Challenges and Perils of Commercial Insurance

Creating a strong and thriving corporate culture within your company can make a big impact, in more ways than you might think. In this episode of Risky Business, Colin Rooke and Paul Martin talk about some important points you should consider when planning for the future of your business.  

Listen to the full episode here, or read the full transcript below.

Paul Martin: Welcome to risky business, commercial insurance with Butler Buyers. This is Paul Martin, business commentator on CKOM and as always, I’m speaking with Colin Rooke, the commercial risk reduction specialist with Butler Buyers insurance. And we’re talking about all of the challenges and perils of commercial insurance. So if you’re a business owner this will be something you absolutely need to pay attention to. And you know, Colin when we were speaking in the last program, we were talking about the annual review process. What a business owner should expect of a broker and the kinds of questions a broker will be asking the business owner as the policy renewal date is upon us.

Paul Martin: And there are some basic questions that are sort of standard to the whole industry. And they kind of relate to changes, right? What change has happened since our last conversation?

Colin Rooke: Yeah, we talked about what is required every year. And not just to bore the listener with I guess the information they’re used to hearing, but just to more address, okay, yes there’s things that every broker has to ask. There’s questions we have to ask every year. But when you’re focusing on a risk, it’s taking those answers and thinking about it a little bit and then coming back with a different outlook. Rather than looking at the insurance policy saying, based on your answers here, I think you’re premiums are going to go up or down.

Colin Rooke: We’re going to have to add this property, add that building, et cetera, et cetera. It just tells us so much about where a company is going. And it’s all part and parcel with our risk assessment systems and our planning to say, okay great, well we’ve learned a lot here. And maybe we’re already working on a plan. Maybe you’re already a client of ours and we have a plan in place. We’re going to instantly … We could instantly switch gears based on just the renewal questions because that’s going to just tell us so much more about the upcoming plans of a business. Which quite frankly is what the insurance underwriters are looking for too. But again, through the eyes of an insurance policy and our focus is looking at your business through the eyes of risk, which includes insurable risk but is not only insurable risk.

Paul Martin: And really that’s the nature of business, isn’t it? A business owner is always trying to grow the business. They’re making changes. They’re adding this, subtracting that. Looking at new product lines. And maybe we should just talk about that. Just pick an example of how you would approach a change in the business that say the competitor might not. Or the traditional way would not embrace in the same way you did. So let’s just say for the sake of argument, I’m a business owner and I’m thinking about maybe I’m going to buy my competitor. A traditional approach to that would be what kinds of questions would you ask me if I had said to you, “Hey, I’m thinking of buying the competitor.”

Colin Rooke: So yeah, using the traditional approach, right away you’d say, okay I’m going to need the name. I’m going to need the address. I may need some building descriptions. I may want to know about the contents. Are the operations the same? Or are they different? What will the overall employee count be? So right away you turn into … Again, you go right into insurance policy mode. Now, again, we do need to know that stuff, and you’re going to tell your client that okay, I’ll update the insurance market and there’s going to be some kind of cost increase and we’ll let you know what that is.

Colin Rooke: But the challenge in the industry is that’s where it usually would stop. You’ve done your due diligence, that new business is insured. There is no gap. No one has done anything wrong, but in our opinion, we still haven’t … Our job isn’t complete. In fact, our job has just started when it comes to helping our clients navigate through that merger or acquisition.

Paul Martin: So you’re saying the traditional approach, that would be the end of the parade? And in the Butler Buyer step by step plan, that’s the beginning of the parade. In fact, you’ve only just opened the door. We’ve only just begun.

Colin Rooke: Exactly. And it’s funny that you use that example because especially in the insurance, insurer or insurance broker world when we talk about acquisitions, there’s several a week. There were several this week just in our province. And across North America, mergers and acquisitions are occurring in record numbers. And so it is often something that does come up at renewal. Not even really at renewal. We’re using this as an example that you’re going to learn about it no matter what. But if we’re working with our clients as part of the plan, we’re going to learn about what their thing … So when it comes to any acquisition, right away the conversation for us is going to turn to culture.

Paul Martin: Isn’t that interesting because most of them would say it would be money. And as a business commentator I see this all the time, that there are mergers and acquisitions that fail and you look at it, and they fail frequently. And you look at it and you say, well how hard can this be? The bean counters are in charge of making the deal.

Colin Rooke: Yeah.

Paul Martin: They bring the two financial statements together and that’s pretty easy. I can match or add two income lines together and figure all that stuff out. They always fail on culture because most mergers and acquisitions do not take into account the culture of the organization and that the people won’t mix. It’ll be oil and water. Financial statements, yeah they’ll always mix. But the people might not.

