Insurers need to get out of office more often

Would you like your Insurance premium drop by nearly 1/3rd ? or Policy benefits increased without you paying a rupee extra? Insurance companies, can do this easily. But they have to be out of office. I mean, they should spend significantly less on offices and headcount. Because, insurance business doesn’t need offices and hundreds of staff.

In my University days, reading Social Economist Amitai Etizioni’s Modern Organizations was sine qua non. Etzioni laid bare how Organizations get self serving and pile up costs not to accomplish the purpose they are meant for, but catering to the personal whims of the employees. Insurance companies across the world spend huge money on offices and staff that add no value to their customers.

Worse, they make things more difficult and depressing for customers who’re forced to wade through layers of reckless bureaucracy.

We know that customers rarely visit insurance offices to buy policies. Then why spend good money on things that are unrelated to business growth and quality?

Can insurance companies live without branches anywhere? The answer of course, is YES. You may cut jobs, impact real estate prices, but it would help reduce insurance costs by nearly a third.

If insurance becomes affordable, more people would get financial security and there’d be less destitution in the society. It’s a compelling study for those who despise insurance, to know that substantial part of poverty in this world is derived due to lack of affordable insurance (Oxford University- Poverty Traps & Development- Stefan Dercon).

I recall the question I asked the first time I ever entered an Insurance company office- not as a customer, but as a newly recruited Officer of a large general insurance company- I must have looked dumb when I questioned why the company had so many Branch Offices, Divisional Offices and Regional Offices when the work of one was getting aggregated at the other, with seemingly no value add. My senior colleagues were candid enough to say, we needed structures to give us all opportunities for promotions. The Branch Manager aspired to become the Divisional Manager and the Divisional Manager wanted to be the Regional Manager moving farther away from the customer, to get bigger office and higher amenities. The truth in the first place is, even the Branch Office is redundant – as I noticed no customer actually walked in, except rarely- and the whole place was mostly a front for meetings of staff, who most of the time, engaged in farcical work like “ Learn a Hindi Word a Day” gaming one Staff Union against other, applying for housing loans, settling employee bills, conducting sports events, compiling staff reports, preparing for promotional exams-and looked busy while none of the activity helped the customer feel better.

I shirked off the experience as a possible Public Sector malady and moved to the all “new and vibrant” Private sector. Cut to a decade later when I ended up as a CEO with a mandate to scale up the largest and fastest growing life insurance venture out of a struggling entity- my nibbling thought of “ Why we needed so many offices?” still remained.

I was a bit playful, on the first day of my work as a CEO, I arrived unannounced not at the Head Office, but at a major Regional Sales Office in a posh business district of Mumbai, to take charge of my work. I was promptly stopped by the security guard, without revealing my identify, I asked permission to see the office in-charge, he was nowhere to be seen, the staff were busy having an extended lunch time, while I patiently sat at reception trying to check how long it would take them to notice a stray visitor at their Reception.

A lady eventually spotted me waiting so long and escorted me in. I greeted them with a beaming smile and promised that I would soon create more work for them so that they’d never feel lonely and abandoned in their offices.

I did. Business came pouring in- trickle of business turned into overflow and we hit a million policies in no time, the fastest take off in the industry. But the problem remained. We had too many offices, too many staff- as business came gushing in, a false notion prevailed that more Offices and more Staff mean more money. I knew, that was not the case, but as a CEO, I still had my limitations. I sat on an organizational structure that had layers under layers and no one truly cared as the gravy train rattled on.

Subprime sounded the first warning bells. Cost control became the buzz word. I wanted to stop opening offices and recruiting more staff, but alas, we couldn’t because it’s sacrilege to talk about downsizing.

To prove my point, one day I took a taxi, went alone unannounced on a road trip covering all the remote branches we had in one State. The results were comical. Except the ubiquitous Security guards, at most places I found no staff attending to their offices. Many places, the Branch Manager hardly visited his own branch for weeks. All the so called “staff” we had on payroll “managed” their work using mobile phones from shopping malls, movie theaters, beaches etc.

I presented the tell tale picture to the Board for permission to shut these offices- but for reasons very different, we could not.

I moved on to another Start Up venture in Life Insurance, strongly determined to set up a “Branchless Business”. I succeeded largely in creating an enterprise from the start with a motto of “Less is More”; we broke even faster than we planned for. Piggybacking on technology and partnership models, we cut capital spends and still managed to grow fastest with a user base crossing million lives. We reduced Organizational layers to 5 from the prevailing norm of 12. Amitai Etzioni might have appreciated that, I an ardent fan of his book- actually did what he proposed and got proven benefits.

The other thing I managed was to do away with security guards; except standing to attention to make you feel needlessly important- there’s no security to be provided, except through the Policies we sell. The savings in these costs, legitimately belong to the customers.

Simple technology solutions make a compelling case for insurance companies that having no office makes business better. The only office you may need is MS Office and a smart phone, to effectively manage customer engagement.

So next time you want to choose a Policy and is wondering which is the right company- ask them how many offices and staff they have. You may find that less is actually more, for you.