Happy New Year! Time once again for that most hallowed of all traditions: New Year's resolution!
Note the singular. As one who often painfully learns from experience, I've discovered that the longer the resolution list, the less chance that I'll act on any of my otherwise brilliant suggestions. Over several years of experimentation, feedback and a certain fondness for an old Three Dog Night song (or another similarly titled by U2), I have now arrived at the perfect number of resolutions to share that may stand some small chance of surviving past the end of this article.
One.
But other than being the loneliest number, which insurance resolution will be the one of 2013?
Embrace reverse engineering.
You have heard of the numerous technology websites and companies that tear apart the latest gizmos and immediately tell the world—or their paying clients— what went into them. In insurance sales lingo, this is known as a "temporary monopoly." Translated from the original tongue, that means "Cash the checks quick, Ma!"
Consider the iPhone. In the beginning it was considered radical and eye-opening. But once the game was changed, it didn't take long for every other phone company to make the smartphone the centerpiece of the menu. In a few short years we have come from the iPhone being amazing and unique to nearly every other phone looking, and allegedly working, the same or even better. Those other manufacturers took the new device apart, figured out how everything worked, then redid their processes and designs to meet or exceed the new game in town. Apple's recent lawsuits over patent infringement affirm this reality.
Let's apply reverse engineering to an insurance story posted on LinkedIn about a house fire near Sacramento, Calif.
Jennifer and Brad Taylor's house burned down. Their insurance company arranged for temporary living quarters and stood ready to devote full policy limits to rebuilding the home.
Our fire victims' home is located in a major flood area. Although protected by levees, the Army Corp of Engineers had ruled that those levees need major repairs or they could no longer be considered adequate. As a result, FEMA stepped in with a building moratorium stating that any home in that area damaged beyond 50 percent of its value can only be rebuilt if elevated above the expected flood depth.
Problem: in much of the designated area, that would require the first floor of the newly constructed dwelling to be at least 20 feet off the ground. Can you say "mind-blowing reconstruction estimates"? Even if Sacramento grants the burned-out homeowners a variance, FEMA rules require flood insurance rates to respond accordingly. Can you say "mind-blowing flood insurance premiums"?
The good news? The response to the LinkedIn posting quickly hit the clear coverage answer: the need for ordinance or law coverage attached to the homeowners' policy (remember the loss was due to fire, not flood). The bad news? We are now confronted with the classic claim/E&O class conundrum: hindsight is perfect, but how do we turn it into foresight?
Reverse engineering. Unlike many of those opening up that new iPhone with the goal only to create a knockoff, our goal must be to take what we learn and then build it better. To borrow from Covey's Habit No. 7, we not only want to duplicate the saw, we want to sharpen it.
Our analysis must go beyond the obvious insurance starting point: the homeowners' policy. If we start there, the agent sold a solid policy with good limits. If it had been a "normal" fire loss, all would evidently be well. But complications ensued, and without ordinance or law coverage, major gaps in the insurance program have been revealed. So if our analysis is the typical E&O avoidance, we are merely looking at duplication with a bit of improvement: start recommending ordinance or law coverage for homeowners. We could extend that recommendation to our commercial property clients as well, and things are even better.
Yet if we stop there, we risk joining those iPhone competitors who learned the hard way that simply duplicating the technology wasn't a winning strategy. Successful competitors were those who realized they needed to reverse engineer the entire iPhone "experience." Compare what cell phones looked like just a few years ago to today's phones and you can appreciate that far beyond mere technology, iPhone's major impact was also from details once considered secondary, such as appearance, size and touch screen interface.
Here's where reverse engineering becomes a true New Year's resolution. Let's return to the story and expand the analysis. Viewing the fire loss article with wider eyes, new facts jump out at us:
- Our victims are not the first homeowners to face this situation. Since FEMA established the rebuilding rule in 2008, six others have suffered such a fire loss.
- More than 40,000 homes located in the designated area could suffer a similar fate if damaged beyond the 50 percent limit.
This raises three insurance related questions:
- How many other agents offering home or business coverages in this area are aware that the rules affecting the rebuilding outcome of otherwise covered property losses in this area apply to not just a few, but thousands of prospects and clients?
- How many have taken proactive steps to recommend additional coverages (ordinance or law) or risk management alternatives (plan to rebuild elsewhere) to every prospect or client affected by the FEMA rule?
- How many agents would answer "not aware" to the first and/or "haven't" to the second of the above would like to first learn of their ignorance of a replacement/rebuilding rule—enacted almost 5 years ago—with major potential impact on adequate insurance protection recommendations via the opposite side in an E&O suit?
Some agents would answer, "That's unfair. How could they have known? You can't keep up with everything!" To which I would reply, again based upon the article, "Well, if you didn't know, a whole lot of other folks clearly did."
In the last 5 years, FEMA officials have emphasized, city regulators are quoted as long frustrated over federal complications, the House member representing the district is drafting legislative fixes that would apply countrywide (turns out there are many other similar areas located around the country; any in your area?), local residents have circulated petitions and while some of the levees are under repair, numerous parties have loudly begged the federal government for more money. And local agents (at least the one on this home) are going to argue they somehow missed this?
I'm not suggesting this sad situation is the result of evil intent or reckless greed. It's just one more example of how a process that typically starts with an agency learning about, then selling, the products but still failing to see the big picture. Whether the awareness arises from the lessons of a leadership guru, the systematic dismantling of the latest tech device or the blister-raising dreams of a young Jeff Beck wannabe, the technique is the same: Seek out the latest and greatest examples of where you want to create value, and then reverse engineer the heck out of it.
Your ultimate goal is what changes a nice idea into a powerful, life-changing resolution. Remember the observant young son in Harry Chapin's immortal "Cats in the Cradle," "I'm gonna be like him, yeah, ya know I'm gonna be like him."
With reverse engineering, I'm not gonna be like him; I'm going to be better.
Happy New Year!
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.