The Rock of Gibraltar

In a Time Magazine article from 1957, Carrol M. Shanks, Prudential’s president at the time, believed that ‘insurance men’ must find new and exciting approaches to spur mass insurance sales and cut the costs of insurance. It was when Prudential counted 33.2 million policyholders and achieved a significant milestone; bypassing its biggest rival, Metropolitan Life, as the world’s No. 1 seller of life insurance.

To sell more and better, Shanks began decentralizing Prudential’s Newark operations to regional home offices, opening up six locations across the US and Canada. This process continued for a while and in 1980, it was reported that the number of employees working at the Newark location was set to be just over 3,000, down from 11,000.

In 2019, Prudential thought it found a way to spur mass insurance sales and cut insurance costs with the acquisition of Assurance IQ. “By eliminating the inefficiencies of conventional models, Assurance’s technology-driven, on-demand service platform lowers the cost of customer acquisition, allowing deeper reach into the mass market,” the company stated in the press release announcing the deal.

While Shanks’ moves proved to be effective in an analog era, Prudential’s latest move proves that it has a strategy problem, not a reach problem, and this Assurance IQ petition for an expedited declaratory ruling asking the Federal Communications Commission to clarify components of the Telephone Consumer Protection Act so it can continue harassing consumers on the phone, is the perfect example.

Since taking over the company, Prudential has seen Assurance IQ lose $97 million over the course of five quarters. In the first losing quarter (Q4 2019 / $9 million), Prudential’s Andrew Sullivan accredited the losses to not having enough agents to meet consumer demand while stating that they were “well underway in getting those agents appointed for Q4 of 2020.” In the second losing quarter (Q1 2020 / $23 million), Sullivan stated that they are investing ahead of Q4 to make sure that they have the right number of fully and properly trained agents. In the third losing quarter (Q2, 2020 / $16 million), the company assured that preparation for the Medicare annual enrollment period is progressing well. In the fourth losing quarter (Q3 2020 / $30 million), Sullivan said that while they were only 3 weeks into the annual enrollment period, they were pleased with the customer demand which is driving “considerable sales growth” and that they expect a $15 million profit in Q4. And in the latest (but not last) losing quarter (Q4 2020 / $19 million), Sullivan stated that given Prudential’s “organic investment” into Assurance around marketing, distribution and infrastructure, Assurance IQ is expected to demonstrate operating losses in the near-term.

But perhaps the most surprising turn of events is Prudential’s decision to add a new component to Assurance IQ. The insurer is building out a W-2 agent model after determining that it would be more successful over the long-term if it added on to the on-demand agent model. This is a big blow for the company that believed it bought “the Uber of insurance.” What’s more, “the code,” Prudential’s CEO believed Assurance IQ has cracked, appears to be wrong. Essentially, Prudential paid $2.3 billion to acquire a company that may turn into a Health IQ.

In December 2019, we shared the following Prudential Glassdoor review that was later taken down:

“I barely do any “work” while working at Prudential. In some ways it’s nice but in other ways I guess I wish I had a job where I worked on something meaningful. My day goes like this: I arrive at 8 AM, turn on my PC and log in and look active on-line. I then head to the gym next door where I shower and shave for the day. On my way back I stop off at the deli and chat it up with the owner and his workers. I come back to my office around 9 ish with my coffee and bagel. Sometimes I have to attend a meeting at 9 but most days not. Usually I make myself visible between 9 and 11, sending some emails or attending a meeting if I need to. From 11 until 1:30 I’m out again. I do a daily swim at the Rec Center next door and then grab lunch at the deli. Make myself visible from 1:30 to 2:30 and then it’s time for my afternoon coffee. 3 to 4, back in the office. At 4 I’m out the door. Oh yeah, this is only 4 days a week. The other day I “work” from home. My boss only needs to see me once a week for a status update with a bunch of other Directors. I just need to have about 10 minutes of updates to talk about and he’s happy. I’m paid a really nice salary, have a ton of vacation and do nothing. Get great reviews and bonuses. Been going on for years. Tells you something about how this place is run.”

Last month, this review made it to Glassdoor:

“Prudential is a joke of a company. I worked in the Newark corporate offices for many years. It is one big, inefficient bureaucracy. I once spent 18 months spinning wheels on a project with 15 other associates. In that time we were forced to create lengthy power point presentations that said nothing. Our final results were nothing more than a list of a few ways Prudential could hire people. Ridiculous. After years in this environment, you realize it isn’t fixable and not worth your time and effort. I quickly learned that I could get away with not working while being paid a very high salary. I would show up at meetings here and there but spent hours each day at the gym next door, working out with many other Prudential employees doing the same. Also worked from home often where I caught up on home chores.”

Historically, life insurance businesses were built on the backs of motivated people. It appears that after 145 years, Prudential has lost its motivation, which is why they should retire the Assurance IQ business and look for motivation elsewhere.