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Sunday, 18 November 2012 00:00
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In business, who takes the knock: customer or owner?

Recently, the big players in the nation’s insurance industry met minds to re-position the sector and build confidence in the prospective customers. In realization of this vision, the Chartered Insurance Institute of Nigeria (CIIN) organized a seminar tagged “Making Insurance Count”. At the well-attended event, the Managing Director, Sovereign Trust Insurance Plc, Mr. Wale Onaolapo, delivered a paper entitled “Making the customer a winner”. KAYODE ADELOWOKAN writes.

“Customers are the foundation of any service organisation. They are the scorekeepers in the service game. Management practice should therefore be based on a deep knowledge of customer characteristics in the area of expectations, needs and competencies as they vary from kind of services to products. Benjamin Schneider and David Bowen in their book “Winning the Service Game” said of service as less tangible than products; much of service quality is in the delivery”.

The knowhow of service delivery is as important as what is to be delivered.
Mr. Wale Onaolapo, Managing Director/Chief Executive Officer, Sovereign Trust Insurance Plc delivering a paper titled, ‘Making the customer a winner’ during 2012 Education Seminar with the theme: “Making Insurance Count” organized by Chartered Insurance Institute of Nigeria (CIIN) said that most underwriting firms now use more direct sales methods and rely more on their own full-time representatives than was in time past.

Although, Onaolapo said that brokers are still being used, they are tending to become more specialized in market segment and product group thus enhancing their ability to add real value to the insurance subsector. Other changes in distribution techniques include alliances with banks through bancassurance model, increase in direct marketing and the adoption of e-business. The use of these new and innovative techniques has meant new skills in selling and technology support.

Having greater sales force productivity, he noted that today’s salesmen in insurance are better educated, more empowered and better motivated than before. To enhance their productivity and effectiveness, they are supported with the necessary tools and information to both sell and serve customers. The result is that average gross premium income per sales staff has increased tremendously in the last couple of years as affirmed by reports published by most underwriting firms.

“In excellent customer service; most successful underwriting firms have now gone beyond quality of service to providing truly excellent customer service in all aspects of customer service delivery from enquiries to rate quotation through to prompt claim settlement in the occurrence of risk crystallization while also deploying their risk management techniques to reduce the occurrence of loss”.

The Managing Director also said that the winning insurance companies have been those who successfully demonstrated competitive risk selection and pricing. The very keen competition for available business has forced companies to develop even more sophisticated ways to evaluate, categorise and price risks. These companies have successfully reversed the previous acceptance of underwriting as inherently unprofitable.

Profits from their underwriting business, coupled with smarter investing, have vastly improved their overall profit performance and return on invested capital.

He cited that the quality of the human capital recorded in the insurance industry in recent times has vastly improved. The industry has now been able to attract and retain good quality people. The industry now competes effectively with banking, accountancy and management consulting for top talents graduating from our higher institutions of learning.

The more successful companies now outspend banks in staff training and management development, spending a significant percentage of their net premium and investment income on this newly discovered strategic resource. The resulting increases in productivity, creativity and innovation have played a large part in their relative superior performance.

Looking at re-engineered and streamlined operational processes, the Sovereign Trust Insurance boss said that the restructuring that took place in the Nigerian insurance industry in 2007 also saw to the fundamental redesign of insurance business and this has led to much improved operations and enhanced customer service. Reengineering has helped the companies that embraced it boldly to reduce costs, improve performance and enhance their flexibility.

The quantum leap in the value they are able to deliver to their customers enabled the leading underwriting firms confront the competitive challenges unleashed by the restructuring of the industry. Large scale reengineering has also meant massive investments in technology and reduction in headcount.

With the advent of “Global Village”, Mr. Wale Onaolapo said that the concept of universality as envisaged by our forebears that the entire universe is one, has become a virtual reality now. Thanks to scientific technological advancements pronouncing the death of distance and speeding up communication. Peoples’ contacts have become instantaneous across nations and businesses have profited the most. Our industry too has finally woken up from slumber and come to terms with technology.

Technology today is the competitive engine; its application has gone beyond the hereto-fore traditional uses of systems beyond capturing, storing and retrieving data. Information systems are now being used to design, package and deliver innovative insurance products and services online. Some of the leading edge technologies in widespread use in the industry include electronic data interchange such as the NIID project of the NIA, and similar projects which banks have been using for decades, image processing and expert systems.

Having a winning formula
“For organisations to succeed, having in place a winning formula is not only imperative, but highly needed if their corporate objectives are to be achieved. For any business to be successful and to be classified as a winning company, a winning formula predicated on a good strategic framework must be adopted”.

In his work, “Good Strategy Bad Strategy”, Richard P. Rumelt asserted that a good strategy honestly acknowledges the challenges being faced and provides an approach to overcoming them, that the greater the challenge, the more a good strategy focuses and coordinates efforts to achieve a powerful problem solving effect.

“The winning formula which I would recommend should be inspirational and embedded with powerful business development framework designed to support and equip leaders and managers with the knowledge and skills required to successfully grow their organisations. The formula encompasses;

Strategy
This is the “how” of achieving what the Board and Management of any company must have agreed as the mission of their business. Today’s managers must take action that will help to attain one or more of its organization's goals and objectives. This could be achieved through the detailed strategic planning process of integrating organizational activities and utilizing and allocating the scarce resources within the organizational environment so as to meet the objectives. While planning the appropriate strategy, it is essential to consider that decisions are not taken in vacuum and that any act taken by an underwriting firm is likely to be met by a reaction from those affected like; competitors, customers, employees or regulatory authorities.

