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Last Word: Prepare to ride the visibility curve

Last Word: Prepare to ride the visibility curve

Insurers are in the business of being financially prepared to meet the costs of the risks they have underwritten.

These costs are both inevitable and necessary, because without losses, demand for insurance would dry up. But far fewer companies are well prepared from a marketing or thought leadership perspective to grasp the opportunities provided by this "inevitability of loss."

Newspapers do it differently. Unlike insurers, their product addresses the past--the very recent past--not the future. Their product is reliable information. The more information they can assemble ahead of an anticipated event, the better they will be able to cover the event when it happens.

An extreme example is the obituary writer's craft. When John Kenneth Galbraith, the celebrated economist, died in April, major newspapers didn't rush to assemble lengthy obituaries from scratch. They had long pieces already written, which they simply reviewed and updated.

Insurers and brokers could learn from this. Their product is security, not information, but as the world of risk grows more complex, this security is increasingly buttressed by deep expertise. Clients want evidence of their risk partners' expertise. Brokers and underwriters cannot afford to be silent as risks materialize and mutate. The old advertising slogan used by Northwestern Mutual Life--"Have you heard from the quiet company?"--simply will not work in today's property/casualty market.

Fortunately, there is a powerful force that insurers and brokers can harness to ensure that their expertise is appreciated. I call it the visibility curve. It measures the topicality of an issue, and can be based on data of various kinds: column inches in the publications clients read, time allocated to the issue at industry conferences, etc.

The critical question is not how the peaks and troughs of the visibility curve are measured. Any insurance executive could list issues that are "hot" in the industry and those that are not. The critical question is how quickly a company responds, relative to its competitors, as interest in an issue rises. Or, to put it another way, how well does the company ride the visibility curve?

What does it take for a company to ride the visibility curve successfully? In a word: preparation. Insurers and brokers should prepare for events which can be expected to focus interest on a particular issue. They should gather their facts and organize "talking points" in readiness for these trigger events.

Such trigger events are often highly predictable. Take the recent step toward nationalizing Bolivia's gas fields. The event should have come as no surprise--it was in the election manifesto of Evo Morales, the man who went on to win Bolivia's presidential election. With a little preparation, a well-informed political risks insurer could have secured a valuable op-ed slot in the Wall Street Journal or Financial Times as soon as the event occurred, applying their expertise to the question on everyone's minds: Is this a one-off event or the harbinger of similar acts elsewhere?

Or consider tunnel collapse. Many insurers consider tunnels unattractive risks because their recent loss experience has been poor. When a tunnel collapses, it is often a major insured event, costing tens of millions of dollars and generating significant media coverage. An enterprising broker that is expert in these risks could use such an event to build awareness for its expertise.

The opportunities are obviously numerous. Clearly companies will want to be prudent and sensitive in how they handle them. In certain circumstances, prudence and sensitivity will--rightly--make them reluctant to comment. But more often than not, such reluctance stems from inadequate preparation--they simply do not have the facts and figures they need on hand. Insurers should learn from the obituary writers.

William Pitt is a senior advisor to HawkPartners L.L.C., a strategic marketing consulting firm based in Boston.