COVID-19 is changing and challenging the world. Nothing you haven’t heard before, right?
But one thing is certain: We will continue to see recessionary conditions due to COVID-19 for at least the near term. That’s why we’ve recently published a report to help insurers respond to this recession. While the report highlights winning strategies from companies that have successfully navigated past recessions, success is more than just the right combination of cost-cutting and investing. Success also hinges on your mindset. Times like these, while difficult, also present an opportunity to emerge even stronger than before. This is when fortunes change and market positions shift.
The insurance industry is designed to assess and protect against risk. However, this lens can sometimes inadvertently lead companies to be risk-averse, avoiding uncertain or bolder strategies and limiting potential. Combined with a recession, these limitations can have significant implications.
So how should you be thinking during a recession? Should you be bold or conservative? Opportunity seeking or risk-avoiding? Most leadership teams will fall back on what they have done before and generally take actions consistent with their existing assumptions or beliefs.
Instead, you can enhance the quality of your thinking and decision making by changing your mindset. Stopping to reflect on how you approach decisions can help you not only during this recession, but also during any difficult time in your business.
Mindset One: Question the Question
How you frame or view something is extremely important. Frame things too narrowly and you spend time focused on something that might not move the dial. Take artificial intelligence (AI), for example. When many people think of AI, they think of it as a tool to improve processes, increase speed and reduce costs. And this is true, but it’s also surface-level and limits the potential of what could be achieved.
We can look at AI differently by asking a different question. For example, instead of asking “How can we reduce claims handling costs?”, ask “How can we prevent claims?” By reframing the question in this way, you’ll start to look at the potential of AI differently. I wrote about this a couple years ago.
The important point here is that you should be deliberate about the questions you ask and focus your teams on—especially during a recession. If you frame things in a way where you solve for the short term, you may be doing so at the expense of the long term.
Mindset Two: Remember the Long Term
A recession can immediately shift a company’s perspective from the long term to the short term, and for good reason. Recessions are stressful, filled with uncertainty and often do require some short-term measures to weather.
Cost-cutting is usually necessary during a recession, but it should be focused on structural changes that fundamentally change the way work gets done, as the graph below illustrates.
Strategies like reducing workforce based simply on percent targets or uniformly reducing investment spend can be fast and relatively easy, but these costs are likely to come back or result in issues like a deficient customer experience. These strategies don’t change how your business will scale when the economic environment recovers—they essentially allow you to stand still, which means you are likely losing ground to others.
Instead, the focus should be on making structural improvements to how work is done, often enabled through technology. Examples include:
- Convert paper-based, manual work into digital, automated workflows to improve cost structure.
- Use technology for customer service to answer questions quickly, saving time and also improving cost structure.
- Break down silos in your business that are a product of history rather than customer preference to unlock synergies to improve customer experience and cost structure.
There are clear long-term trends in our industry: Customer expectations are rising and moving towards digital, and a combination of technology and data analytics will unlock new opportunities. These long-term trends don’t go away because of near-term challenges—in fact, some are even accelerated because of the recession.
You should consider if your mindset (and your strategies) position you for the future environment. Are you still making steps towards this, or are you choosing to stand still for a period? Do you see an opportunity to accelerate your efforts? Does your current focus, pace and level of investment still position you to be successful in the long term?
Mindset Three: Review Your Predictions and Assumptions
Developing a strategy requires making predictions and assumptions. What will resonate with customers and partners? How will competitors respond? Etc. However, some of these assumptions have been held for so long that you might not even recognize them as “assumptions.”
In recent years, some of these ingrained beliefs have been questioned. For example, the level of complexity in our product offerings, the value of human agents/brokers, the pricing construct for policies and our industry’s role in risk prevention.
It’s good practice (and a well-established innovation technique) to surface and challenge these beliefs during strategy formulation, but it’s even more critical in times of uncertainty.
I’m not suggesting that you second-guess everything about your current strategy or plans; instead, you should test the resilience of them. What are the few most impactful predictions or assumptions that underlie your plans? How will your business fair if these are off target? What if you need to pivot to an environment that is different than what you assumed—do your plans give you the flexibility to make this pivot?
Coming out of past recessions, there were clear winners and losers, as illustrated by the chart below.
The winners had a clear, objective perspective on the position of their business and deliberately made improvements and investments based on their predictions and assumptions. Now, especially when the future is so difficult to predict, taking a bit of time to review and challenge your key assumptions is time well spent.
Mindset Four: Lead with Confidence
With so much ambiguity during a recession, leadership teams can feel uncertain about their path forward. This uncertainty can manifest as an unclear strategy with changing or conflicting priorities, which wastes time and creates angst as teams try to decipher the intentions of leadership. This can not only reduce productivity, but also potentially lead to unintended actions.
During times of turbulence, teams will look to leadership for signals about how the company is really positioned, and, to be blunt, if there’s actually a plan at all.
The previous 3 mindsets won’t help you much unless you act, communicate and lead with confidence.
To be clear: There is no winning formula. Every company will be different and have different needs and concerns. The important detail to remember is to have a balanced approach and to let knowledge drive your response, not fear.