Getting Together to Offer More Insurers need to partner with other financial institutions to provide clients with the customized financial services they want. (Life/Health).

Many insurance companies will soon find themselves taking on the role of financial solution providers as opposed to providers of a defined set of insurance products. Developing and implementing strategies to sell solutions rather than products will take significant effort, and it's clear that partnering with other financial institutions will be a critical element for success.

Internally, companies will need to change their professional staff, business processes, systems and infrastructure. The focus of each of these components must shift from supporting purely predefined inputs and outputs exclusive to the company to gaining access to and use of financial and analytic tools, as well as a broad spectrum of products and services from inside and outside the company. This implies that the core value insurers will deliver to customers in the future will shift to quality decisions about the application of financial products to solve customer problems, rather than just the delivery and management of the products themselves.

As a result, most insurers will need to rely on and coordinate with other financial organizations to a much greater extent than before. This is both risky and complex. Protocols, lines of communication, performance measures and performance tracking must be designed and managed to the satisfaction of multiple organizations. Companies that might otherwise be competitors must exchange information, know-how and money.

As a first step to prepare for this exchange, an insurer must decide what unique value it can offer customers and partners--in other words, how it will differentiate itself in the marketplace. Knowing this, an insurer can determine what it can and cannot share with potential partners in designing its relationship with them. Access to the insurer's staff, processes, systems and information must be planned so that it allows an efficient set of interactions with partners while protecting the company's core market value. Even more important, the insurer will have a better sense of what it needs access to from potential partners.

Designing the mechanics of cross-company interaction and cooperation while maintaining appropriate confidentiality will not be a one-time event. Changing customer needs and changing partner offerings will make it necessary to continuously re-examine how insurers will work with partners. Insurers will need to dedicate resources to search out external products and potential suppliers of those products, as well as designing the processes and procedures to interact with them. Specialized units or entire organization design changes may be needed to align resources effectively as well as to continually design, implement, manage and dissolve relationships with noninsurer financial institutions.

Another consideration is that selling solutions is harder than selling products. Products are designed to provide specified values that are determined when the product is designed, independent of the customer. Solutions are tailor-made for each customer to provide customer-specific value. Insurers are used to selling products for which, at the time of sale, about 70% of the costs are unknown, but they are not used to selling products for which, at the time of the sale, the product itself is not known.

Solution sales are personal to the extent that the client's situation is unique and to the extent that the product, from the client's point of view, cannot be separated from the person who delivers it. Clients are relying on the ability of the individual representative of the insurer to make good decisions with respect to their situation. Salespeople must not only listen to the customer's needs, they must evaluate whether the customer's assessment of its needs is correct and, if not correct, persuade the customer to change its assessment. Success will not be measured in terms of the product's performing as advertised, but rather in terms of whether the client has received the value it sought.

Insurance professionals will require more training than just familiarizing them with new products and services. It will include developing skills in complex financial-analysis tools, problem-solving techniques and service logistics.

Customers are seeking greater value from their insurance and other financial product purchases. That is why they are seeking out solutions instead of products. Insurers must change the way they think about the value they deliver to customers, how they will deliver that value and how that changes the way they must sell.

Gregory J Hoeg, a Best's Review columnist, is vice president of Am-Re Consultants Inc., a subsidiary of American Reinsurance Co., Princeton, NJ.