover much smoother.

Remember, while there is always a way to modify price, it’s also true that you will get what you pay for. As long as you know in the end exactly what you are (or aren’t) buying, and can find a way to make it work for you, this can lead to acceptable results for everyone involved.

With the continued rise of insurance premiums, we have an obligation to look at alternative plans, without sacrificing our primary objective of having adequate insurance. If I find, through this part of the process, that I can’t receive a better price, I want to know why—and many times this will help to identify areas of club operations that need to be improved, to qualify for better rates.

If your insurance partners always have your best interests in mind, they will always look for ways to provide you with the right coverage for the right price. This is where their knowledge of their products, and of what else is out there, comes in handy. And if you overcome the fear of “conflict,” you’ll be able to work with them more effectively, to fully capitalize on their experience and understanding of insurance products.

3 In It for the Long Haul
If, during this part of the process, you find yourself stepping beyond the bounds of straightforward discussion into true conflict, it’s probably a sign of a Lack of Commitment on someone’s part. Reaching a level of true commitment is a two-way street. For my part, all I ever want is for my insurance broker or carrier to help me get the best coverage for the best price. If I get signals that they’re not always working with me towards that goal, I see that as a sign that they probably don’t have the full and necessary degree of commitment to my property.

At the same time, we have to be committed to making sure having us as a client is worth it to the insurance provider, too. If we’re not also committed to being a good partner, we can beat them up mercilessly on price—but it will still probably end up costing us when we try to collect on claims or need other services. On either end, without true commitment, there is no partnership.

4 Backing It Up
Once real commitment is attained, the next step is dealing with the Avoidance of Accountability. This comes into play after the handshakes have been exchanged and the contracts have been signed. Can you count on your partner, as you put your new coverage into action, to always deliver when needed?

For me, the key part of gaining this assurance is being diligent about checking references. You can’t let price alone sell you on any certain insurance plan, because if a company can’t service you, they’re useless, no matter how little they may cost.

Most of us ask for client lists when we start to deal with a new supplier—but fewer of us follow through and make enough calls to our colleagues, to find out if a carrier can really be counted on to deliver what’s promised. Fewer still do this if we’re renewing with the same carrier.

Instead, too often we renew year after year, not bothering to get updates on how a carrier has been performing for others in the industry. We may have been fortunate not to have had any problems of our own that have put our carrier to the test, but that doesn’t mean that’s been the case throughout our business. Just as the particulars of insurance coverage change constantly, so too can the abilities of once-reliable vendors to continue to support their products. And at the same time, carriers we once avoided because they had a “bad rep” may have changed for the better and could be deserving of another chance.

The renewal process offers the best time to talk with our colleagues and get an update on who’s truly proving to be accountable—and who no longer might be. Hearing great testimonials about a company, especially when they’re based on recent experiences, always goes a long way towards giving me assurance that I’m making the right decisions.

5 Keeping Score
The final step for a properly functioning insurance renewal process is to give full attention to the results of the plan. Inattention to Results is pure negligence. What are the measurable results that you need to be tracking, to make sure your coverage is sound and cost-effective?

Here, too, your partner should be ready, willing and able to help you find ways to properly monitor results and confirm that your coverage is on target. If your plan is not actually providing you with what you think you’ve arranged for, then you need to know what you can do to correct it.

Here is where having a good, functioning management team of your own is also key. I work closely with our club controller during the renewal process, starting with some advance strategy meetings, to make sure we’re on the same page. I also get all department heads involved, so they can be ambassadors for their areas of operation, especially if changes in coverage, policies or benefits occur. Making everyone on your team part of the process not only helps give them better insights, it also gives you more eyes and ears, to make sure you’re covered as you need to be.