Power Up Your Insurance Business with Strategic Alliance

November 20, 2008

SOURCE: InsuranceNewsNet, Inc.

In slow business cycles, sometimes you need a little help from a friend, or more accurately, a strategic partner.

A strategic partnership or alliance is not the same thing as a legal partnership because under this set up two entities work together with others to reach a common goal without giving their individuality. In a strategic alliance one of the parties involve possesses one or more business assets that it does not want to develop internally but will help the other parties in the alliance.

Many strategic alliances involve large companies – even entire countries – but this strategy can be just as useful for small businesses and among professionals even though they may be structured more informally.

It is a structure that can work very well for prospecting for new clients. For example, a health benefits consultant established a strategic partnership with a property and casualty agent. Their strategy involved attending each other’s client meetings as a value-added resource.

If the property and casualty agent is going to see a client, the health benefits consultant tags along and volunteers to review the client’s health insurance and makes recommendations for improvements – free of charge. Besides generating additional business for each partner, both professionals enjoy non-financial benefits. They keep each other motivated and they have fun working together.

Obviously, a strategic partnership works best if it involves the right elements. While both parties are looking to increase sales, expand its offering, improve prospecting, etc., the partners must complement – not compete – with each other. In the above example, if the property and casualty agent also carried some health insurance, the partnership wouldn’t have worked out.

The right strategic partner should also have the right skills, the right position and proven competence. Partnering with somebody who is not very knowledgeable in his or her line of business is not a good idea.

If the producer’s target market is business owners, experts recommend forming strategic alliances with accountants, attorneys, management consultants and advertising consultants. These professionals are not only a rich source of referrals to other business owners. These professionals have already built a relationship with their own clients and are therefore considered as trusted advisors. A referral from these professionals would be highly valuable if their client has a need for business insurance products. In return, the producer refers his or her strategic partner to suitable prospects.

In many cases successful partnerships are built on common work culture, ethics, business philosophy and methodology. Another important factor to consider in choosing a strategic partner is the chemistry of personality.

Do you like each on a professional and personal level? Are you comfortable working together? Even if the strategic partnership is highly productive it is unlikely to last if the personalities conflict. Mutual trust and respect should be given equal importance. These are key elements that allow strategic partnerships to thrive.

Establishing a strategic alliance can be both informal and formal. A formal arrangement is more complicated to set up because crafting of the strategic partnership agreement requires time and effort. The contract should include the business expectations of both sides as well as address potential legal issues that may arise. Although the terms inside a partnership agreement will vary with each partner it is important to put provisions that protect one’s business while maximizing the benefits from the partnership.

Meanwhile, a mutual understanding that both parties are expected to provide referrals back and forth is usually all it takes to set up an informal strategic alliance. Either way experts say businesses or professionals who enter into strategic alliances should focus on the partner’s needs their own.

In case the strategic partnership fails to work it is best to dissolve it because a bad partnership is worse than no partnership at all. Successful strategic partnerships should also be terminated if it no longer serves the needs of either partner – unless both happen to shift their strategies at the same time and towards the same direction. Still, the business arena is ever changing and where one strategic partnership ends another strategic alliance begins.