Why Aflac’s CEO selected the duck

Amos and Brady additionally focus on the face masks that launched Aflac’s astronomical progress in Japan; coaching the following era to work in what’s, basically, a household enterprise; and why he believes folks will stay important in relation to medical health insurance customer support and gross sales.

Take heed to the episode or learn the transcript beneath.

---

Transcript

Diane Brady: Management Subsequent is powered by the oldsters at Deloitte who, like me, are exploring the altering roles of enterprise management and the way CEOs are navigating this modification.

Welcome to Management Subsequent, the podcast concerning the altering guidelines of enterprise management. I’m Diane Brady. This week I’m talking with Dan Amos. He’s the chairman and CEO of Aflac. You most likely know the insurer. It’s among the best recognized within the U.S. Why? Due to that duck that’s on the commercials screaming “Aflac,” in every single place we go. That was Dan’s thought. He’s been within the job virtually 35 years. This can be a firm that additionally will get about 70% of its revenues from Japan. And Dan is simply the second CEO in its seven-decade historical past. Nice dialog. A person who feels very strongly about a variety of the values of enterprise, the worth of gross sales, and the worth of the human contact in a enterprise that’s very a lot logging on. Hope you get pleasure from it. Thanks for becoming a member of us.

[Interview begins.]

Dan, it’s good to be with you. Thanks for becoming a member of us.

Daniel Amos: My pleasure.

Brady: Nicely, I’m catching you throughout an excellent interval. You’ve reported terrific earnings. Your inventory has been up. Inform me somewhat bit about what’s occurring.

Amos: Nicely, you’re proper. It’s an thrilling interval. I attempt to not hit too many highs and too many lows. I like to only methodically make our numbers and go on. However it’s enjoyable when all the things sort of comes collectively in a powerful method, and a variety of the issues that we had been engaged on got here collectively and made it for a powerful quarter.

Brady: You don’t strike me as a person who follows your inventory worth in the way in which that some folks deal with it like a sport of sports activities.

Amos: I don’t. I by no means have. I’m not going to promote it. So, in the event you’re not going to promote it, you don’t have to observe it each day. And I consider the outdated story folks will ask me, I at all times say, properly, why is the refill? Nicely, there have been extra consumers than there have been sellers.

Brady: Yup.

Amos: No, I inform them the alternative. There have been extra sellers than there have been consumers. Now, and that’s a real assertion. Folks get on the inventory and it will get sizzling or chilly both method, however the remainder of it’s predominantly pushed off your potential to attain your goals. And what I search for is, are we attaining our goals that we promised the Road? And if we do this, we’ll be alright. And one factor I at all times attempt to do is tie compensation again to the goals that can please the Road. And while you do this, you’re in fairly good condition. You’ll be able to really feel so much safer at night time that that everyone’s bought their eye on the identical factor.

Brady: Nicely, I believe Aflac’s all about feeling safer at night time, isn’t it? And I wish to, this can be a firm that has had solely two CEOs in virtually seven many years, you understand? Mainly, your dad and your two uncles began it. You took over virtually 35 years in the past. Let’s begin with that. Do you lead any in another way now than you’d say even 10, 20 years in the past? Don’t wish to return to the very starting, however what have you ever realized?

Amos: Nicely, I believe, I hope I’ve gotten higher. One factor I’ve carried out is I’ve extra endurance. After I was youthful, I didn’t have a lot endurance, and I nonetheless, they child me and say, I’m at all times pushing, and I’m. However I at all times appreciated once I got here into the enterprise was to go to gross sales as a result of I appreciated the objectivity of issues versus subjectivity. And to an incredible diploma as a CEO, your scorecard is your earnings report and the way you probably did on it. So it’s at all times enjoyable to me to set these goals after which obtain them. After which to have folks which can be with you that I’ve seen over these final 35 years that a variety of them have retired and moved on, however retired in nice monetary situation. And that’s been enjoyable. So, I really like seeing folks develop internally with the corporate as properly.

Brady: I’ve to ask about that as a result of I do know you should get requested so much. You once more, you’re on the high of your sport. You’ve simply had a terrific quarter. However folks would possibly say, Dan, when are you going to retire? Do you suppose you’ll ever retire?

