Episode 18 with Paul Quaranto, President and CEO at Boston Mutual Life Insurance ​- How to Stay Relevant in a Disruptive Marketplace

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Beyond the Challenge is a podcast where executives in the insurance and financial services industry share their insights and experiences. Hosts Kevin and Sandy Dougherty talk with today’s top business leaders about what keeps them up at night and the biggest opportunity organizations can capitalize on today. We encourage you to listen, share, and subscribe to our program.

Kevin and Sandy Dougherty each have over 20 years of experience in insurance and financial services, corporate leadership, and executive search. They’re the owners of Global Corporate Solutions and Global Corporate Leaders. Global Corporate Solutions partners with organizations to gain efficiencies and contain costs. Global Corporate Leaders partners with organizations to enhance and evaluate talent.

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Welcome to Beyond the Challenge. Here are your hosts, Kevin and Sandy.

(interview)

Kevin: Today we’re talking with Paul Quaranto, Chairman, President, and CEO of Boston Mutual, about the trends, challenges, and opportunities he sees for the insurance industry. Paul, can you tell us a little bit about yourself and how you got into the insurance industry?

Paul: Sure. Well, thank you very much, Kevin and Sandy. It’s a real pleasure to have the opportunity to spend some time with you today and talk a little bit about the Boston Mutual story so I very much appreciate that. I’ve been fortunate enough to be in this industry for about 40 years now. About 10 years before I joined Boston Mutual, I was in various underwriting and marketing and sales and management roles and took on a position with Boston Mutual back in 1990 managing a group insurance sales office, was asked to come in and head up the group insurance department 4 years later and was fortunate enough, 10 years ago, to be selected through a succession planning process to be the seventh, just the seventh president, in the 130-year history of our company. So, consider that to be quite an honor and a really unique place that I look forward to talking with you about.

Sandy: Thank you, Paul. All sectors face challenges, but for the insurance industry, the list seems especially long. Many carriers seem to be struggling to stay relevant while others are embracing new technology, reimagining distribution channels, and developing strategic partnerships. How has the new standard of working from home changed the way Boston Mutual looks at workplace benefits?

Paul: Well, that’s a great question, Sandy, and I think Boston Mutual, like many folks in our industry, and, again, when you consider that, you know, most companies in our industry have been around for 100 plus years, we are obviously dealing with transitional issues coming off of legacy systems, legacy processes to get to more of a current state function, if you will, that not only allows us to compete in our space but to compete more globally against other service customer expectations. And so when the pandemic hit, as unfortunate as that was, as challenging as that was, there were some silver linings in this. It really did afford us an opportunity to sort of accelerate that pace. Here at Boston Mutual, I mean, we were primarily a site-dependent organization and we quickly transformed based upon the work we had been doing leading up to the pandemic in terms of the work to progress with our technology platform, the introduction of a project management discipline and an innovation lab, we were able to capitalize on all of that to quickly move to 90 plus percent remote status for our employees. So, we were able to, you know, obviously, with an abundance of caution, start by protecting our employees because we can’t take care of our customers if we don’t take care of our employees first, so very proud of the way we navigated that and capitalized on that opportunity. Some of it is within the realm of change management as well because I think, as we look at our industry, and Boston Mutual is very much like the industry, and that we live in a very expert sort of culture, expert mindset, where we do things a certain way because we think that’s the right way to do them and change from that is hard. So, learning that change is okay, that we can move forward and do things better without giving up at the core of who we are and what we wanna stand for in the marketplace was really impacted through this pandemic in a very positive way. So, very proud of our ability to do that. At the same time, given that we have morphed into predominantly a workplace sales organization, it did present some challenges. So, while we were tending to our employees, so were most employers out there and the intermediaries that connect us to those employers, the brokers, the consultants, all of those third-party entities, were facing the same challenges so it forced us at the same time to begin to think about how do we continue to engage our customers and our customers representing the producers who sell for us, the employers who basically agreed to allow us to sell our products to their employees and how do we make all that work, and so it took us a little bit of time to settle in on that and to recognize that we did not want to just commoditize our story and our products and our services so how we continued to present our value proposition to the marketplace was something we were very thoughtful about and how we could do that in more of a virtual or a remote world. So, it’s taken us a little bit of time to sort that out but I think that, as we’ve got ourselves in a good place to approach the marketplace, whether it’s in person as the world allows us or to continue to function in a virtual and remote world, we are seeing producers and employers really approach it the same way. And I think that the last piece of this is the pandemic has really highlighted the need for what we sell. I mean, I think that people understand more than ever the need for the benefits that are offered by this industry, in our case, really starting with life insurance and being in a position to provide that level of protection that, God forbid, something should happen to a family member. So, I think we’ve navigated it well. It wasn’t something that we had expected, it was a transition we were in the midst of, fairly was accelerated and I’d like to think we’ve capitalized on it and, at the end of the day, we’re in a better position to tell our story in any form necessary to continue to build and leverage off of what we think is a strong value proposition and providing benefits and customer service for all the right reasons to the right people and being able to move the company forward. So, we’re excited about that.

