Low-cost initiatives can go only so far before they take on the aura–and problems–of cheapness: limited designs, sloppy contracts, poor service, etc.
As the saying goes, “You can squeeze only so much juice from an orange.”
This applies to insurance products and purchases as well as to other products and services, be they cars, computers or reservation systems. Wherever you look, from the executive suite to the consumer purchase, cost savings initiatives can morph into “being cheap” in the blink of an eye. That can be very expensive in the long haul.
Let’s see how this applies to the insurance product landscape.
Company executives: Curbing waste wherever it exists will always be on your list, but cutting into the marrow of insurance products and services hardly qualifies. Pare back on legal reviews? Be prepared to pay for it in regulatory challenges and lawsuits. Cut back on actuarial modeling? Be ready to suffer the consequences of so-so designs and no competitive edge. Order massive layoffs? Get ready for bad PR, lawsuits, and potential takeover.
Actuaries: You can trim development time and costs by not adding more features to products, but foregoing innovative add-ons could put your products on ice. When guaranteed living benefits features took wing in variable annuities, for instance, how could you cost-justify not offering such features in your own company’s VA products? That would be VA suicide–a costly mistake.
Consultants: Want to cut corners by ceasing to market your services? Want to offer clients “low-cost, simple” solutions by holding back on suggesting competitive upgrades or break-through concepts? Look out. You may attract some bottom feeders, but your firm will risk losing face with premium clients. At some point, you’ll have to start building clientele all over again just to stay in business.
Systems pros: No doubt about it, you have scored huge gains in not only cost-control but also productivity, immediacy and a host of other positives. But cutting costs here–fewer upgrades, smaller staffs, less intensive quality control, etc.–can undo all that in a jiffy. What do you save if you offer a neat new online data entry capability but withhold or limit administrative support for it?