Amos: Oh, yeah, I do. I believe I’ll retire. I don’t know when. I’m not going to be an excellent retiree, however there’s a time and place they are saying that you just’ll know precisely when it’s proper. And I do know it’s not proper now. I actually get pleasure from doing it. You recognize, I snicker concerning the truth is I don’t do it for nothing as a result of it’s simply a part of me. I believe a part of that’s as a result of my Uncle John, who was the CEO and my dad and his brother began it, and though we by no means had some huge cash, we needed to promote the inventory door to door. I’ve watched it develop and it’s been enjoyable to do this. And so I believe there’s somewhat bit extra of a satisfaction ingredient with me than it might be for some outdoors people who are available. And in order that’s been a part of the custom of the corporate.

Brady: You recognize, I’ve at all times discovered it fascinating, this can be a firm that’s sort of in deep Georgia, proper? Close to Alabama. You get 70% of your gross sales from Japan. And right here within the U.S., a variety of what folks know, clearly, the duck, now we have to speak concerning the duck. But it surely’s supplemental, it’s incapacity, it’s accident insurance coverage. Let’s give folks somewhat little bit of a taste for a way that got here to be. Let’s particularly begin in Japan, the place I do know your most cancers insurance coverage has actually been the genesis of the way it all started.

Amos: Nicely, let me return to the World’s Honest in Osaka, Japan, in 1970. And John Amos, my uncle, who was the CEO, went over to Japan and noticed a thriving economic system. And again then, he had by no means seen this, however he noticed folks carrying surgical masks. Since Covid, after all, we’re properly conscious of that. However he requested why are they carrying surgical masks? And so they mentioned, Nicely, it’s as a result of we’ve bought a chilly and we don’t wish to move it to another person. And he went, Let me simply inform you, anyone that can do that’s well being acutely aware and can purchase insurance coverage. And he then spent the following 5 years getting licensed to do enterprise in Japan. This 12 months will mark our fiftieth anniversary of doing enterprise in Japan.

Now, the opposite factor that was attention-grabbing is, previous to World Warfare II, the life expectancy of the Japanese have been of their late fifties. Immediately, it’s within the eighties. However through the seventies, when their life expectancy began rising a lot, they thought that they had an epidemic of most cancers occurring. When in reality it wasn’t an epidemic, they have been residing lengthy sufficient to get it. Most cancers is a illness of age. So it turned extremely popular.

However apparently sufficient, once we initially began, we needed to do a three way partnership with an organization and nobody needed to do it with us as a result of in Japan it’s taboo to speak about most cancers. Or it was, it’s not as a lot anymore. And so you’d see folks that will die and also you’d learn the article within the paper and it mentioned they died of a coronary heart assault. Nicely, they didn’t die of a coronary heart assault, they died of most cancers, however they gained’t put it in there as a result of some households don’t wish to marry into the household the place there’s a historical past of most cancers. And in order that’s the sort of factor.

So once we bought into the most cancers insurance coverage enterprise, it took off. And what we did was is we paid Xamount of cash in the event you die, however we paid 10 instances that sum of money in the event you died of most cancers. After which we paid a lot a day for each day you have been within the hospital. And that was principally the coverage. And it did so properly we really arrange outlets inside department shops and offered it in department shops. And the primary 12 months that we began promoting, we offered extra insurance coverage that 12 months than the primary 15 years that the corporate was in enterprise in the USA.

Brady: It’s attention-grabbing, I consider you because the consummate salesman to your level, you began in that. We’re on the cusp proper now of possibly not curing most cancers, however actually right here within the U.S. it’s develop into a continual situation. How does that change the calculus of why folks purchase life insurance coverage? I imply, can we follow Japan for a second?

Amos: Nicely, initially, right now our insurance policies have way more hospital advantages and outpatient remedies, issues alongside that line.. And if you consider it, continual really is extra expensive to the coverage. Within the early years, you both bought most cancers and also you died otherwise you have been cured fairly shortly.

Brady: Yup.

Amos: Immediately, as you talked about, it’s continual in nature, so that you is perhaps on these medicine for the remainder of your life.

Brady: Yup.

Amos: So that’s what folks want protection for, is to assist fill the gaps which can be related to the hospitalization that they’ve. Or within the case of Japan, the nationwide well being care and what they provide. And in order we’ve seen co-pays and deductions go up in the USA, we’ve seen that in Japan with the nationwide well being care program as properly. And it went from zero deductible to 10 to twenty to now 30%. And in order that’s out-of-pocket bills to them. And the opposite factor is, in Japan, they offer you a ward. However if you need a semi-private room, you need to pay up for it. So all of these issues add collectively to assist fill. And we promote additionally hospitalization insurance policies as properly to assist complement their present nationwide well being care plan.

[Music starts.]