Sandy: Paul, with the workplace changing and people starting to come back into the workplace now, do you think you’re going to continue to do a hybrid model of going both into the workplace as well as still doing some things virtually as far as how you’re gonna be selling to your clients at this point?

Paul: Yeah, that’s something we’re spending a lot of time with, Sandy, and I think we will end up in a hybrid model. I think one of the questions companies have to ask themselves as they sort of think about how do we sort of reenter the world is we can, based upon all of the guidelines available and science available to us, is, you know, are you a remote organization, a virtual organization, or is there some site dependencies that are critical to who you are, and we believe that there are some critical aspects of site dependency. We think how we represent our brand, our culture, and all we do when servicing our customers, all of our stakeholders as well as each other as employees, it’s really important that we do have opportunities to be together. Now, that being said, we don’t think that needs to be five days a week and every week of the year so our plan had been really to try to work around two core days that we would bring people back into the organization for two days and that would give us an opportunity to formally meet or see someone in the hallway or have lunch with somebody and sort of reconnect and we think good things happen when we reconnect that way. And then we’d build schedules around that. Our plan was to do that shortly after Labor Day. We pushed it back to November with the surge of the Delta variant and now we’ve made a decision to push that back ’til 2022, just out of that abundance of caution. And, again, if we weren’t in a position where we were able to service our customers at the level we are, we might have considered pushing that a little but I think we’re in a good place meeting the needs of our customers, both our producers and our policyholders, and taking care of our employees. So, we’ll travel that route but I think a hybrid model is really where we go. And I think the other part of this is understanding the issues from the employee perspective and we all know that the world is talking about, you know, staffing shortages and it’s a hard time to find people and all of that. I think you wanna create the right environment for your employees. So, some of that is the work we’ve done in really building out a human resource platform that allows our people to be engaged in all we do, to grow professionally and personally, to make sure that we’re addressing all of the issues of the day across the diversity equity inclusion platform as well as the ESG, the environmental, societal, and governance platforms, and so that’s very, very important to us and I think the experience is equally as important. I think people have found that there is a balance to life that can exist in this world. I think there are people that wanna get back in some time because there is this loneliness thing that’s going on in the world that needs to be addressed but they don’t wanna have to come in full time. So, I think contemplating all of that in your decision is gonna be critically important.

Sandy: What do you see as the main barrier to growth and innovation for just an average insurance carrier? What’s holding carriers back from being innovative?

