The Sandpiper — and the Insurance Industry

Sandpiper In.JPG

Sandpipers are tiny, somewhat top-heavy birds that, per Wikipedia, “eat small invertebrates picked out of the mud or soil.”  The shorebird variety — which I am observing daily, and humorously, whilst here on vacation at the ocean on Fire Island, NY — picks its prey from the wet sand. The waves crash on shore and, as the surf recedes, the sandpiper frantically rushes in, picking into the rich sand for its “small invertebrate” prey, only to then reverse course and run away quickly as possible to avoid the next wave that inevitably comes crashing in.

Sandpiper Out.jpg

Birds of a feather, the sandpipers do flock together. But, no mistakes about it, this is not a cooperative endeavor; what each bird pecks out of the sand, he keeps (and eats) on the spot. Sandpipers do not share. They will rise in the air and fly together when necessity strikes, but they do so unwillingly; their wont is to stay aground, avoid the incoming wave, allowing their feet to get wet but keeping their bodies dry.

Sandpipers are thus the great exemplar of “getting your feet wet” – but only your feet! And in this respect they strike me — I know, I know; you are on vacation; why are you even thinking about this!? — as the perfect metaphor for how the few thousand companies in the U.S. insurance industry, in particular the peer leaders in both P&C and Life and Annuities, react to each and every latest technological and marketing innovation. This is not the stretch it may seem; trust me, or let me explain:

Back in the mid 90s, “We have to ‘get’ a Web site!” Why and to do what? “We’ll figure that out but we gotta’ have a Web site!” [Guess what, fans? Fun Fact: They all “got” Web sites, and in due time they got Web sites galore. Today, everyone in the industry admits that after two decades of Web site development and endless re-designs and redevelopment, they cannot explain succinctly and convincingly just what all those Web sites are for. But that’s another story, for another day.]

Oh, yeah: There is that other domineering metaphor: Table stakes.

And so it goes with Direct Sales Online. “IBM and all these consultant guys are telling us that unless we start selling our products online we’ll be ‘disintermediated’… that Google and Amazon are coming for us!… Of course, we’ll have to careful here, ‘cause we don’t want to ‘disintermediate our intermediaries’”! [How quickly they picked up the lingo!] “Yeah, but we can find something to sell online… We can sneak something out…”

And so it goes with Social Media. “We have to be on Facebook!” “Or maybe we should be on Twitter!” “No, we need both.” “How about… Pinterest?” “I don’t think so, maybe, maybe not, but Videos! — we need videos, Vines and Periscope and stuff!” “Well, I don’t know what kind of videos we could do, but we gotta be on Linkedin for sure, you know, recruiting and stuff! Branding!”

And so it goes with The Cloud: “At least we need to get our feet wet with The Cloud… None of our important systems, of course; God forbid putting the Client System(s) [the Crown Jewels] – on The Cloud!… But we’ve got to get something on The Cloud!”

And so it goes with Big Data! “We need Big Data!” [(Don’t we already have too much data? But that’s why we need Big Data, and Big Data Analytics!] ) “And Data Scientists: Good Grief, we need Data Scientists and I can’t even stand the Actuaries!” Why? Because:

There are very powerful trends coming together to cause serious industry disruption. That can be a big threat, but if insurers start responding now and embracing the change, it could also be a big opportunity, said James Dodge, Senior Consultant, Advanced Analytics & Data Solutions, Milliman.

And IoT, Internet of Things. What does that mean for us in the Life business? Dunno, maybe it means Fitbit.

Blockchain! “No, truthfully I have no idea what that is, but we better get somebody to look into this Blockchain thing!”

And so it goes with Digital! It’s not enough, say the consultants, to use Digital; you must Be Digital

What have I left out? A dozen fads, and some other genuinely change-productive developments: SaaS, CRM Systems, CMS’s, advertising online, cross marketing, Drones, MarTech systems, Ad Tech systems, Programmatic, Machine Learning, AI…, und so weiter: We’re there, we’re (kind of) doing it; we’re getting our feet wet, and we’re (kind of) doing okay. We’ll survive; heck, like the consultants say, we may even thrive!

Okay, so sandpipers, as I was saying, are under a certain aspect humorous creatures. And in their own inimitably delightful ways, so are the insurance companies that put themselves through these continual frantic and frenetic gyrations when they’re confronted with the next inevitable wave of technological and marketing innovation. “We need to get our feet wet… But only our feet!”