Jason Girzadas: We’re now beginning to see firms deploy AI throughout the enterprise. The problem for leaders is the right way to shut the hole between the promise of gen AI and the outcomes achieved thus far. We spoke with Jason Girzadas, the CEO of Deloitte US, which is the long-time sponsor of this podcast. Right here’s what he needed to say.

Jason Girzadas: I believe each CEO and board interplay and dialog that I’m part of proves the truth that the promise of AI is broadly held, and the hope is much and deep that it creates enterprise worth. However there’s challenges, to make sure. What we’ve seen is that the chance of success will increase dramatically with robust govt sponsorship and management. There must be a portfolio of investments round AI, in addition to to hyperlink the enterprise possession with know-how management to see the worth of AI associated investments. Over time we’re optimistic and assured that the worth will end result, however it will likely be a portfolio the place different short-term alternatives for automation enhancements round productiveness and value takeout, after which longer-term medium-term alternatives for enterprise mannequin innovation which can be really transformational. So, this can be a basic case the place it gained’t be a single strategy that realizes worth for AI.

[Music ends.]

Brady: You recognize, as you’re speaking, I’m pondering so much concerning the position that authorities and regulation performs on this. I’d love to listen to your ideas on the regulatory panorama proper now. When folks take into consideration insurance coverage, it’s virtually like eager about your funds. It’s a subject that induces a variety of stress, a variety of concern. How do you suppose the regulatory setting helps or harming our potential to essentially shield ourselves in opposition to the duvet that you just give us?

Amos: I believe most individuals don’t perceive insurance coverage they usually want some recommendation or assist in realizing what to do. In Japan, it’s less complicated as a result of everybody’s below the identical well being care system. So if I seize somebody on a practice and ask them, all of them have the identical coverage in order that they’re extra more likely to know what it’s. However within the U.S., it’s with completely different accounts or payroll deduction accounts or teams and, say, Starbucks could also be one which now we have on payroll, which we do. They’ve one sort of main medical. And Dr. Pepper is one other one which now we have. After which a variety of small firms too. In these instances, they don’t know. And what has at all times helped us is to promote our product in an employer-employee setting. So the worker then has a degree of confidence that if the employer is providing it, regardless that I’m paying for it, they’re saying I most likely want it to some extent. And they also’re shopping for the protection they usually’re getting a greater worth as a result of it’s being offered in an employer-employee setting the place you get three issues. You get youthful folks, you get more healthy folks, and also you get the employer telling them they should come again to work. So when you will have these three components, you’re going to have a more healthy block of enterprise and you’ll give them higher charges than they might in the event that they purchased it on a person foundation. So the patron feels safer as a result of the employer presents it. And all in all, we may give greater advantages and supply higher merchandise via that distribution channel each within the U.S. and in Japan.

Brady: What if these advantages are taxed? As a result of that’s one of many issues that folks speak about now. I imply, is that, do you suppose authorities understands the position that you just play? Let’s take it right here within the U.S.

Amos: Nicely, they’ve in Japan by no means actually tried to tax advantages. They thought-about it in the USA, however they determined to not do it throughout the final 12 months or so. What I’d say is, in the event you’ve paid the premiums, I don’t suppose, you don’t earn a living in well being care. You’re going to, as a common rule, you’ve bought bills which can be precise bills. However then you will have bills which can be non-medical. For instance, somebody has most cancers, they’ve it in Columbus, the place our headquarters are positioned. They should go to Johns Hopkins or Emory or any of the most important — Sloan Kettering. And sure, a hospitalization could be coated at Sloan Kettering in New York Metropolis, however you’re going to both should sleep within the room the place your partner is otherwise you’re going to should get a lodge room. It’s not going to cowl the lodge room in New York Metropolis. Most of them gained’t cowl your airfare as a affected person, nevertheless it actually gained’t cowl the partner. So there are all these outdoors bills that you just don’t consider with sicknesses that may actually run up the tab and take some huge cash out of pocket. Nicely, these folks which can be in that state of affairs, they want the cash.

Brady: Yeah, it’s true. That’s why most of them go bankrupt.

Amos: I don’t know anyone that buys medical health insurance to earn a living.

Brady: No, it’s completely true.

Amos: They’re doing it to determine the right way to cowl the gaps which can be created of their protection.

Brady: Let’s speak concerning the duck. I imply, I do know that you just get requested about it so much, however in all honesty, you picked it. You picked the duck over Ray Romano method again when.

Amos: That’s proper. You’ve bought a great reminiscence.