Paul: I think a lot of that is self-imposed. Again, goes back to that idea that we are an expert culture, right? That we live in a world where we have, you know, actuaries and accountants and attorneys and really people who are very good at what they do and I think we tend to keep our blinders on and look at that and think that this is a very complicated product, and it is a complicated product but, I mean, I don’t know if we have to make it as complicated as it is today and so I think it starts internally recognizing that you need to almost, I don’t wanna — “impose” is a strong word but almost impose some disciplines into the organization that are new to the organization. And what we did, going back a couple of years now, was really to introduce the project management discipline along with an innovation lab. And what we’ve done is we have integrated our project management team, our enterprise project management office, our innovation lab, and our technology department into one team and our plans are to further integrate that across the organization to move into the customer experience as well. So, we’re challenging ourselves to take the blinders off, to think differently about how we sell our business, how we design our products, how we service our customers so that we can be more relevant in the space because what we do offer is critically important, and if you look at all of the numbers that are put out by places like LIMRA, we know that there are opportunities, and particularly when you get to middle and lower middle income America that really has a need for the product, we need to connect with them. And that’s who we are at the core. We are a company that serves those markets and so we’re really focused on how we get to them, understanding what it is they need, understanding how we can communicate to them the need and the value of the product and give them a good experience to buy the product and to service them moving forward.

Kevin: Paul, what do you see as the future of distribution for the industry?

Paul: That’s a really, really good question. That’s the $54,000 question, I think, Kevin, right? I mean, we have terrific distribution today, right? And I think the challenge, and I think it’s not just in the workplace space where we live, I think it’s across the whole continuum of products and services that are offered through the industry, is the focus of that distribution. I mean, I think you’ve got, you know, internal pressure on carriers from a pricing standpoint so, you know, a lot of the products we sell are very front end loaded in terms of commissions, in terms of how we do that and the impact that has on financials. I think, to some cases, as business becomes more transient and persistency is harder to achieve, I think there is a price to pay if you’re not smart in how you build out your compensation to producers, so I think we need to be aware of that. In our space, it’s sort of this transition from products that exist on individual policy chassis to group insurance policy chassis and it’s much easier when you have group products to just transfer that business through an agent of record change or just a change in carrier. So I think we need to think about that. I think there are also challenges on the return for distribution, on their return on their investment, relative to getting to the markets that need our help most. So, I think traditional distribution has certain thresholds in terms of their expectations from a compensation standpoint of what they can commit to in terms of the size of a client, whether it’s an employer or how many employees are involved, what are the products they’re looking to buy? If it’s an individual sale, what is the net worth of that person and what might I be able to sell and make for that? And then you complicate it with some of the regulations that exist and are being contemplated again in the world around things like the fiduciary rule and best interest standards and the requirements that are being placed on distribution to meet certain standards, that really creates a challenge for them to get to the people that need it most. So, you know, we as an industry are wrestling with that. We have a voice clearly through our national trade organization, the American Council of Life Insurers where we’re addressing those issues at the federal and the state level to make sure that we’re not missing the mark, but I think that’s up in the air. And I end that by saying that life insurance is still very much a product that is sold. So I think there is a need for distribution but I think those needs will change. I think some of them will change relative to the market space that you’re looking at, Kevin.

Kevin: What is Boston Mutual doing to stay relevant?

