Case Studies  >  Insurance Company

HELPING A LARGE INSURANCE COMPANY COMMUNICATE A MAJOR REDUCTION IN COMPANY BENEFITS AND EMPLOYEE PENSIONS

Highly Targeted Tactics Provide Employee Base of 4,000 with Context for Dramatic Changes in Relationship with their Employer

Nicolazzo & Associates' client, a large mutual insurance company with headquarters in the Northeast and field offices across the country, faced a major dilemma as it realized that it would have to dramatically cut employee benefits. The situation was exacerbated by the fact that the company had a reputation for creating a "family" work environment and treating its employees generously.

Background and Situation Analysis

Facing intense competitive pressures and rising costs from within, our client made a decision that was necessary to literally ensure its future survival. As it carefully analyzed its operating costs, the company realized that its general pension and benefit plans were out of line with industry benchmarks and a major factor in declining profits. In fact, if the company had not been doing so well with its investments, it would have lost money in its last fiscal year.

During its history, the firm had cultivated a loyal employee base that enjoyed perks beyond industry norms. For example, to this point the company was paying 100 percent of healthcare coverage for all employees...despite rates that had been rising between 12 and 15 percent in recent years. Additionally, hundreds of retirees were receiving lifetime pensions and fully paid healthcare. The bottom line was that over the course of a three-year span the company's salary and benefit costs had risen 23 percent. To continue as a viable company, these increases were unsustainable.

In its markets, the company was facing aggressive price competition coupled with inadequate rates in many markets. Our client also faced business pressures from regulatory constraints, largely unsympathetic regulators and legislators, greater catastrophe exposure and mounting pressures to be more cost effective in its general operations. Now, the company recognized it had to get is operating costs in line with the rest of the industry.

To achieve the necessary savings, the company created a special committee of senior managers that reported its recommendations to the CEO. With solid backing from the board of directors, our client decided to introduce a voluntary separation program, revise the formula for determining pensions, direct employees and new retirees to begin to contribute 20 percent to their healthcare coverage, increase co-payments for healthcare coverage and medicines, and reduce the amount of life insurance coverage for retirees. This action represented a shift away from the paternalistic attitude that has characterized the company in the past.

Senior management was concerned about the fallout from these announcements and the impact on employee morale. Also, the company worried that local business press reporters would get wind of the announcements and write negative stories. Amidst this backdrop, N&A went to work.

The Plan

After long and deliberate discussions, it was decided that the company would first announce the employee benefit and pension plan changes to its top managers at a regularly scheduled management conference on the West Coast. This provided the opportunity for the CEO to deliver a speech that set the tone and context for the changes. After the speech, a videotape from the CEO, which was written and produced by N&A, was shown that would later be viewed by all employees in all locations. The treasurer, COO and vice president of human resources were also available to answer questions. Breakout sessions to help respond to questions about these changes were also held at the conference.

After the event concluded, managers returned to their respective offices with a comprehensive announcement kit. The elements included the videotape, talking points for employee meetings, a detailed executive Q&A, an executive memo from the CEO, press statements, and PowerPoint presentations. All the documents were tied together by a series of key messages that were developed by N&A.

At N&A's recommendation, the company also prepared a special VIP package of information for employees that would be offered early retirement. This custom package, which was designed and developed by N&A, was presented to each affected employee only minutes after the general, company-wide announcement. Additionally, some 900 personal letters to retirees were prepared and mailed on the day of the announcement.

Inside the human resources department, a special four-person team was set up to handle inbound calls and e-mails from across the company. HR staff was specially trained to deal with individual circumstances. Employees were also given assistance in re-calculating their pensions and evaluating the impact of healthcare contributions. An open-door policy prevailed throughout the company, giving rank and file employees the opportunity to meet face-to-face with operations managers.

The Results

Our client's communication plan worked to perfection. Consider the following:

• When senior managers learned about the changes and the context in which they were being made, they overwhelmingly supported the moves

• Though a coordinated and highly structured effort, employee questions and e-mails were answered within minutes

• The voluntary incentive (retirement) program was well received, with more than 100 employees accepting the package within the first few days of the announcement

• A tightly focused announcement program and flurry of supporting communications materials ensured a comprehensive understanding of management's position

• The announcements generated no media coverage

• Through a well-developed strategy and proper execution, the company was able to lower its headcount, begin to contain overhead costs and assure the company's continued success