Colin Rooke: Yeah, I just read a study that approximately 30% of failed mergers or acquisitions, in 30% of those cases, culture was cited as the determining factor in I guess the decline or I guess the failed attempt to combine two businesses. And so it’s stats like those, and it’s quite frankly listening to past horror stories and doing our research that’s again, caused us to change focus and really start to work on okay, so this is a problem. We know it’s going to be a problem. We’ve identified it, and now we even have tools available that we can give to our clients either prior to an acquisition. But let’s say we found out a little late.

Colin Rooke: It was a deal done very quick, and we’re late to the table. No problem, we can still work right now using our tools to determine okay, what is the culture of both businesses? What can we learn from each side? What’s worth keeping? What’s worth getting rid of? What’s our plan to do so? And it’s a really interesting tool and we get a lot of positive feedback because it really just opens the business owner’s eyes to the two companies can look the same on paper, but just be so different when you dig in.

Paul Martin: I would think it’s fair to say too that for most business owners, they look at acquiring a competitor for example, the first question is, do I have the fiscal capacity to execute the transaction?

Colin Rooke: Yeah.

Paul Martin: Can I afford to buy my competitor? And then they think about, is my competitor a good competitor? Are they good in the market? Do they make a good product? Do they have good client base?

Colin Rooke: Market research, yeah.

Paul Martin: Exactly. But never do they say, do they have good culture?

Colin Rooke: Yeah, what are their people like? And will their people mesh well with our people? Or maybe for example, the reason why you’re interested in acquiring that competitor and the reason why they have such a position in the marketplace is their people. And maybe your people are the problem. And so we need to have that conversation. You need to know going in what needs to be done because a lot of businesses … And again, the research confirms it as well, will say their culture, their people are their competitive advantage. And if you swallow that competitive advantage up into a culture that maybe isn’t performing well, engagement’s low, you’re going to lose overnight what you just paid for.

If you swallow that competitive advantage up into a culture that maybe isn’t performing well, engagement’s low, you’re going to lose overnight what you just paid for.

Paul Martin: Alright. We’ve got to take a little break. We’re going to come back and I want to dig into this just a bit further because it’s quite fascinating. The tools that you have available that could help business owners make some not insurance-based decisions, but decisions that ultimately would impact on insurance plain old good business decisions. Alright, you’re listening to Risky Business, commercial insurance with Butler Buyers. We’ve got to take a break. We’ll be back after this.

Paul Martin: Welcome back to Risky Business, commercial insurance with Butler Buyers. Paul Martin here and as always I’m talking with Colin Rooke, the commercial risk reduction specialist with Butler Buyers commercial insurance. And just before the break Colin we were talking about corporate culture, how that can factor into a merger or an acquisition that a business may be doing buying a competitor for example. And you’ve got tools that would help business owners sort through whether that’s a good business deal or not. Nevermind the insurance part of it. It’s just this is part of your risk management thing. It’s got way more to do with insurance. It’s got to do with plain old running a good business.

Colin Rooke: Yeah, yes we do insure our clients, but we also don’t want to see them fail. And again, we are trained as risk managers. The problem that has been in the past, is that you use your risk management skills only through the eyes of the insurance policy. But what if you … I’m assuming that most brokers know how to add a new company to a policy. So that’s not going to be the business owner’s main concern. Something like culture, if it isn’t, it should be. And again as a company that’s focused on risk management, we need to be at the forefront of having those conversations.

Colin Rooke: And another thing that comes up all the time is when we’re talking about culture we’ll hear, well we feel anyway engagement is quite high at our company. And talking to the management, engagement is quite high over there. There is a big difference between culture and engagement. And we’re usually very quick to sort that out. Culture describes the way things work around here, would be the best way to describe that. Engagement means really how the employees feels about the way things work around here. So those are two very, very different topics.

Culture describes the way things work around here, would be the best way to describe that. Engagement means really how the employees feels about the way things work around here.

Colin Rooke: So my point is, you can’t take two groups of seemingly happy people, put them in a bucket, and say, well you’re happy here, you’re happy there. We’re all going to be happy. Because they’re happy for different reasons, or could be happy for different reasons. So again, having that conversation and using a tool that’s going to identify the differences. What makes them happy? What makes each business successful? And then amalgamating those in a way that everyone’s on the same page, employees included. That’s going to truly define success in a merger.

Paul Martin: Do you have some examples of the kinds of things that you might be talking about when you’re … What your tool would look at?

Colin Rooke: Yeah.

Paul Martin: We talked corporate culture, and you’ve just described it as the way things work around here. How do you scratch that surface to be able to figure out how things work around here? What kinds of questions are you looking at?

