Innovation drives growth
Aflac has gained new customers in part by coming out with new products and by tweaking existing ones. Aflac’s executive team decides which products to add by speaking with field agents who regularly communicate with customers.
“We talk to our agents in the U.S. field force about what customers are asking for that we don’t presently have in our portfolio,” says Cloninger. “We have a representative group that we bring in to headquarters twice a year to talk to us about product ideas.”
Cloninger puts the advisory council together based on recommendations from state sales offices and tries to include agents of all levels within Aflac’s sales force. These agents ask customers what additional products they would like Aflac to offer and ask noncustomers what would convince them to purchase Aflac products. The council gives input about a new product multiple times over the course of that product’s development.
Because agents work on commission, they are always motivated to come up with new products that might be big sellers. Both dental and vision insurance products came from the advisory council.
Dental insurance, which was added about four years ago, was instantly popular with Aflac’s customers and made up 7.4 percent of new sales in 2005. Vision insurance was introduced in the middle of 2005 and made up 2.2 percent of new sales for the remaining half of the year.
Cloninger watches the competition to see what it is doing, but innovation usually occurs through those conversations with agents and by looking critically at every aspect of Aflac. Most Aflac products are updated about every three years to ensure that the company remains a market leader.
“We look at new things that are being done to treat major illnesses like cancer and make sure that our products fit the latest health care delivery system,” says Cloninger. “We’ve added benefits to our cancer policies over the years to do things like pay for experimental treatments, pay for treatments by recognized national cancer centers.”
Cloninger also has to manage product pricing.
“We try to price all of our products on a so-called level premium basis, where we don’t have to go back and ask for premium rate increases as many supplemental insurance companies do,” says Cloninger. “We want to sell a product that is priced so that the customer will have the same premium over the life of the contract. We do that for all of our products, except Medicare supplement products that have government-mandated increases in benefits every year.”
Cloninger also came up with an idea several years ago to help save customers money when they switch jobs. With Americans frequently changing jobs, he feared those customers might drop Aflac coverage rather than continuing to pay premiums — which would now also include the portion the employer had previously been paying — while waiting for coverage to begin at a new job.
“When a person leaves one payroll account, if they sign up with another payroll account and do the same Aflac product within a two- or three-month period, we’ll waive the premiums due during the period that they were not associated with an employer,” Cloninger says.
Today Aflac has 90 percent name recognition, but it wasn’t always that way. For example, in the mid-’90s, it didn’t have a large presence in densely populated New York and California.
“We took on an initiative to make sure that we invested in growing our distribution network in those states,” says Cloninger. “At the time, California wasn’t even in the top 10 of our producing states. Now California is the No. 1 state in terms of new premiums written. New York has grown similarly.”
To build market share in those key states, Aflac used television advertising starring a mischievous duck. The idea for the Aflac Duck, created by the Kaplan Thaler Group, arose when employees were having a difficult time pronouncing Aflac — and someone noted that the name sounded like a duck’s quack.
The duck commercials helped lead the company to unprecedented growth for the next three years, as Aflac grew by 28 percent in 2000, 29 percent in 2001 and 17 percent in 2002, almost doubling sales in that three-year span.
