“Featured this month in Insurance & Technology Magazine, a magazine that is on point and really hits home for me, is Negotiating Success, an article that looks at the challenges facing effective relationships between insurers and technology suppliers.

The article touches on something which has become all too common in the industry…Failed negotiations between insurance carriers and technology vendors where Carrier executives want to “win” negotiations by getting some kind of “deal,” and technology providers feel pushed to the breaking point.

The article references an insurance executive who “insisted on all kinds of financial discounts and performance guarantees… He was going to squeeze every dime out of that vendor… Eventually the contract just fell apart because there was no way the vendor could fulfill its obligations. In the end, both lost money and the carrier had to start all over.” Problems arise when insurance executives treat vendors as adversaries rather than partners in a win-win situation. This is especially true when the executive is representing a big industry “name” or an important account for the vendor from a PR standpoint.

My perspective is that the spirit and intent of this article is right on target. I have had many relationships with executives, some good and some not so good. The best were with executives who knew and understood the strategic importance of their relationship with IdeaStar. They were also realistic and appreciative with regard to their project and its footprint within our environment. No doubt these individuals were motivated by good financial outcomes, but they did not allow that to become the primary motivation in the negotiation. Instead, they strove to create an environment where both parties liked and respected one another, and the goals, roles, and processes were all clearly understood. Then they left their project in the hands of an experienced project manager and a capable team.

The adversarial-style executive has also come up from time to time, and, looking back every project but one has failed when I negotiated with an executive like the one in the article. As it says, failures are caused by three main things:

  • Asking for unreasonable terms
  • Behaving in a way that irritates senior management
  • Creating a hostile environment and negative feelings throughout both organizations.(I recall my receptionist saying something like… “Mike, Bob is on the phone again! Ugh.”)

Clearly it takes a while to build trust between client and vendor, and you can’t rush that process. However, after a commitment to a vendor has been made, the attitude must shift to a cooperative approach as quickly as possible. This “partnership” transition becomes vital to project success. If the vendor then proves untrustworthy, then reaction is warranted.

On that note, I would encourage executives, especially health insurance executives, to read a technology book (Net Ready by Amir Hartman), go to an Insurance technology conference (A.M. Best EFusion 2005), or subscribe to a magazine (e.g. Insurance & Technology Magazine). By actively improving their technology I.Q., negotiations with technology providers will go much more smoothly.

Here’s an analogy: My ’96 Maxima has 220,000 miles (OK, I like to drive my cars into the grave!), and is seen a couple times a year by my mechanic. When I review the estimate to fix “that noise coming from the right-front somewhere,” I know just enough about cars to ensure a fair deal. Every now and then I do question the estimate, but I do it with respect and honesty because the mechanic is the expert, and I’m not. Because I respect him, he gives me consistently honest and fair quotes and I don’t feel like I’m getting ripped-off like a lot of my friends often say about car repairs – and my car stays in peak shape and doesn’t leave me hangin’ when I need it most. See the correlation?