As the Frenchman said: It is to laugh…

But: Not so fast: The sandpiper’s behavior is indeed humorous from the Olympian point of view: Rush in, rush out; repeat. Repeat all day long. Repeat every day.

But, hey, let’s not miss the reality that this works. The sandpiper does a hard day’s work; he survives; he thrives; he prospers. He lives off the ocean, but not in it; he gets his feet wet, but he’s never swallowed by the waves, no matter how strongly and unpredictably they buffet the shore. The sandpipers were here last year; they’ll be here next year, and all the years after, until maybe climate change dooms them once and for all. But for the foreseeable future they’re here to stay.

And maybe, just maybe – and oh, how I regret even to think this, let alone say it out loud! – maybe the same can be said for the insurance industry!?

A little (true) story: Back in February 1997, shortly after the premiere of neworklife.com on the Web, I (the “Webmaster”) sat in a room surrounded by the full complement of senior executive officers, “invited” by the CIO and mandated by the CEO, to listen to VP John Patrick of IBM preach the gospel of the Internet. This was thought of by them, when they thought of it at all, as simply the latest craze, as the next CB radio, or perhaps the next Hula-Hoop, to stretch back into their likely memory space. (Ironically, but not too surprisingly, Mr. Patrick’s gospel had much more success with IBM’s many customers than it did within IBM itself. That’s another different story to tell.)

It was a true “Come to Jesus” meeting:

It’s good that you guys have a Web site now – but that’s just table stakes. I’m here to tell you, within the next five years, you and your blessed agent sales force are going to be out of business! You will either use your Web site tomorrow to sell directly online to customers, or in five years you’ll be history! I know, I see it in your faces, you don’t believe, you doubt: But you must get used to the idea, to the reality, that your agents are today already historical relics. The new world is the Internet and your old world — recruiting and training agents to sell face-to-face over the kitchen table — is disappearing as we speak. The Internet will disintermediate your business within the next five years!

That’s not an exact quote, of course, after all these years, but it’s damn near exact; it was the very essence of Mr. Patrick’s deliberately shocking sermon. (I’m so happy I was there to be able to witness in person the look on the collective face of our senior execs: They were incredulous; they were indignant; they were besides themselves; they were, as it were, to use the alien but most appropriate metaphor, gobsmacked. As a moment, it was for me… a Priceless memory.)

But guess what? That. Did. Not. Happen. New York Life’s vaunted sales force didn’t get disintermediated in the next five years, by 2002; and it hasn’t been disintermediated 20 years later, in 2017. And realistically it just isn’t going to be disintermediated any time soon. It. Will. Not. Happen. (any time soon)…

Not to say that everything at New York Life is just as it was prior to Mr. Patrick’s sermon. Quite the contrary; not everything, but most everything, did change, in myriad minor and, in some cases, major ways. There was no “Internet wave” that the company did not consider carefully, elect or reject, nor participate in intelligently when elected, if only so often half-hardheartedly and hence half-successfully. We definitely got our feet wet and we never got crushed by any seemingly seismic Internet waves.

And the same is, of course, by and large true of the insurance business generally. Today’s business world is indeed quite distinctly different from the insurance world of 20 years ago. And the “Internet” has indeed had and – prophesying here! — will continue to have a mindbogglingly major impact on how that biz does biz. But, so far at least, Google and Amazon and “the Internet” have been way too busy with other things to disintermediate and eviscerate the insurance biz. And the insurance biz itself has been way too busy getting its feet wet and to be fitfully, painfully learning – against all its instincts, it must be said — to allow itself to be disintermediated, to be eviscerated, by “the Internet.”

This business, with virtually all its various business models tweaked and transformed in so many different and simultaneously reluctant and skeptical and beneficial ways — by the Internet and many other undiscussed developments — still does a heck of a lot of profitable business. And I still more than kind of wish that Mr. Patrick had been proven to have been more prescient, let’s say mostly right, because the insurance business, even after 20 years of tortured turmoil, of dipping in and out of every technological phenomenon that spills onto the shore, still needs that kind of kick in the ass.