Paul: Yeah, I think there are several things and I think one starts with, you know, our strategic plan, which we’ve laid out, really talks about — starts first and foremost with guiding principles. I mean, we know who we are at the core. I mean, we were formed 130 years ago. Our first president wanted to be a progressive life insurance company that afforded middle to lower income working families the opportunity to secure protection for their family. Fast forward 130 years, we’re still that same company. We’re a mutual company, we’re a life insurance company, we serve certain markets that we’ve stayed true to over the time. How we get to them has evolved, individual channels, group channels, workplace channels, but at the end of the day, we’re still that same company. So, remaining true to who we are is very important to us. We don’t want to become a commodity in the space. So providing products that are of value that really meet the needs of that marketplace, providing a sales experience and a service experience that meet those needs are really important to us. So, creating that value proposition is one way we wanna stay relevant. And that’s having the courage to be a little bit different, right? And so that’s part of what is important to us. I think a company of our size, it’s critical to us creating our niche in the world. I think it also goes to what we do as an employer to engage our people. We talked a little bit about that, being a place where people wanna work, to be able to attract the level of talent that is gonna be important for us to move forward, to do the things along the lines of project management, discipline, innovation to make us that company of the future that we want to be. I think engaging at the federal and the state level is critically important. I mean, we’ve committed very much so to be part of the discussion through the American Council of Life Insurers, through our state-based association, the Life Insurance Association of Massachusetts. We have remained very involved and I have remained very much at the table and will speak on behalf of the company and the industry when given the opportunity. So we think having a presence there as well. And then being involved in our communities. We’ve created our Making an Impact Program. We were just recognized for the third year in a row as one of the most charitable organizations in Massachusetts by the Boston Business Journal, something we’re very proud of. So making sure that we are committed to our communities and aligning our giving to the people that we serve in the marketplace is very important to us in terms of relevance. You know, I think some companies decide that they wanna stay below the radar. Our approach has been that we want to be on the radar. We want people to see us for the good we do as an employer, as an insurer, as a member of the community, a member of the industry, and a member of society because I happen to think this industry does an awful lot of good for society and is very important to society as we progress forward in terms of the levels of protection we afford our customers.

Kevin: Sounds great. What type of strategic partnerships do you see working the best for carriers?

Paul: Well, it’s interesting. You know, as I sort of started in my role and I think anyone, when they take over a leadership role, sort of spend some time thinking about, “Okay, this is a big deal, how do I envision the difference that I wanna make? The legacy that I wanna leave? When it’s my turn to hand it over, what do I want it to be?” and, for me, I think that had a lot to do with really building off an incredibly strong financial foundation that my predecessor, Paul Petrie, had built and really be allowing the company to grow and prosper into the future and so that was about really building upon that niche, that value proposition we talked about, and, equally so, creating what I call a state of organizational readiness across a people process and technology spectrum to where the company can sustain and scale the levels of growth that we think we can achieve. And so, as we began that journey, you know, some of those issues are things that we do well internally, back to that external, that expert focus that I referenced earlier, but some of them I think are things you can partner outside. So, for example, one of the first moves that we made a number of years ago was to realize that we needed some help with technology and so we outsourced technology for a number of years to shore up our existing foundation and to create a plan to move us to really a future state foundation from a technology standpoint. A year ago, we brought that back in house and it has served us incredibly well. We made a decision when our Chief Investment Officer retired to retain an independent investment advisor to provide us with a level of oversight so we replaced the Chief Investment Officer with a partner with, you know, 100 plus resources and expertise that has served us well. So I think, depending upon the size of your organization, and I think we are of the size that this works, is I don’t think we should outsource things that are core to our insurance business but I think there are sort of supplemental disciplines that you can consider outsourcing to shore up, you know, the areas where you may not be as strong. So, again, we started with an outside project management team, we insourced them. We built our own innovation lab. So, we’ve been trying to be versatile from a cost-benefit standpoint in terms of assessing where we can capitalize on those opportunities. Certain things, the way we sell our business, administer our business, pay our claims, we wanna stay inside with obviously the core of who we are and what we do, but I think if we can supplement that and accelerate the rate of growth along the path of our strategic plan, then we entertain those thoughts. Lots of opportunities I think to partner across distribution. I think you need to look at those. Do they align properly? I think the first time you look at any time you go outside, it all starts with the cultural fit, right? You need to make sure that whoever you’re partnering with, there is a balance between, you know, sort of where you are in the food chain and where they are in the food chain relative to what it is they do and, culturally, if you’re important to each other and the cultures that you have within your organizations align, then I think you’ve got the basis of a good conversation and potentially a relationship that can be successful.

Sandy: Do you think it’s possible to have a direct-to-consumer distribution channel with workplace benefits or is that something that you think needs to be sold?

