A Few Thoughts for Insurance Entrepreneurs

Managerial flexibility, effective communication, selecting and placing employees wisely, customer care and reputational risk are some of the factors would-be entrepreneurs need to consider when contemplating running their own businesses, according to one insurance executive with the work history to support his conclusions.

Robert (Bob) James, chief operating officer at QBE North America, has spent his entire working career – spanning 30 years – in the insurance business. About half of it was in personal lines, with Allstate and MetLife. Along the way he’s also held executive positions with AIG, CNA, Bank of America and Countrywide Insurance. At Countrywide Insurance, with its specialty in lender placed insurance, James had a ring-side seat from which to watch the economic meltdown that began in 2007 with the residential mortgage crisis.

With those experiences in mind, at the Entrepreneurial Insurance Symposium held in September in Dallas and hosted by MarketScout, James shared some of his views on what it takes to thrive in the insurance business whether one is starting a company or taking an established firm to the next level.

Private or Public

“It’s easier to do what you want to do if you’re privately held,” James said, emphasizing that his opinions are his own and not those of his current or former employers.

It may seem obvious, but when looking at very successful companies and why they are successful, many times “it’s because they are privately held and not beholden to quarterly analysts’ results,” he said.

While access to capital may open up opportunities for the entrepreneur, it also brings with it the risk of losing control of the entity one creates.

“I guess if there’s a message for you as you contemplate your own business, should you decide to bring in other owners and/or dilute your ownership, where you’re no longer a majority owner, or go public, you should be cognizant of how much of a sea change that is,” James said.

A privately held company, as opposed to one that is publicly traded, has more flexibility. James cited San Antonio, Texas-based insurance and financial services company, SWBC, as an example of a successful enterprise that exemplifies his point.

SWBC was founded in 1976 by Gary Dudley and Charlie Amato with $1,500 of starting capital, according to information provided on its website. Its initial focus was on the needs of financial institutions. SWBC now has offices throughout the country that provide insurance, mortgage and investment services not only to financial institutions, but to other businesses and individuals, as well.

James said he connected with the company through its lender placed insurance business.

“They have 2,000 employees,” James said, “and they win the best employer in San Antonio, best employer in Texas awards year after year.”

On a tour of SWBC’s headquarters, James said he asked several employees “what makes the company so great?” One replied that when a co-worker’s daughter died in a car accident Dudley and Amato paid for her funeral. Another answered that the owners personally hand out bonuses to their employees every Thanksgiving.

“There are … other stories like that,” James said. “I talked to Charlie and Gary about it and they said ‘you know, that stuff doesn’t cost us that much money in the grand scheme of things and the [reputational] mileage is just priceless.'”

That kind of flexibility would be difficult in a publicly held company, James said. However, “a lot of private equity firms will give you that kind of latitude and in fact encourage it because they understand the importance of employee engagement [in order] to grow.”

‘Mission Statement’

“We must all efficiently / Operationalize our strategies / Invest in world-class technology / And leverage our core competencies / In order to holistically administrate / Exceptional synergy / We’ll set a brand trajectory”

Sound familiar? It should. Those lyrics, from the Weird Al Yankovic song, “Mission Statement,” were composed of words from actual corporate mission statements. Mentioning the song in his presentation, James said it is hilarious, but “unfortunately it hits too close to home.”

Strategy documents at most companies “are absolutely awful. … They’ve got way too many words on a page. They don’t really describe often times what’s the core reason for your being in business.”

If you are a business owner or team leader, “your understanding of where you are trying to go is obviously clear to you and most always not clear to those who work with you, even in smaller organizations,” James said.

It’s important for the people who work for you to understand where it is they are going. They are looking for leadership, for hope. So, describe what success looks like – create the story and tell it to them, whether it’s a journey to grow a business or to get through a crisis.

“If you’re a victim of a corporate strategy that you can’t change, your job is to translate it into something that’s understandable to your team. If you’re the architect of corporate strategy … [think about] what is the social reason … that we are in business? What’s the value we bring to the customer? It’s really important to be able to articulate it.”

Right People, Right Role

The insurance business is a relationship business, and people with a high quotient for relationships – James included himself in that category – sometimes have an undue level of empathy for the people who work for them.

“If you have that high quotient relationship, and you want to grow your business, put the right people in the right role,” he said.

As an example James related a story about a man who once worked for him.

He was “a wonderful guy but he had a problem. His problem was that he did not know how to delegate his team … so he ended up doing his team’s job and his job,” James said.

At quarterly business reviews it was obvious that the man had not slept, that he was unprepared, and he would come in with a stack of papers and try to make sense of them.

“I had talked to him about this issue, but rather than recognizing that he was not going to change, I proceeded to beat him like a drum,” James said.

Fortunately the HR person did recognize the problem.

“‘He’s incapable of doing his job,’ she said. ‘You need to fire him, because … he’s not going to quit. He’s going to keep trying to please you and he’s in the wrong role.'”

Customer Care

Plain and simple, customers don’t care about your problems.

“They don’t care,” James said. “I view many of you here in the room as my customer. If I sit down and explain to you how tough my job is and how much stuff needs to change. … You don’t want to know that. You want to know if it’s affecting you and you want to know if I can fix it.”

As a team leader or an entrepreneur, it’s important to “put yourself in front of your people when you’re in a period of crisis or stress. It is very difficult because often times you don’t know what to say to them or you don’t have the answers or you don’t know what the future holds.”

Reputational risk matters, and getting in front of your team or your customers and admitting your mistakes is very important.

“Just as important as celebrating wins,” James said.