So don’t get me wrong; I’m not an apologist for the industry, God forbid, and I am not preaching any kind or degree of the triumphalism manifested by those dimwitted empty suits unwillingly sermonized at New York Life in 1997. But, let’s face it, Mr. Patrick was just dead wrong back then, and 20 years later his prediction — if it is ever to be proven — cannot be proven any time soon. And that goes even for the whole phenomenon of Insurtech – even for the exultantly self-satisfied Lemonade! — which, I think and predict, in the manner of John Patrick — will be swallowed whole, with all that’s wholesome incorporated, while the unsavory is spit out.

No, like the sandpiper, frenetic and silly as it seems viewed sub specie aeternitatis, the insurance industry survives – and thrives – with its feet wet but its top-heavy body mostly dry and intact, however fearful it must continue to be of the ever-rising technological and marketing surf.

Say it ain’t so, Joe. But, no, (I believe, I think) it’s so.

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One Response to The Sandpiper — and the Insurance Industry

  1. khittel says:

    (I’m posting this behalf of my good friend, Mr. Goldsholle:)

    Quite frankly, Ken, although we often agree, I strongly disagree with you in terms of the impact the Internet has had, and will have, on the life insurance business.

    Although that speaker from IBM in 1997 was in sales hyperbole land in suggesting that change was that imminent, change is essential and it is a coming, and likely far sooner than the luddites expect. To the extent that buying insurance online can be made Faster, Cheaper and Better online, that is where the future is. And that’s more than a mantra.

    As you know, after retiring as Chief Brokerage Executive of MetLife at age 50, and then consulting for many insurers (including your former firm) for several years, I have been enjoying a 22+ year long 3rd career — in the Internet business. Since 1995 I have been Founder, CEO and/or Chairman of businesses operating such websites as FreeAdvice.com, ExpertPages.com, AttorneyPages.com, InsurancePages.com, SeniorCareAdvice.com and DoItYourself.com (which we sold some years back, making my once generous MetLife pension essentially irrelevant).

    The Internet has already brought major change to the life insurance industry, even though change has not been nearly as fast nor as pervasive as that speaker from IBM predicted back in 1997. It’s no longer a question of technology. The necessary Internet technology now has been in place for a decade. Your smartphone already has more power than the behemoth mainframe computers that occupied several floors of our former office buildings. Some insurers have seen the future. My former company, MetLife, sold its entire individual sales force and just recently spun off its individual business into a separate publicly held company, Brighthouse Financial.

    Between 2005 and 2015 the number of life insurers declined from 1,119 to 814. https://www.acli.com/-/media/ACLI/Files/Fact-Books-Public/2016LIFactBook.ashx?la=en at page xiii In terms of new life insurance purchases, the number of new policies purchased and the average face amount of such policies each declined an average of about 1% per year. ibid page 84.

    Nearly all consumers under 65 are used to engaging in multiple financial transactions online — from banking to investing. Remember bank tellers? They’re largely gone, replaced with ATMs, home banking and using a smart phone to take a picture of incoming checks and depositing them without traveling to the branch and waiting online. Remember the large number of stock brokers and investment counselors? — their numbers have been rapidly declining thanks to mergers, the rise in online trading, the use of robo-brokers and robot-advisers, and the increasing use of index funds and ETFs. Don’t just take my word for it, see studies such as https://www.brookings.edu/research/dwindling-numbers-in-the-financial-industry/

    Among the key factors that I believe has made the transition to online purchasing of life insurance slower than I at least expected has been the combination of a lack of imagination among senior insurance company management — many of whom were wedded to the past or unwilling to risk alienating their historic distribution systems — coupled with a backwards looking regulatory structure, which tends to deny life insurers the opportunity to deploy the same set of incentives that has helped move other financial transactions online. In fairness to management, Faster, Cheaper and Better is not practicable when an insurer is obliged to charge all similar risks the same premium, and deploy the same underwriting processes, regardless of the cost or efficiency of the distribution system that brought the customer to the door.

    Broadway sometimes gets the words right, and as the lyrics from the 1950’s My Fair Lady put it:

    Just you wait, Henry Higgins just you wait
    You’ll be sorry but your tears will be too late
    You’ll be broke and I’ll have money
    Will I help you? Don’t be funny

    And, to update things a bit:

    My name is Alexander Hamilton
    And there’s a million things I haven’t done
    But just you wait….

    Gerry Goldsholle
    Founder & CEO, Advice Company
    Exec. Chairman, AdviceCo Ventures Company
    Direct Line: 415-339-6510

    Like

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