Paul: You know, I still think in the workplace space, and workplace, you know, define workplace, right? It’s the remnants of what used to be group insurance, more traditional employer paid business all the way out to really employee paid business that’s just facilitated through the employer, the voluntary benefits space. And so I still believe that, for the foreseeable future, that will be a third-party independent sale. I really believe that because I do think that there is a need for somebody to represent the importance of the need to the employer and their employees and also to differentiate, if you will, between the options that are available in the marketplace, what the carriers represent, what the products represent, what are the priority order of products that you wanna offer your people, how do you wanna strategize about what you as an employer pay for and what you give your people as an option to pay for themselves. I still think there’s a need for that in terms of, you know, not only helping people to see it but then to plan for it. Maybe a little bit different in the individual space. I think, you know, carriers have tried some direct-to-consumer efforts. It’s still a product that is sold more than bought but, again, as we evolve, the question is can we get to a platform, particularly in those lower to middle income markets where it’s hard to find distribution that can justify the time and effort spent for the return on a sale of a policy, can we create a simpler product and process that we can do something a little bit more direct? I’m not sure it’ll ever be fully direct but I think that’s the sort of innovation that we need to be thinking about because that is the huge hole out there, right? When you think about the uninsured and the underinsured, it really is in that space, and when you think about the need, particularly going through this pandemic, the need is in the space. So I think there’s a lot of work to be done on that and I think we’re gonna see a lot of attempts to do different things, Sandy. I think that’s what will happen. A lot of carriers will pick their spots and try to do some things.

Sandy: Okay, great. What do you see as the biggest opportunity for the insurance industry over the next few years?

Paul: Well, I think we’ve talked a lot about it. I mean, I really do think, sort of selfishly, for us as carriers, there’s this opportunity to accelerate our rate of growth and innovation, right? I really believe that coming out of this, we have people who are more open minded in terms of, okay, change is not a bad word, it’s an okay word, and we can move these things along. Just seeing the results of the fact that change actually can make their lives better. So I think internally, the struggle through change management, people who accept that change doesn’t mean that my world goes upside down or I lose my job, that’s not the case at all, we like to say we really like to take and deploy our people to the customer experience and let technology take care of the process. And I think when I say that to our people, they really like that idea. I mean, so many people in our customer service world, I’d rather be spending more time on the phone but I’m having to manually manipulate a situation on our legacy system. So, I think when we lay it out that way, they understand and get excited about it. So I think that’s one very, very significant opportunity for us. And, again, I think at the same time, we have this opportunity where people understand the need for what we sell more than ever before. So, I think if we capitalize on the awareness and really take the opportunity not to just push stuff at them but to educate them on the value of what we sell and what the options are out there, there is an opportunity, and, again, I go back to this mindset, “I think that this industry serves, you know, the more affluent, the higher end of the income spectrum.” It really doesn’t. I mean, this industry really speaks to middle and lower income families. So, our ability to help those families who don’t have the options that the more affluent have in terms of giving them opportunities to provide different levels of protection, in our case it’s life insurance, but there’s retirement products and there’s income replacement products out there that are equally as important that people need to see, I think it’s an opportunity to get to those markets at a time when people are more receptive than they’ve been, and knocking down some of the stigmas that what we sell is too complicated, too expensive, those sort of things. So, I think those are significant opportunities that are steps to capitalize on. Now, that being said, I think we’re up against a background of a pretty crazy time from a regulatory standpoint. I mean, I think, you know, we have an awful lot going on at the federal level, at the state levels, and so we are living at a time when I think we’re trying to settle in, we’ve been a state-based regulated industry for a long time, it has worked really well, but as we all know, there’s a lot of talk going on right now, whether it’s a paid family medical leave, whether it’s retirement security, whether it’s algorithmic accountability, whether it’s fiduciary rule, best interest standards, whether it’s tax stabilization, there are a whole list of issues that are at the forefront that could impact the industry, some good ways, some will be a bit more restrictive, that could impact those opportunities. So, I think for people who do what I do is sort of keeping your eyes on those issues and the impact they can have on your company, seeing what the challenges are and then capitalizing on the opportunities that are presented.

