When small is better than big

 Manila, Philippines - Given a choice between becoming a cruise ship or remaining a speedboat, what would you choose?

For Andrew Co, president of Filipino-owned Reliance Insurance Company, the choice was to remain a speedboat. Cruise ships may look invincible but take too long to maneuver, require a big number of crewmen to sail, and cannot just adapt to the ever-changing sea.

Speedboats, on the other hand, can zig and zag, need very few people to operate, use a lot less fuel, and, yes, are definitely faster.

Andrew’s company is celebrating its 60th anniversary on Aug. 18. Even if its paid-up capital is ahead of the requirement posed by the Department of Finance, it has deliberately stayed small to be able to function like a speedboat for its clients.

In Andrew’s mind, the collapse of giant financial institutions abroad has proven that big does not always mean stable.

“The bigger you are, the harder you fall,” he said. “As for us in Reliance, we deliberately remained selective yet profitable. We are not going after market share. We are going after mind share. We want people to go to us not because we are big. We want them to choose us because we are good,” he said.

Focused on quality

Reliance focuses on providing its customers sufficient financial protection by maintaining a good risk-capital ratio and profitable operations. Simply put, the company always makes sure it has more than enough capital for the risks it takes. It also chooses its risks wisely. Through years of underwriting experience, the company has developed the skill of cautious risk-taking, which is mainly responsible for its above-average industry results. 

“Being well capitalized and maintaining a good profit margin are crucial to earning the public’s confidence,” Co said. “Most people associate ‘big’ with being good. But we are slowly showing them that in certain kinds of business, like insurance,  ‘small’ can actually mean ‘better’ and ‘safer.’”

Andrew added that in the insurance business, people look for protection. And Reliance provides quality protection by limiting the number of its “exposures” and refusing to fall for the all-out low-premium game that most big companies go after.

“Engaging in the all-out low-premiums games is not  prudent due to the exponential accumulation of risks, which will easily cause serious damage to the company if and when losses occur.  Siyempre, doon ka na sa sigurado. Since we only insure a limited amount of risks, you are definitely safer with us. With us you are making a safer choice,” Andrew emphasized.

Funds for protection

Reliance maintains simple and practical operations. Since the company believes that the primary purpose of premiums and capital is the protection of policyholders, maintaining cost-effective operations is a must. Hence, Reliance shuns fancy offices and fat bonuses for its executives. Instead, it puts its money to good use by investing wisely in training people and financing stable investments.

“Improper use of funds and over-expansion always lead to downsizing when times get bad,” he said. “We see it often on CNN. Like a public company, we emphasize transparency and frugality in our operations. We just make each peso count because these are public funds.”

Trust in relationship

Reliance knows its customers by name. Being a niche player in the insurance business, the company has established relationships with its clients for decades. Many of its clients are now on their second or third generation. Why they stick with Reliance is simple — the friendly smile and sincerity of its people. Familiarity and a personal touch makes filing claims effortless. Their business relationship with the company is based on trust, which curiously is what the word “reliance” is all about.

“I always tell our employees that Reliance means ‘tiwala,’ or trust. No one likes anonymous, faceless companies with telephone operators or call center agents giving you answers. We address the concerns of our customers directly. Our clients trust us. We are like family to them. And they know we are here for the long-term,” Andrew explained.

Ability to adapt

Just like a speedboat, the handling of Reliance is very responsive and dynamic. It adapts to changing economic conditions with foresight and precision. In the early 1990s, the company already embraced automation to adapt to the digital world. Even before the government’s call for higher capitalization, the company, through its operational efficiency and underwriting results, already built up sufficient retained earnings.  It is currently able to conveniently comply with regulatory requirements. And over the years, Reliance has managed to stay ahead of the pack.

“Focusing on our returns-on-capital, providing sustainable protection and sticking to prudent operations are major factors in being a niche player in this business,” Andrew stressed. “It is the beauty of being small.”