Who Creative Destruction Destroys

“We’ve got fifteen people left but without a replacement carrier, they’ll all be gone soon.”

We all knew this company was toast. We had gotten the referral from a prospective client who was the carrier that cancelled them. Talk about the brush off. For all of us.

This guy’s results had been terrible and his strategy was a generation old. The market was minimum limit auto business (called nonstandard), one of the most competitive and efficient markets the world has ever seen. Carriers that win there tend to be extremely technologically sophisticated (cutting edge analytics, highly scaled online distribution), narrowly focused strategically (only auto) and regional (strong relationships in community and with local producers to limit moral hazard). Everyone else gets creamed and these guys were getting creamed.

A couple of my colleagues, bless them, were spending time trying to pull together some information to help. As the lead analyst in the office the pitch on the numbers was inevitably going to be up to me. But we weren’t going to get what we needed, which was simple enough: evidence (data) to support the story that this company could make money (rates are going up!). I knew this guy wasn’t sophisticated enough to have that evidence. He wasn’t even sophisticated enough to ask that question! In the right way anyway.

This means that he not only didn’t make any money but that he didn’t understand how someone could make any money on the business he was doing. Wait until the market turns, he thought, like a sickly old goat wandering into a navy seal firing range.

So we had the call. He sent us all the data he had, clearly working hard at it. But it wasn’t useful and told a terrible story. So we had one more call and said as much. That’s when we got the sob story which to be honest felt awful.

This was a little while ago and I still think about that guy. On a personal level, I hope he’s found something for himself and the people who relied on him. In the bigger picture though, the world is a better place when outdated business models die.

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