When Failure to Plan is Planning to Fail: 4 Common Pitfalls and How to Avoid Them When Building an Annual Plan

Life comes at you fast. From a global pandemic to snarled supply chains, work from home to an environment of rapid inflation (not to mention rising interest rates), the Mutual Industry has confronted a generation’s worth of change in two short years.

In this environment planning can be particularly challenging, especially when it comes to the highly complex world of P&C (Property and Casualty) insurance. Now more than ever, having a well-defined plan is a highly valuable investment of time. Critics may argue that a plan is of limited value in a dynamic marketplace. Instead of relying on improvisation and lurching from crisis to crisis, at Mutual Capital Analytics we believe it is far more effective to leverage a well-defined plan. Robust planning, combined with an ability to adapt as needed, can have a major impact on your organization. In this article, we will explore the common pitfalls associated with annual planning in the P&C industry and how to avoid them.

Common Pitfall #1: Lack of Sufficient Depth

In the realm of planning, both top-down and bottom-up approaches are commonly employed. However, a top-down approach often fails to achieve sufficient depth. This oversight leads to delayed execution because the lack of definition requires the team to conduct additional analysis midyear to determine how to accomplish high-level desired outcomes, as opposed to taking immediate action. For example, it is far better to plan for a loss ratio tied to the execution of specific rate and non-rate actions, at the state and product line level, rather than to simply plan for a desired loss ratio. By incorporating the necessary depth, you can foster discussions and strategic planning that will later enable immediate action on the tactical moves required to drive overall success.

Common Pitfall #2: Insufficient Consideration of Multiple KPIs

Relying too heavily on a single key performance indicator (KPI) can be detrimental to your organization’s success. For instance, focusing solely on measuring premium or policy count neglects the balanced evaluation required for effective decision-making. It is often important to accomplish two things at the same time, such as retaining

customer share while also achieving premium levels that drive targeted bottom-line results. Our recommendation: build a plan that focuses on multiple KPIs, such as premium, policy count, and customer retention. That way you ensure the right incentives are appropriately balanced and aligned with your organization’s goals.

Common Pitfall #3: Inadequate Differentiation in the Planning Process

One plan does not fit all. Different parts of your business may operate under unique models and require specialized planning approaches. For instance, planning for large national partnerships might differ significantly from planning for local agents using comparative raters. Instead of a single comprehensive strategic plan, we think a differentiated planning exercise that takes a more targeted approach can better align each part of your business with its specific drivers.

Common Pitfall #4: Failure to Track Progress Against the Plan

Your annual plan is not a static document. At MCA we see an annual plan as a dynamic tool for driving success and enhancing your understanding of your business. Tracking progress against the plan is crucial for capturing insights, learnings, and market changes. Deviations from the plan can shed light on emerging trends or reveal gaps in your understanding of the business. By embracing these insights, you can adapt your strategies and ensure continued growth and success.

Conclusion: According to Plan

As Mike Tyson famously said: “Everyone has a plan until they get punched in the mouth.” At Mutual Capital Analytics we believe a good annual plan should be capable of absorbing blows dealt by a rapidly changing business environment and enabling your company to adjust—according to plan. We recognize the importance of annual planning in the P&C industry and the potential pitfalls that organizations may encounter along the way. By addressing these common pitfalls, we help our clients plan deep, incorporate optimal KPIs, account for business unit variation, and make space for adaptability. Our expertise allows us to help organizations navigate planning in the complex world of Property & Casualty insurance so that they achieve their goals and surpass their competitors in this dynamic industry.