COVID-19 is changing and challenging the world. Nothing you have not heard before, right?
But one thing is certain: We will continue to see recessionary conditions due to COVID-19 at least in the short term. Therefore, we have recently published a report to help insurers respond to this recession. While the report highlights winning strategies from companies that have successfully navigated past recessions, success is more than just the right combination of cost savings and investments. Success also depends on your way of thinking. Times like these, even if they are difficult, also provide an opportunity to emerge even stronger than before. This is when wealth changes and market positions change.
The insurance industry is designed to assess and protect against risks. However, this lens can sometimes inadvertently cause companies to be risk averse, avoid uncertain or bolder strategies and limit the potential. In combination with a recession, these restrictions can have significant consequences.
So how do you think during a recession? Are you going to be bold or conservative? Opportunity to apply or risk avoiding? Most leadership teams will fall back on what they have done in the past and generally take action that is consistent with their existing assumptions or beliefs.
Instead, you can improve the quality of your thinking and decision-making by changing your attitude. Stopping to reflect on how you approach decisions can help you not only during this recession but also during all the difficult times in your business.
Mindset One: Ask the Question
How you frame or look at something is extremely important. Frame things too narrowly and you spend time on something that may not touch the steering wheel. Take, for example, artificial intelligence (AI). When many people think of AI, they think of it as a tool to improve processes, speed up and reduce costs. And this is true, but it is also surface level and limits the potential for what can be achieved.
We can look at AI differently by asking a different question. For example, instead of asking "How can we reduce the cost of claims management?", Ask "How can we prevent claims?" By reformulating the question in this way, you will begin to look at the potential of AI differently. I wrote about this a few years ago.
The important point here is that you should be aware of the questions you are asking and focus your teams on ̵
Mindset Two: Remember the Long-Term
A recession can immediately shift a company's perspective from the long term to the short term, and with good reason. Recessions are stressful, fraught with uncertainty and often require some short-term action to cope. the image below illustrates.
Strategies such as reducing the workforce based simply on percentages or evenly reducing investment costs can be quick and relatively simple, but these costs are likely to recur or result in problems such as a deficient customer experience. These strategies do not change how your business will scale when the economic environment recovers – they basically leave you standing still, which means you are probably losing ground to others.
Instead, the focus should be on making structural improvements to how work is done, often activated by technology. Examples include:
- Convert paper-based, manual work to digital, automated workflows to improve cost structure.
- Use customer service technology to quickly answer questions, save time and improve cost structure.
- Break down silos in your business that are a product of history rather than customer preferences to unlock synergies to improve the customer experience and cost structure.
There are clear long-term trends in our industry: Customers' expectations are rising and moving towards digital, and a combination of technology and data analysis will unlock new opportunities. These long-term trends do not disappear due to short-term challenges – in fact, some are accelerated even due to the recession.
You should consider whether your attitude (and your strategies) position you for the future environment. Are you still taking steps towards this, or do you choose to stand still for a period? Do you see an opportunity to accelerate your efforts? Do your current focus, your pace and your level of investment still place you to be successful in the long run?
Mindset Three: Review Your Predictions and Antumptions
Developing strategy requires predicting and adopting assumptions. What will reason with customers and partners? How will the competitors react? Etc. However, some of these assumptions have been held for so long that you may not even recognize them as "assumptions."
In recent years, some of these ingrained beliefs have been questioned. For example, the level of complexity in our product offerings, the value of human agents / brokers, the pricing structure for our policy and our industry in the role preventive .
It is good practice (and a well-established innovation technique) to demonstrate and challenge these beliefs during strategy formulation, but it is even more critical in times of uncertainty.
I do not suggest that you guess everything about your current strategy or plans; instead, you should test their resilience. What are the few most effective predictions or assumptions that underlie your plans? How will your business be fair if they are outside the target? What if you need to turn to an environment that is different from what you assumed – do your plans give you the flexibility to do this pivot?
When you came from previous recessions, there were clear winners and losers, as illustrated by the chart below.
The winners had a clear, objective perspective on their business position and deliberately made improvements and investments based on their predictions and assumptions. Now, especially when the future is so difficult to predict, it takes some time to review and challenge your key assumptions. Good time.
Mindset Four: Lead with Confidence
With so much ambiguity during a recession, leadership teams may feel insecure about their way forward. This uncertainty can manifest itself as an unclear strategy with changing or conflicting priorities, which wastes time and creates anxiety when teams try to decipher the intentions of leadership. This can not only lower productivity but also potentially lead to unintentional actions.
During times of turbulence, teams will seek leadership to get signals about how the company really is positioned and, to be blunt, if there is actually a plan at all.
The former three ways of thinking do not help you much if you do not act, communicate and lead with confidence.
To be clear: There is no winning formula. Each company will be different and have different needs and problems. The important detail to remember is to have a balanced approach and to let knowledge drive your response, not fear.
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