Xerox, Eastman Kodak And Cost Plus Insurance


Remember Xerox? How about Eastman Kodak? Both companies were pioneers in their industries. They were visionaries providing solutions by fulfilling previously unmet needs, creating new markets that did not exist before.

By William Rusteberg

“Make a Xerox copy please” became a common command that is still used today. A “Kodak moment” is a phrase still used to convey the beauty of a tranquil evening sunset at the beach or a warm summer day at the lake.

In the early stage-life of any new product, market share can quickly translate to a de facto monopoly. The first to create a new and innovative product always has market advantage.

The challenge facing successful business ventures is to understand the necessity to continuously respond to market forces in a proactive manner since competition will certainly become a factor to consider at some point. To ignore this basic business premise by remaining complacent is business suicide.

With the introduction of Cost Plus Health Insurance four years ago, we see similarities in market progression. As was the case with Kodak and Xerox, Cost Plus Insurance swiftly earned a strong following with little or no competition to contend with. One-source shopping when there is only one source does not always bode well financially for the end user but gives rise to opportunities for improved alternatives.

The eroding effects of complacency are now becoming evident in this nascent, rapidly evolving Cost Plus Insurance market. A logical but dangerous, if not deadly business strategy drives many to the conclusion that “If a product is selling well and there is no competition to speak of, why change anything?’  The problem with this line of reasoning is that pioneering, successful business endeavors that fail to react quickly and appropriately to market threats end up losing market dominance.  The lure of maintaining windfall profits blurs judgment into delay or even inaction

When complacency reigns in the boardroom a Trojan Horse is effectively in place providing competitors with a powerful weapon with which to compete and win.

Market reaction to Cost Plus Insurance, while slow to progress initially, has now ushered in, for the first time, a competitive environment. The Trojan Horse was activated at midnight while the good folks promoting Cost Plus Insurance were sleeping blissfully after a day of drooling over their ledgers.

Competition, intent on acquiring existing Cost Plus business on a lower cost basis with improved plan structure and performance strategies, is made easier when the incumbent is complacent,  relying  only on branding and experience while ignoring pricing and quality.

There are now numerous TPA’s active in the Cost Plus arena, along with audit firms and other intermediaries such as law firms, software companies and accounting firms. A competitive market is forming. That is good news for consumers.

Fees are more competitive, including stop loss premium. Audit fees, initially as high as 12% of billed charges are now much less. Percentage-of-savings fees are fast becoming things in the past, replaced with fees based on allowed charges or a flat PEPM. TPA fees are more competitive as well, especially in the area of commissions earned from audit companies and other subcontractors TPA’s employ for their Cost Plus clients.

Cost Plus Insurance has become an industry buzzword that will forever be embedded in insurance vernacular. Ownership, though, will be in the hands of many.

Editor’s Note: Competition benefits everyone. Lack of competition breeds corruption.