Colin Rooke: Yeah, so I’ll sort of I guess reference some of what’s in one of our culture assessment tools. But the biggest thing is how does the organization think? Now this is for both sides. Consider each are being asked this because they’re merging. So how does the organization think? And what do we value? And it’s one thing to say it, those values have to be proven by actions. Butler Buyers could say insurance made easy, but if we’re not making insurance easy, then we’re not really insurance made easy.

Colin Rooke: So again, it has to be something that’s tangible, that you can articulate how we do it. So that’s one of the major topics. We also talk about okay, why are we in business? What do we do? And again, let’s say it’s a sheet metal manufacturer. So the answer really isn’t when we say, what do we do? We’re not trying to say well sheet metal. It’s what do we do that keeps us in business. Why are we in business? What do we do different? What’s great about us? So we have that talk as part of the assessment. We get into leadership quite a bit.

Colin Rooke: How clear are expectations between the two cultures? How are people evaluated for performance? How do they motivate people on each side? And what’s the style of leadership exist in each company because again, if there’s differences there … If the one group is used to something entirely different, there’s going to be challenges. We talk about strategies, what useful strategies are being used today in the company? Skipping just, we talk about the clients. How are the clients treated? You could have two different businesses doing the exact same thing that have a completely different approach to customer retention. They could have a completely different approach to the acquisition of new customers.

How clear are expectations between the two cultures? How are people evaluated for performance? How do they motivate people on each side? And what’s the style of leadership exist in each company?

Colin Rooke: Maybe one business is very strong in acquisition. The other one is very strong in retention. And without again, having this talk, you’re not going to know that. We talk about marketing. What are the two different marketing strategies in the business? Has it been communicated to both sides? What’s the social media position? Their digital marketing strategy. Things like that. We talk about operations. We talk about sales. We talk about normal behaviors. What is a normal behavior at each company? And we actually write those down.

Colin Rooke: We write down what is normal. So if beers in the boardroom is totally normal, every Friday at five, we write that down because again, if one company’s coming from beers in the boardroom, and they’re moving to a company that is very against beers in the boardroom, it just allows us to have that conversation and make sure things happen smoothly.

Paul Martin: Is it your experience that … This is kind of a foreign topic for a lot of business owners. They just … They’re too busy being busy. they don’t have enough time to get into this stuff.

Colin Rooke: Yeah, as you mention, it’s not the first thing that comes to mind when you’re talking about acquisition. You mentioned is this a foreign topic? It definitely is when it’s coming from your insurance broker. Right away, why are we having this talk? Especially if it’s a newer client. But then the light goes on. They see, they get it. This is a risk. I’m trained as a risk manager. Yes, one of the tools is without doubt the commercial insurance policy. But again, one of the tools. So when you explain it right, that look, together I’ve identified this risk. We have a plan.

Colin Rooke: In this plan, we need to address this culture issue. So I guess it’s kind of two surprises. One, I didn’t really think about that before I jumped in and bought this business. And I’m thankful that someone is having this conversation with us. And not just pointing it out, there’s something I can use, something that we can work on together to really solve this. But then yeah, I’d say especially again on the … And that was my insurance broker that brought that forward.

Paul Martin: Do you find that most deals are driven for financial reason, never for cultural reasons?

Colin Rooke: Yes, yeah.

Paul Martin: Yeah. And so hence, so many times the opportunity to stub your toe?

Colin Rooke: Yet you ask again, business owners, how do you define your success? And they’ll say, it’s our people. It’s our culture. They don’t say, strong, strong financials.

Paul Martin: Yeah. And yet they can’t define their culture. They’ll say, it’s the best thing I have going for me, but I can’t describe it.

Colin Rooke: Yeah, tell me about it. What do you mean?

Paul Martin: Yeah, yeah. Isn’t that a fascinating topic? Well, as always the time just blasts by Colin. Yeah, we’ve gone through another show. It’s hard to believe, but the end of the show is upon us. So I want to thank you as always. And this time for bringing to us the non-traditional conversation because usually a show about insurance is going to be about the nuts and bolts of insurance. Today we talked culture. What a different approach, and yet they’re intertwined very, very closely.

Colin Rooke: Intertwined, yeah.

Paul Martin: You’ve been listening to Colin Rooke, the commercial risk reduction specialist at Butler Buyers commercial insurance. And as always, we encourage you to give Colin a call or one of his team members and if you have some questions as a business owner or you want to explore this a bit further, he’d be more than pleased to give you a free consultation. So Colin thank you again for joining us.

Colin Rooke: Thank you Paul.

Paul Martin: You’ve been listening to Risky Business commercial insurance with Butler Buyers. This is Paul Martin. Talk to you next time.