Kevin: Understood. What is the best decision you made that had a positive impact on your career? 

Paul: Wow, that’s an interesting one, I probably should have thought about that one a little bit, Kevin. Yeah, it’s interesting. I mean, I think so much of it comes down to, you know, trusting your instincts and, you know, the decision when I was about 10 years into my career to join this company and to stay with this company has served me really well. I mean, I think that the industry has gone through a lot of change. I mean, Boston Mutual has remained true to who we are, who we’ve been, and I really place a lot of value on that. Our brand is “Family matters no matter what” and I felt that from the day I joined the company as a sales manager and, as I joke with people when I welcome them to the company, I’m supposed to say that now in this job but I really believe it. And I know my own family, even down to my grandkids now, speak about Boston Mutual like it’s family. So, I think making a commitment to this company, this organization is something that has served me and my family well. I mean, obviously, I was fortunate enough to progress at the company in terms of taking over the group division and then taking over in the leadership role, very, very humbled by that, never thought I’d have this opportunity, that’s for sure. So, I think understanding and trusting my instincts that this is a place that is right for me and works for me and now having the opportunity to lead that. In terms of leadership, I think the best decision I made early on was to step back and assess and we put together a strategic plan back then that we have remained true to in terms of what we wanted to do to move the company forward. The current version of it is referred to as Vision 2025 and it’s about getting this company to where we think we can be, which is not only a successful company that achieved an A rating when we were told we couldn’t and our goal is to become an A plus-rated company with AM Best by the time we get there. That’s something we aspire to. And doing that with a platform of sustainable, profitable growth, organizational readiness, and validation along the way that we are really good in the space we wanna play in and really good for the right reasons in terms of being a good company representing the goodness of mutuality and all that we wanna stand for in the marketplace. So, maybe it’s stubbornness, maybe it’s instincts, but staying here and being fortunate enough to have this role and then really laying out a plan that we’ve tried to remain very focused on and discipline to that I think has served me well.

Kevin: Paul, what advice would you give to someone looking to get into the insurance and financial services industry?

Paul: Interesting, really good question. I’d say give it a chance, first of all. I mean, I think it’s funny, I played some ice hockey in my undergraduate days up at Colby College in Maine so I do a lot of work with the coach and the program and speak to a lot of the players and, you know, when kids are coming out of school, they’re never thinking about a career in the insurance industry and I spent a lot of time saying, you know, “There’s an awful lot of opportunity in this industry.” I mean, again, if you look at it from the perspective of we’ve all been around a long time, we’re all doing good for society, I think everybody is realizing there are opportunities for innovation and growth and to do even better things as we move forward, and so I think just give it a chance. I mean — and, again, you’re not, you know, pigeonholed into one particular discipline. This industry presents all sorts of opportunities for people to join this industry and pursue a career. And I think the industry is very attuned right now to creating that right work experience for people. I mean, an awful lot of work is going on to being that really engaged employer, I know we’re very focused on it, and creating the right experience for people and so keep your mind open. It’s not your parent’s insurance world anymore, it’s a little bit different, and I think it’s pretty exciting. I have the opportunity and I inherit this from my predecessor, I visit, unfortunately, it’s virtual now but I used to sit with every new employee that joined the company and where we push back our opening ’til the first of the year, I did a couple of virtual meetings the last couple of weeks and just saw some amazing talent joining this industry and people coming from very diverse backgrounds and so I think, you know, we are doing a better job and I think the industry is in terms of letting people know about those opportunities. The first thing I did was call our HR folks and congratulate them because they’ve done a fabulous job in terms of opening people’s eyes to the value of this industry and the value of this company. So, I think the future’s bright.

Sandy: Paul, thank you for your time today. It’s been great to hear your insights on how carriers can stay relevant and the opportunities you see for the industry over the next few years. Thank you very much.

Paul: Thank you.

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