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March 13, 2009 at 08:00 PM
JHA Speaker: Stand Firm On Prices
Bonita Springs, Fla.
“We’re in the worst economy in our lifetime, and I don’t think it’s going to get better in the next year,” Reed Holden, president of Holden Advisors Corp., Concord, Mass., said at a conference here.
Holden spoke about strategies for maintaining realistic prices in the face of a brutal recession during the annual disability insurance conference sponsored by JHA, Portland, Maine.
He called for a calm, analytical response to the recession. “My advice to you is, as quickly as possible, get over it,” he said.
“Getting over it” should mean improving products and services and working hard to find genuinely qualified prospects, not cutting prices to unprofitable levels, Holden said.
“You can’t price your way out of a recession,” he said.
One way to increase sales reps’ ability to sell based on something other than price is to train them to understand the products they are selling, he continued. Another way is to put more effort into using simple screening questionnaires and other techniques to filter good prospects from those who are not actually likely to buy, Holden said.
“Not all customers want and are willing to pay for value,” Holden said.
Building sales reps’ confidence is also important, he said. Effective sales executives “are not banging the ‘we’re going to die’ drum,” Holden said.
If executives at a disability insurer think the reps are focusing too much on price, that may be a symptom of other company problems, Holden added.
He recommended that executives who are dissatisfied with their sales reps try going out on sales calls for a day. “You have no idea what it’s like out there,” he said.
Holden recalled working with a client company in the electronics industry that thought it was having problems because its sales reps were too quick to discount. In reality, the reps were discounting because the company was unreliable and failed to support them adequately, Holden said.
He also emphasized the importance of firing bad customers, including customers who spend a disproportionate amount of time complaining.
“The squeakiest wheel is usually the least profitable,” Holden said.
Disability Insurance Experts Ponder Recession Impact
Bonita Springs, Fla.
Thinking beats cowering, a top disability insurance market watcher says.
Drew King, president of JHA, Portland, Maine, called for a calm, analytical response to the recession here at his firm’s annual disability insurance conference.
“I encourage you not to be part of the herd,” King said at the general session that kicked off the conference. “Let’s not go in the bunker.”
Instead of adopting a “duck and cover” strategy, disability industry executives need to decide what they think the situation is and make choices based on how they think the recession is going to end, King said.
“And it will end,” he added.
JHA is a disability insurance risk management and consulting arm of General Reinsurance Corp., Stamford, Conn. Its conference draws many of the movers and shakers in the disability market.
This year, because of the economy, “we’re a little bit smaller,” King said.
But he estimated premiums from in-force coverage increased 2% for group long-term disability in 2008 and 2% for group short-term disability. JHA also surveys the group life market, where in-force revenue may have increased 4%, he said.
Past recessions have led to increases in disability claims. So far, however, the current recession has not had much, if any, effect on claims, several speakers said.
One theory is that policies and claim management strategies have improved. Another is that workers are too worried about job security to file disability claims, Gerard Lynch, president of General Re-New England Asset Management Inc., Farmington, Conn., said at a conference breakout session. His Gen Re unit manages assets for insurers.
A third theory is that, because of challenges such as credit card debt, “people were too leveraged to go out on claim,” Lynch said.
In the future, the recession and government efforts to end the recession could hurt the disability insurance market, Lynch predicted at the general session and the breakout session.
Governments “will throw as much money at this as they possibly can,” Lynch said. “From their point of view, inflation is a small price to pay for political and economic stability.”
That means that, after a year or two, inflation is likely to rise, and asset classes such as oil and grain are likely to do well, Lynch said.
