Meghan Moran at Johns Hopkins University studied 263 “avowedly anti-vaccine websites …[tracking] how many made powerful use of anecdotes – [and found that] a tragic story to stir fear and sympathy in a parent can be a more effective spur to action than any number of statistics.” – The Economist 3-30-19
Anecdotes powerful enough to ruin young lives versus direct evidence is proof the power of a story surpasses science or facts almost every time. Since time began, snake oil salesmen have always found willing and gullible customers because stories sell. So, learn to tell stories!
However, if you want a healthy child or a healthy company, depend upon science rather than slick stories. Stories work to sell, but stories without science fail to work. Selling and working are not synonymous, but people, sellers and buyers both, get confused. One of the reasons companies lauded in magazines often fail is because the stories told make for great magazine articles, but lacking science (good management decisions and processes) the company eventually fails. One can think of internet-based companies along these lines, too. If the people involved can keep the differences straight in their own minds, why not combine them – stories work to sell and science works to succeed?
As a snake oil salesman might say, “a sale requires zero effectiveness post money exchange.” This mindset is why so much insurance sold has inadequate coverage. The producer is only concerned with the sale, not the coverage. Time after time I have asked audiences, agency executives, broker executives, and producers how much commission is generated on a properly written account. For example, what is the minimum commission on a properly written commercial account? Properly means writing all the applicable coverages. We then look at how many accounts fail to generate that much commission, i.e., how many accounts are written inadequately. The number is always at least 50% of accounts are written inadequately.
A Matter of Luck
Consumers buy insurance trusting they are getting the coverage they need — but they only get the coverage they need in these situations if they do not have an uncovered loss. That is just a matter of luck. They buy because of the story rather than the science of whether the coverage matches their exposures.
If buying insurance, look past the story and get the facts. What are your exposures and does the policy provide coverage for those exposures? We call these items “coverages” because an exposure means being exposed and coverage is supposed to cover the exposure. It is rather simple, but I find some people have lost the connection between the two and the public may not understand it at all.
Another angle is how carrier and agency leaders are victims of storytelling themselves. This industry has been running on stories and over-simplistic vaccine tales for a long, long time, and this has contributed to the loss of connection between the concepts of exposures and coverages. Lots of people have made lots of money telling stories to storytellers and storytellers are easy marks themselves when a story is good. If you want to operate intelligently, use actual facts. Here are a few.
Cross-selling increases retention. Great story, no known science. Cross-selling and retention may (or may not) be correlated but correlation is not causation. Furthermore, all cross-selling is not equal. It may be one thing to cross-sell auto and home, but cross-selling auto and life is not the same sale. Understand that each kind of cross-sale is different. Therefore, the science of cross-selling is different for each line. Recognizing this point, in my experience and in my training of producers, makes a huge difference in sales success.
Using the personal lines cross-sale as an example, what causes retention and cross-selling correlation is a mutual cause. It absolutely is not force feeding an extra sale down someone’s throat that causes retention to increase. A person who is unlikely to shop around is a person who is most likely willing to bundle. It is the person’s underlying personality that causes the two variables to move in concert rather than one of the other variables causing the other variable to move.
Revenue per person drives profit. No proof of this statement exists except in theory. Perhaps no proof exists because the right tests have not been conducted, especially tests controlled for like kind agencies (for example, the same amount of personal lines sales for the same size agency, etc.). A correlation exists between revenue per person and the size of the agency. Many of those agencies have grown large by investing in technology that allows people to be more productive, but not necessarily more profitable. The productivity savings is the result of the technology.
Personality tests winnow out bad sales people. Personality tests are not behavioral tests and tests for staff are not indicative of successful producer hires. Just give this some thought. A test designed for staff, at least a good one, involves testing for detail, process, diligence, etc. These are people who generally do not want to sell. A test designed for producers has one primary variable: Will they ask for the sale? How different can these positions be? To use one test for both makes no sense. But the stories told convincing people that one test fits all — those are good stories.
Insurance companies all have the same investment income. Another great and powerful myth is that insurance companies all make the same investment income. Two factors are involved in all investment equations. The first variable is yield. Insurance companies’ yields commonly vary between 2.5% and 8% today. In and of itself, the difference in yields is huge. The second variable is how much money is invested. Some companies have huge investment portfolios, and some have rather tiny investment portfolios. Take a company with a 6% yield and a $50 billion investment portfolio who makes $3 billion compared with another company with a 7% yield but only a $25 billion portfolio who only makes $1.75 billion. Which carrier has the most profit, the most capacity, the most flexibility? Over the last 100 years, carriers have only made money based on their investments, so investment income makes all the difference in the world.
Myths vs. Hard Math
I test myths with hard math. The only people I ever convince that facts trump stories are those with critical thinking skills who are often people who do not tell stories well. Rather than the charismatic people person, inadequate story tellers may be the best people to run agencies and companies. Emotional and fake stories are just too powerful for people without strong critical thinking skills. The problem with facts that contradict stories is that people really, truly want to believe the stories. Stories tug their heart strings. For them to disavow a story is emotionally stressful. To disavow facts is pretty easy.
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