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Branding is a buzzword that isn't going to go away. It has been a hot topic for years and just by the definition that a brand is the identity of a specific product, service, or business, branding won't ever go away.

Author and entrepreneur Seth Godin insists a brand is the product of the simple formula: prediction of what to expect times emotional power of that expectation.

You know the story. Credit default swaps, federal bailouts, suffering housing markets, escalating foreclosure rates, the erosion of consumer wealth and retirement benefits, business and bank failures, and accusations of deceptive insurance practices relating to hurricane loss claims while insurance companies were experiencing "record profits."

Those in the industry were branded villains and bullies by uninformed or misinformed media, politicians with vendettas or agendas, and individuals who seized upon the opportunity to promote themselves and their personal brands.

Retired Col. Tom Dials, president and chairman of Armed Forces Insurance Exchange in Leavenworth, Kan., said the industry's brand has been hijacked by individuals seeking to further their own agendas at the expense of the insurance industry.

Take AIG, for example. During the crisis, many labeled AIG as the world's largest insurance company; yet it wasn't the insurance operations that led to the company's fall from grace. It was other, more volatile financial services products. That part of the equation was often overlooked or left unexplained.

Additionally, there's the challenge in helping consumers understand the insurance transaction and what it means, Dials said. "I think the fundamental problem is the average consumer doesn't understand what he or she is purchasing," he said. The transaction is a transfer of risk, not an entitlement to low rates or full reimbursement in the event of any sort of loss.

What can be done to make sure our industry's brand stays where we know it should be?

First, know your industry. Second, share that knowledge with your policyholders and the audiences you define as vital and spread the industry's brand in a way that is easily understandable, which means clear, concise, and easily understood contracts and messages across numerous distribution channels. Third, maintain focus and consistency in brand messaging. And finally, be transparent and available. Participate with and engage in sustained conversations with your policyholders and audiences, and share our industry's brand at every step and in every conversation.

"Just three years ago, financial performance ranked as the top criterion for all U.S. companies," said Matthew Harrington, president and CEO for Edelman U.S., a public relations firm, in a press release announcing the results of the inaugural Edelman Financial Services U.S. Trust Barometer. "It now scores at the bottom, replaced by transparency and trust."

"Maybe the industry 'ceded' its brand versus someone else hijacked

it," Dials said. And thus, maybe it's time for the industry to stand up and demand it back.

We need to differentiate ourselves from those in the financial services industry that are to blame. That begins with being honest and transparent, and communicating well with policyholders in a way they can understand.

A March survey of financial journalists by BackBacy Communications and Marketwire, for example, found that financial services companies have an opportunity to rebuild trust by being seen as honest and credible.

It comes down to bringing the mutual concept to the forefront, which is probably part of your brand in the first place.

WHY TRUST IS IMPORTANT

If building a brand means getting policyholders to trust us, it unfortunately seems that we have a ways to go.

As of March 2010, insurance company trust levels rate at 2.50, while that of a stranger on the street is higher, at 3.32, said Paola Sapienza, a professor of finance at Northwestern University's Kellogg School of Management and co-conductor of the Chicago Booth/Kellogg School Financial Trust Index.

But there is good news.

"One year after the depths of the worst financial crisis in half a century, Americans are more likely to say their financial institutions are doing what's best for them," according to a Forrester Research news release.

Forrester Research's annual Customer Advocacy Rankings surveys more than 4,500 consumers who rate banks, investment firms, and insurance companies in the United States.

One of the highest-ranking financial institutions in the Chicago Booth/Kellogg School Financial Trust Index proves to be credit unions, with a 3.59 trust level.

"Credit unions are particularly interesting within the category of local banks because they are nonprofit institutions," Sapienza said.

"This is an interesting aspect because we see in a sense that trust in national banks, 31 percent, (of respondents) say they trust national banks either a lot or substantially, while the number is about 58 percent for credit unions and 53 percent for local banks."

A number of factors contribute to the success of credit unions, said John Lass, senior vice president of Corporate Strategy and Transition for CUNA Mutual Group in Madison, Wis., which provides insurance products and financial services to credit unions, credit union members, and policyholders.

"First, credit unions are owned by the members," Lass said. "There is no separation of interest between the customer and an outside shareholder."

Lass also said that the cooperative ownership structure of a credit union is based upon the principle of each member having one vote, regardless of the size of their account activity.

Third, the board of directors of a credit union is comprised of unpaid volunteers who often come from the primary communities served by the credit union, Lass said.

"All of these structural factors create a strong element of trust and comfort for the member that the credit union really can act in the members' best interest," he said.

Wait a minute?. Does this sound familiar? It should.

Mutual insurance companies enjoy the advantage of mutual ownership in which the policyholders are the owners of the firm, Lass also noted.

Nor are mutuals, by definition, publicly traded and subject to the relatively short-term thinking that comes with quarterly earnings reports and expectations.

"Both of these structural differences, when compared to stock insurance companies, should provide a basis whereby mutual insurance companies can take their customers' best long-term interest into account when making strategic decisions," Lass said. "In the end, this is what trust is built upon." And brand, apparently, is built upon trust.

Then how is it that our industry ranks so much lower and our brand has seemed to suffer?

To be fair, mutual insurance companies are not broken out from the larger insurance company category in the Chicago Booth/Kellogg School Financial Trust Index.

So what if the mutual property/casualty insurance industry were to break away from the insurance industry as a whole? Would the trust level increase? Yes, it would, Sapienza said.

Just one more reason our industry needs to differentiate itself from the larger financial services industry, and even the rest of the insurance industry inside of the larger financial services umbrella.

Editor's note: This article was reprinted from IN Magazine, published by the National Association of Mutual Insurance Companies.

September 1, 2010

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