(7-minute Listen)
Part 6 in a series by Jack C. Randall, CIC, PCLA, PFMM Emeritus ©2020 Randall Resources Int’l
When it comes to maximizing your mutual’s Reinsurance investment, let’s look at another 2 effective and powerful Gold Nugget Secrets your mutual can utilize to: 
- Attract proposals from multiple reinsurers!
- Get the best reinsurance rates!
- Get the best reinsurance terms!
- Be offered the broadest selection of programs and retentions!
In this segment, let’s examine some “gold nuggets” that will specifically showcase your mutual’s ability to produce, monitor, and utilize meaningful data to benefit your mutual AND pique the interest of reinsurers…
1. Know where you are financially AND how you got there!
Reinsurers are naturally more attracted to mutuals who are keenly aware of various financial numbers and trends being posted by their company – both recent and comparatively over time. In addition to monitoring, reinsurers want to see the prospective mutual also be responsive in effectively identifying, diagnosing, and proactively acting to ensure that positive numbers and trends increase and, conversely, correcting those not performing as desired. Your monthly financial statements can show your current bottom line, but they cannot lend the vital long-term info needed to establish trends. That’s where your development and use of certain diagnostic reports can be so important and effective! Plus, if you set them up once, simply standardize them for your mutual’s use again and again. They don’t have to be complicated. Going forward, they can be extremely useful and informative tools for you AND your board!
Unfortunately, many mutuals mainly look to their surplus and premium as primary indicators of their company’s financial health and simply compare them to last year’s numbers. This short-sighted, overly simplistic approach can be problematic for several reasons. Let’s look at some difficulties that result if your mutual is NOT able to refer to data from any standardized diagnostic reports:
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- It’s tough to quickly and accurately pinpoint the positives from the problems. Without granular data shown over time, there is no way to clearly separate what is working from what isn’t. Two years of data doesn’t define a trend. That’s why I recommend 10-years of data in these reports.
- It’s tough to differentiate and identify progress. Not only is it difficult, it’s stressful!
- It delays identification of problems and taking necessary corrective actions. You can’t fix a problem you haven’t identified!
- It tends to make your corrective actions unnecessesarily broad. If you can’t precisely pinpoint a problem, you’ll have to be more general in the “fix.”
I can help you analyze your needs and set up customized reports for your mutual. By creating templates unique to your mutual, I can save YOU time, money, and confusion!
2. Describe and agree on how you plan to “measure” future success!
Unlike “gut feelings”, your mutual’s use of certain, agreed-upon metrics can help everyone accurately assess whether you are closer to the success you desire, or farther away. (That’s where your development and usage of your diagnostic reports is so important!)
Numbers don’t lie. But, problems and confusion can arise if both board and management don’t agree, in advance, on exactly WHICH numbers you will use to track and “measure” success.
Let’s take your company’s “growth” for example as something you want to measure. Growth can be measured in a lot of different ways: premium income, policy count, risk-in-force, size of territory, number of agents, surplus growth, etc. While ALL of the above can be used, which of them have you and your board agreed upon as the best indicator(s) to use and track?
I find that many mutual managers track growth by in risk-in-force or growth in premium as key indicators, whereas their boards often look at policy count growth. While each of these are indeed growth measurements, growth in some areas may actually be counter-productive to others! For example, if your mutual’s RIF has been outgrowing your surplus, that is a problem. To solve this, you may want to limit your RIF growth while concentrating your efforts on growing your surplus via increasing premiums generated and/or decreasing expenses. In this example, policy count growth is really not a relevant concern.
Bottom line, discuss, determine, and agree on what you are primarily trying to achieve at a high level in the next five years. Be specific. Maybe you want to Grow surplus to $X, Improve profitability by maintaining a LR of X% or less, Grow (or limit) RIF growth to X% each year, etc. By knowing your primary goal, THEN you can determine which “measurement” is best and what specific numbers are you trying to achieve!
Reinsurers look for vibrant, growing mutuals that are financially sound. To achieve this, it is vital that your mutual:
- Know where you are financially and how you got there, and
- Describe and agree on how you plan to measure your future success
Both involve your ability to produce, monitor, and utilize meaningful data that is hiding right there in your mutual’s computer!
I would love to help you analyze your needs, set up customized reports for your mutual, and help you prepare information that showcases your plan for future success. Give me a call!
Stay tuned for next month’s insights where we will explore even more “gold nugget” insights to improve your mutual’s operation and attract more reinsurers to your mutual!
All my best to you,
Jack C. Randall, CIC, PCLA, PFMM Emeritus
If I can assist your mutual in any way, by answering questions or helping you design an actionable strategic plan and vision to move your mutual forward, please give me a call at (816) 617-4823.