Increase Renewal Account Premiums
The Business Challenge:
The commercial property division of this major insurance company recognized that it urgently needed to increase the rates on renewing commercial property business. For years the market for property insurance had been soft, with brokers and customers essentially dictating rates. The business was losing money. However, field underwriters believed they didn't have the leverage to go after rate increases: they feared that competitors would undercut them and take the business. Their concern was increased by the fact that for years they had been evaluated by a production metric (the amount of underwritten premium) rather than by the bottom-line profitability of the insurance policies they wrote.
The newly appointed CEO was convinced field underwriters had to shift their mindset from production volume to profitability. However this was proving a tough message to get across.
Schaffer Consulting's contribution:
Schaffer Consulting worked with the CEO and his management team to make an initial breakthrough on the issue and prove that a step-up in performance was possible.
They did this by starting with one dramatic Breakthrough project in the head office branch. Two underwriting teams were asked to set a Breakthrough goal to achieve rate increases for renewing business over a four-month period. At first both teams insisted they were being asked to take on an impossible task. However they took up the challenge and set an ambitious goal that balanced rate increases with customer retention: "an average 20% increase in premium while maintaining 75% of the book of business". Field underwriters in the two teams prepared detailed analyses of the renewing accounts that were then used to justify the increases sought. To their astonishment, they got what they asked for and, as a result, their confidence grew. By the end of the Breakthrough project, 90% of the book of business had been retained, with an average 30% increase in premium.
One of the key innovations from the first Breakthrough project was a proactive strategy for account renewal, a disciplined approach for preparing to go to the customer and broker to negotiate the rate increase. The CEO was keen to extend the innovation to account renewals across the division. Schaffer Consulting suggested WorkOut as a methodology for spreading the story of the team's success and for expanding the innovation around proactive account renewal.
How WorkOut was used:
Schaffer Consulting worked with the CEO and a WorkOut Design Team to plan and conduct an Account Renewal WorkOut.
It involved 40 people from branches across the country in the effort to gain rate increases. The focus for the two-day WorkOut was how to achieve increased profitability on the division's book of business renewing at year-end. The big goal was to get an overall premium increase of 20% on renewing business.
The WorkOut focused on themes that would be critical for achieving the rate increases: influencing customers and brokers; applying the proactive account renewal process; and increasing the effectiveness of individual underwriters. At the Town Meeting, four teams presented some eighteen recommendations for action. The CEO accepted sixteen of these for priority effort
In the weeks following the WorkOut, Schaffer Consulting worked with the senior manager charged with implementation responsibility, to build a disciplined management process throughout the renewal period. This involved regular reviews with other senior managers, a weekly report on the progress of specific action recommendations approved at the Town Meeting, and frequent reporting on progress to underwriting teams across the division.
Results:
The WorkOut paid off handsomely on many levels. Its immediate financial impact exceeded all expectations. The average rate increase achieved was 30% - while actual risk exposure on the book of business was decreased.
The timing of the WorkOut was also particularly good. It coincided with the introduction of a new system which made the underwriting process used on each account transparent. This allowed the lead property underwriter to watch on a daily basis how each underwriter was preparing the renewal strategy, and to give them immediate feedback. By highlighting any skill weaknesses among the underwriters in real time, the process prompted on-going skill enhancement as part of the renewal process.
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