Insurance industry needs to improve “perceived” value
Insurance professionals are becoming targets, according to Dave Mosby, technologist, visionary and co-author of “The Paradox of Excellence, How Great Performance Can Kill Your Business.” According to Mosby, who recently spoke at the Professional Liability Underwriting Society (PLUS) Directors and Officers (D&O) West Symposium, companies nationwide, including those in the insurance industry, are being overly criticized when something goes wrong and undervalued for jobs well done.
That phenomena is due to what he calls the “paradox of excellence.” Mosby explained the paradox of excellence as: “The better you do your job, the more invisible you become. The longer you do a good job, the more your perceived value erodes because people forget the pain that you’re relieving,” he said.
The problem with that paradox, Mosby said, is that there is disconnect between the value a company delivers and the perceived value experienced by clients. The perceived value is not the same as the entire value. And value matters because “value is an evaluation of your firm that affects how well you can attract good people to work for you, how much people pay for your stock, how much business you attract and so on,” he said.
When the paradox of excellence exists, Mosby said it contributes to a hostile business environment. “The reason we have jobs is because there’s something someone else can’t do,” he said. But after a while, people forget why they needed the company in the first place because they rely on that company to do the job consistently.
Then, he said, when bad news happens, there is an overwhelming backlash by customers. “The problem looks more onerous and problematic than it really is,” he said. And, he said, when companies can’t improve their perceived value in customers’ eyes, it creates more problems, as the company is forced to deal with price pressures, commoditization and competition.
For example, “How many of you called your water company after you took a shower this morning to tell them thanks for delivering my water?” he asked the audience of D&O professionals. “A world-class company that has a utility role becomes invisible to us because of the quality that they’re doing. Then when something happens and they don’t deliver, we become livid because it’s such a deviation of what we’re used to.”
Companies are taken for granted because as they do a job well, they create distance from the “pain,” because of commoditization, and because marketers focus on unique attributes instead of whole value, Mosby said. Pain is the problem the company was originally hired to fix. To improve perceived value, he said companies should focus on “continually reinforcing their complete value and reinforcing their distinguishing value in a socially acceptable way.”
To improve perceived value, Mosby recommends companies first understand what their total value is, including all attributes. “Often, companies essentially forget things that they have been doing internally because they have been doing them for so long and perfectly, that they’ve taken them for granted,” he said.
The next step, is for companies to provide measurable outcomes that the customer can see. Companies should provide their customer with metrics that answer the questions:
1) What have you done for me lately?
2) How quickly have you done it?
3) What’s special about you?
Communication is key, Mosby said. And, the answers to those questions should include numbers, he added.
For example, a physical therapist can measure patient’s range of motion, to show the customer how quickly and how much the therapy is helping.
One problem Mosby sees that often occurs in the insurance industry is that the industry’s communication often is a bill. “Bills are not perceived as a good thing,” he said. When a company only communicates with a customer with a bill, which is perceived as bad, the insurance company’s perceived value erodes, he said.
As an alternative, Mosby suggested insurance companies evaluate what value they provide, then structure their communications to emphasize that value. The communication would need to be consistent throughout the company in how employees answer the phone, what’s written in bills, and messages in newsletters, etc.
Another mistake companies often make, Mosby said, is they under-promise and over-deliver. “That seems nice,” he said, “but if you do that you’re shooting yourself in the foot because the people you’re over-delivering to will naturally come to expect that performance on an ongoing basis. Companies push themselves into areas that they can’t sustain.”
Instead, Mosby recommended companies keep bad news from dominating communication, and to emphasize their performance in the context of:
• previous performance;
• competitors’ performance; and
• some objective standard.
Budweiser, he said, perfected this when it developed “born-on dating.” By putting the “born on” date on its beer, the company created a standard that is measurable so consumers can compare how fresh one beer is to another. And “fresher is perceived to be better,” Mosby said.
The key steps to take to improve perceived value, Mosby concluded, are to understand the total value and context in which your company is judged; build a plan to integrate communication into how your products are delivered and communicated; and then implement the systems that you’ve planned.
Falling short of that, could be tragic for a company, he said. “Value is not the same as being valuable,” he emphasized, “and performance improvements don’t eliminate the problem if you don’t have perceived value.”