In most buying decisions, price has to be part of the consideration. It is difficult to buy a Bentley on the budget of a Ford. If you are buying a car of the same brand and model between two dealers, their reputation and your experience in the shopping process will typically have greater influence than a small difference in the price. Is price the best determinant for an investment of the type you are considering, that can have a major impact on the direction and future of your business? I would argue that it is certainly a factor but that it should never be the deciding factor in a major business decision. Other key considerations I would factor into the decision process of any major investment:
1. What other value to your business does the provider currently provide, or could provide in the future?
2. Does the provider have a consistent track record of clearly working and looking out for the best interests of its clients?
3. Does the provider deliver options that allow you to utilize a product, skill set, or service that meets your needs now, while also being able to provide you other levels of products, skill sets, or services that may be different over time as your business grows and your needs change?
4. Is there good chemistry in the relationship that will be beneficial to you during inevitable difficult situations?
5. Price is long forgotten when there is quality in the product and in the experience over the life of the relationship.
Below, is an article in The Insurance Journal, March 18, 2008
Price is an Issue in the Absence of Value
Willis Chairman and CEO Joe Plumeri concluded a series of discussions on mega-trends in the insurance industry sponsored by the Insurance Institute of London (IIL) at Lloyd’s last week. He told his audience that “one of the biggest challenges facing the insurance industry is the demand for differentiated value.”
Plumeri’s remarks added to discussions of the changing nature of risks and the “war for distribution and the convergence of capital and insurance markets,” said a Willis bulletin. He encouraged the industry to find innovative ways to meet these new challenges.
Plumeri’s address, according to Willis, packed Lloyd’s Old Library. He told the assembled brokers and insurers to demonstrate what he termed their “Value Gap” to clients who now demand exceptional quality and best cost. “Value is the gap between what clients can do for themselves and what we can do for them,” Plumeri explained. “As an industry we do not have great self-esteem and as a result we don’t get adequately compensated for the value we deliver.”
In plain words Plumeri stated: “Our industry only gets paid for the placement of business and not all the invaluable advice and service that we provide clients throughout the entire process. What you put into that gap will differentiate your client offering.”
Plumeri discussed the volatility of today’s risk environment and urged the industry not to try and give old answers to new questions like cyber risk, terrorism and climate change. He suggested embracing technology as a possible solution. “I believe in enhancing technology not, instead of people, but on behalf of people,” he continued.
Plumeri also discussed the demand for and retention of professional talent as another mega-trend for the industry to take action on. “We have to stop recycling people,” he stated. “We need an injection of fresh, new talent into the industry because that’s the only way we will grow our business.” To achieve that goal means making investments in training of staff as a critical component in retention.
His conclusion was a strongly worded appeal for recognition of the important role insurance plays in stimulating economies. “The insurance industry is the DNA of capitalism,” said Plumeri, “and we have a responsibility to the global economy to meet these new challenges. We need to navigate all these mega-trends to define our future success.”
Source: Willis Group Holdings – www.willis.com