Sunday, January 16, 2005

Policy Waste

Policy Waste

Ran into a friend of mine this weekend and I asked him how his company was doing. "Business is good," he said with a sheepish smile on his face, "in fact, better than it really should be."

An odd response.

My friend owns a company in the repair business. As such, they are often paid not by the individual consumer but by an insurance adjustor from the individual's carrier. It seems that these adjustors are not concerned with the best price for the repair. My friend discovered that the adjustors are really concerned that the invoice proposal for the repair work line up with their expected format.

So how does make your profits better than they should be? I asked.

"It is absolutely nuts," my friend continued. It seems that in order to make the format of the proposal line up typically adds about 20-30% to what the customer actually requires. "And when I propose a good deal to the adjustor, they give me all sorts of hassles. When I give them the proposal that fits their format, I have no hassle and they pay promptly."

Adding cost. Adding expense. Adding to the ultimate premium consumers pay. And this from nationally known insurance companies.

My friend is right. It is absolutely nuts. And it is very believable.

This is an example of policy waste. Rules, either written or implied, that reinforce waste. Rules that increase the cost of delivering service, cost that adds no value whatsoever.

And here's the point...when we see these policy wastes, we can very often remove them at NO capital cost. Unlike eliminating some physical wastes (which can require machine work or new equipment), eliminating policy wastes are often just a matter of changing rules. No cost. Very rapid gains.

Made me want to see what policy wastes I deal with. I hope it does the same for you.

I hope this is helpful.

Feel free to forward to a friend. Email me

No comments: