With a friend of mine, we had visited an insurance company that had been very successful in telephone sales, so much so that the owners had decided to spend some petty cash on a London experiment.
When I met them, the UK operation was three years old, and they felt that it might be advisable to have a review of the operations. They asked me whether I was prepared to carry out this mission and a month later I was their host in a beautiful mansion north of London, set in an estate of fields and woods where you could hunt for pheasants. A bottle of Don Pérignon was in a cooler waiting for my arrival.
In the party that took place that night, I met the management who had come from Headquarters and the managers of the local subsidiary. I could not but think that they had been selected by the shareholders for their big frames of rugby players. As to confirm my suspicions, I was invited to a rugby game for the next Saturday.
I did not have to spend a lot of time at the insurance company. I knew that they were experts in phone sales and that they had imported the IT system from their home country. The sore point, the sore point in any insurance company, and particularly in those that specialize in motor insurance, is the claims reserving method.
It took me less than five minutes to identify the problem. The claims manager had chosen a so-called step laddering method that shows excellent results for a few years and then lead the company to bankruptcy, except if the shareholders have deep pockets.
The shareholders and the managers from headquarters did not know of the long-tail claims. In their country, third-party liability is a word that is not found in the dictionary.
After a brief discussion, they decided to keep a stiff upper lip (at least they had learned this much from England), to lick their wounds and transform the company into a no-risk broking operation.
Although their country lost against England, we had a good time at the match and then went to a Chinese restaurant in London. The first course arrived almost immediately. The main course would not come. One of the managers with a rugby player frame went down to the kitchen and returned within a few seconds. He only said that when he opened his mouth, the cook jumped out of the window. Then, the maître D’ arrived and gently said that we should leave his restaurant.
The following morning, I eagerly opened the newspaper and looked for a title that said that a claims manager had used the same kind of exit.