Structure
Businesses must create structure that best suits their operations or meets the industry standard. Organizational structures outline how a company completes various business functions with the function of business owners and managers clearly delineated ensuring that no one individual is responsible for too many functions. Not only can this create a backlog of work, but it can also allow fraudulent activity to occur. Managers and employees often work better in an environment with a clear structure and level of expectations.

System
According to organizational consultant Dean Meyer, a well-designed organizational system must be stable and capable of influencing everyone's performance. However, prior to planning an organizational system that will be effective and efficient, knowledge of the various types of systems that exist is required. The choice of system that an organisation allows to predominate among the variants of country club, team and task management as postulated by Blake and Mouton's "The Management Grid" would determine to a large extent a winning company.

What is important is that any system adopted must clearly define the roles, responsibilities and relationships between all strata in the organisation.

Process
The business process is a series of activities occurring within a company that lead to a specific end. Most often, the business process must focus on meeting the needs of the customer and delivering a good or service that will fulfill that need. In many cases, the business process is actually a collection of interrelated processes that function in a logical sequence to achieve the ultimate goal of customer satisfaction from the acquisition of raw materials to production and even to the conclusion of the delivery process and to the obtaining of feedback from the customer regarding their level of satisfaction with the product and the efficiency of the physical delivery.

Staffing
This is getting the right human resource personnel to drive the corporate objectives and implement the strategic planning process. Jim Collins in his book “Good to Great”, postulates that a good leader must first get the right people on board and the wrong people off with the right people in the right seat. The old adage that “People are your most important asset” turns out to be wrong because people are not just your most important asset; the right people in the right place are.

Market and Marketing
The business must seek to provide answers to the following questions as regards its product or service;  (1) is there still room for expansion in the product lines offered by the company overall? (2) Do we see possible extensions of the company’s product line into new uses and markets? (3) Is there a high rate of technological change? (4) Does the company serve numerous and diverse customers? (5) Does the company’s offering provide good value for its price?

Setting up of Priorities by the Leader
Because senior executives have long been seen as the strategy makers in the organisation, their role in the process has been the most extensively written about and examined. The characteristics of effective strategic leaders can be best expressed through the metaphor of the tightrope walker, who needs focus in clarifying the organization’s strategic direction and vision for the future, balance in helping people resolve dilemmas associated with the strategic focus and remain open to change and coordination in ensuring that the diverse functions and strategic initiatives of the organisation work in harmony in the service of shared goal to get from one end of the thin wire to the other.

The leader in its growth strategy must ensure that the company’s volume is increasing and should exceed the average growth rate of the entire industry with the company’s products serving as substitutes to products in other industries where possible.

Cash Generation
The leader must ensure that the business generate enough cash inflows because cash gives you the ability to stay in business. It is likened to the company’s oxygen supply. Lack of cash, decreasing cash or consumption of cash means trouble, even if other factors like profit margin remain good. Everyone in a company must understand that his daily activity uses cash or generates cash. All people in every organisation have a role to play in keeping the cash flowing. 

Return on Assets
This number tells you what the company can do with what it has. It's a useful number for comparing competing companies in the same industry. The number will vary widely across different industries. To paraphrase Ram Charan "one truth about business is that the return on assets has to be greater than the cost of using your own and other people's money, the capital.  That is when management is seen to be creating shareholder wealth."  Every company must hold itself up to this standard.

Good Corporate Governance & Sound Risk Management
It is imperative for an organisation to have a good corporate governance structure and enterprise risk management system in place to direct and control the organisation. This structure will specify the distribution of rights and responsibilities among different participants in the corporation, such as board, management, shareholders and other stakeholders, and spells out the rules and procedures for making decisions on corporate affairs.

By doing this, it also provides the structure through which the company’s objectives are set, and the means of attaining those objectives and monitoring performance while also aligning the organization’s risk appetite to its business strategy, enhancing risk response decisions, reduce operational surprises and losses, identify and manage interdepartmental risks, allow for more informed risk decisions and improve capital management.

Service delivery in insurance
Over the years, the general perception of service delivery in the insurance industry as demonstrated by the actors; agents, brokers and insurance companies have not been anything to be proud of. The industry was known to be quick to collect premiums and yet dragged its feet if not avoid the payment of claim when the need arises. Most customers had sad tales to tell from the shabby treatment gotten from the inception of the contract to the adoption of the risk management principles and ultimately the payment of claim.

More worrisome was the attitude of underwriting firms to look for a minutest excuse to repudiate genuine claims.  Our agents and brokers too did not fare better holding on to premiums unduly for too long without remitting same to the insurance companies, not forgetting the ill-equipped human resource paraded by the industry that barely knows the intricacies of what insurance stands for.

But such experience have now become history as the industry has now come to terms with its purpose and ready to play its pivotal role in the economic development of the country. So many steps have been taken by the regulatory authorities since the 60s to weed out the bad elements in the industry with the government coming up at various times with new laws and regulations to guide the conduct of insurance business in Nigeria.

In spite of all these efforts, and the need to address the theme of this discussion, one might need to ask, are we getting it right? Are we practicing the correct principles?

To my mind, I will say yes even though we are not fully there yet. However, the journey of a thousand years they say start with the first step. That we, as an industry must rise to this challenge that is hydra headed by committing and applying ourselves to the various principles and practice of this profession as it is done elsewhere in the world.

The Managing Director/Chief Executive Officer, Sovereign Trust Insurance Plc, Mr. Wale Onaolapo, however said that there is need to provide excellent service by ensuring that the risks are adequately priced through application of economic rates that will enable us pay compensation to our policyholders, meet regulators demand and do have provision for the owners of the business. This will ultimately improve our brand; grow our market especially in areas that we are yet to penetrate.

“I strongly believe that there is no short cut to success other than playing by the rules of the game with total submission to the principle and practice of our noble profession”, he said.

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