What happens to insurance products once two companies combine via merger or acquisition?
More than a few insurance executives have bent my ear on this topic over the years. They have, as the saying goes, been there and done that.
Given that corporate combinations often blossom in the wake of recession and given that the U.S. economy slowly is entering a rebound, now seems a particularly good time to relay some of the points these execs have made.
(Note: This discussion uses the word “merger” to represent corporate combinations. But most of the points also apply to acquisitions.)
The following “what happens” list is a compilation of those points. They are not modeled on any one company but rather on comments I have heard most often. The list also includes some of my own observations, gleaned from watching products ebb and flow through many corporate combinations.
To simplify the conversation, let us use the term Company S for the stronger of the two companies, by financials and/or volume. Company W is the weaker of the two.
Here are some of the product-related events that occur after the deal is sealed:
Product care languishes for a while. This is especially true for Company Ws products. Typically, those policies now have only a stripped-down internal support system (often the result of pre-deal pruning). The W products may also suffer because their managers may have jumped ship upon hearing of the merger, and/or because the Company S staffers may not yet be up to speed on the W product line. Even “S” products suffer from neglect for a while, mostly because everyone is concentrating on business integration.
Product information sources shift into low gear. Marketing departments, public relations units, product literature experts, trainers and others start sifting through all the old materials, trying to salvage those that still apply. Often they must wait to learn of the companys new strategy for products before they can do more. No one is sure what to do about promoting the many products the company now has for sale.
Customers receive repeated notices regarding the change. These notices often tell about the new combined company. Some relate how the corporate transition is coming along. Few tell how the customers own product or service will be affected–until much later.
Producers initially receive reassurance of continuity. In the beginning, management tries hard to keep existing distribution from both companies in place. It does not want the transition to impede revenue flow and/or producer service to customers who have in-force products. These communications are filled with words of happiness to come, but details are sketchy and commitments are absent.
Most products undergo review within a year or two of the merger. Usually the management team of Company S takes charge, perhaps with a few holdovers from W. Together, they comb through the existing products, looking for cherries that fit the companys new “core” identity.
Some products are consolidated, shut down, sold off or left to fend for themselves. The product lineup now includes many duplicates, sleepers and underdogs. Weeding them out is a no-brainer. In the process, pet projects of former managers (and producers) frequently bite the dust. So do promising bold initiatives that Company W may have had on the drawing boards. Even mature products may get a sober review. Management may target some of these for nothing more than milking. That is, the products will get maintenance-level support. If they survive, they stay; if they dont, its adios. The managers who previously ran these products often leave.
Product reviews include assessment of suppliers and joint-venture arrangements. The combined companys managers will earmark some product partners as keepers, but others will be terminated. Sometimes the changes made here directly affect in-force policies as well as product development.
Some producers receive new contracts with new terms, conditions, benefits, etc., while others are “non-renewed.” Management typically seeks to keep the high performers, particularly those in preferred distribution channels or markets. But it sheds the “occasional producers” and those who pose conflicts. Some producers come out ahead, but others spurn their new contracts and go elsewhere. The non-renewed sometimes file lawsuits or spread bad word of mouth. Customers and products directly are affected by this winnowing. Some continue as before; some get lost in the shuffle; some leave.
Product contact information changes. This includes, but is not limited to, phone numbers, e-mail and postal addresses. Companies do pump out this information as soon–and as often–as possible. But the messages dont always “get there” (or get read). This creates the impression that “no one back there knows what theyre doing.”
The dominant buyer takes over product management. This is a sign the company finally is taking hold of its business. Features, prices, terms, conditions, commissions, strategies and more may change. The transition may occur as late as one year after the merger and sometimes later, and it will take longer still to communicate the changes to the market.
As you can see, some common practices show distinct lack of forethought, while others show astute attention to detail. But, taken together, they demonstrate what you already intuit: A merger gives a huge jolt to product development, service, support and sales strategy.
This can be tough on you, no matter what position you hold in the product chain.
Knowing what may happen should help you cope, though. If merger is in the wings, prepare yourself, your staff and your customers for possible product or service changes. Ask questions, keep records, store contact information and so on. Be proactive and objective. Save those rose-colored glasses for sunny days.
Reproduced from National Underwriter Life & Health/Financial Services Edition, August 25, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.