Brady: Speak concerning the Aflac duck. I believe you’ve bought extra model recognition than actually any insurer, however most likely most client merchandise on the market within the U.S. now. What was it concerning the duck that appealed to you?

Amos: Nicely, I’m an enormous believer in analysis. Don’t inform me you suppose. Show to me statisically that that’s the case. And so what we did was, we had been operating commercials for 10 years, and the quantity actually hadn’t modified that a lot. We went from about 3% to about 9%. However I assumed, I’ll be useless earlier than they’ll get to any quantity that issues.

Brady: That is model recognition?

Amos: So I’m, sorry?

Brady: You mentioned the 9%. That’s model recognition of Aflac.

Amos: I’m sorry, model recognition. And so I mentioned, let’s strive one thing daring. And so we went out to completely different firms, allow them to bid or give you their concepts, after which we had storyboards and noticed it. And one was the Aflac duck. And it was, it was scary.

Brady: Scary?

Amos: I mentioned I’ll do something if it’s tastefully carried out. However you have been actually making enjoyable of your identify.

Brady: Mmhmm.

Amos: And having a duck do it, I used to be a nervous wreck. However in enterprise, and I majored in threat administration in insurance coverage, is that there are three ideas of threat administration in insurance coverage. Don’t threat so much for somewhat. Don’t threat greater than you’ll be able to afford to lose. And take into account the chances.

Brady: Mm hmm.

Amos: And we knew that this business or storyboard had examined 3 times greater than any business we had ever run, and the nationwide common on what monetary providers do. It did 3 times higher. And monetary providers is a extremely troublesome space. And insurance coverage does worse than banks as a result of banks you work together with each day, weekly, or no matter, writing checks or no matter. However an insurance coverage firm, you might not have any points till you will have a hospitalization declare or some hospital challenge or, sadly, dying. So that you don’t work together as a lot and the smaller quantity of affect you will have, the decrease the identify recognition. So we ended up saying, okay, we’ll do this. The business was going to value 1,000,000 {dollars}. We had usually spent about $500,000 or rather less on commercials. We went with it on Millennial Day, which might have been 2000. January 1, 2000. And it took off. And inside a matter of three years, we had doubled our gross sales. Our identify recognition had gone to 90% within the excessive eighties, 90% it will definitely bought to. And right now we’re one of many strongest manufacturers in America.

Brady: Yeah, now we have a few your geese round right here really. Squeeze their stomach and out it comes.

Amos: Good. You want extra, let me know.

Brady: Model ambassadors, the whole thing of us. Let me, you talked about that you just studied threat administration. I wish to take it again to the private. I discussed at first that you just’re the second era now to steer this firm. And I do know your children have been concerned. How do you, a household enterprise, which regardless that I do know it’s not managed by you, I nonetheless consider it as a household enterprise and people values come via. How do you move that alongside to the following era? As a result of that’s one of many largest challenges of any, you understand, chief of a family-owned firm or family-controlled or family-run firm that I meet.

Amos: Nicely, you attempt to put them ready the place they will see in the event that they just like the enterprise, benefit from the enterprise. I’ve bought one baby that needed to get entangled and appreciated it, after which determined that wasn’t for him, that he needed to do non-public fairness and determined to do it. I’ve bought one other one which’s within the vogue enterprise and he or she has a few shops, and I don’t have any brothers or sisters, however I’ve first cousins who’ve youngsters that work for the corporate. And so, you simply open the door and allow them to have a possibility to do properly, however they’ve bought to drag their load.

I keep in mind my dad, once I advised him I needed to go in gross sales. He had been in gross sales, and he mentioned, Now you do perceive, son, that in the event you do poorly, your uncle isn’t going to bail you out nor am I. And I’m going to be the one which is available in and tells you it is advisable get out of the enterprise. And I mentioned, Sure, sir, I do know. Once you set it subjective, you’ll be able to debate it. However while you say you’ve bought to do X, otherwise you make or break, then I do know what meaning. However however, I do know there’s that sonny-boy syndrome of people who say, Nicely, you bought it due to household. You’ll have gotten a break since you have been household, however you don’t preserve it due to that.

Brady: Proper. Precisely.

Amos: And so you need to show your self. So I’ve at all times mentioned go into an space that’s goal, not subjective, and you’ll see what occurs.

Brady: So let’s finish with what else is in your radar that you just wish to placed on mine, whether or not it’s what’s across the nook for the corporate, Dan, or what’s intriguing to you proper now?

Amos: Nicely, I’m a really targeted human being and I like to remain targeted. And I inform my staff on a regular basis, I like evolution, not revolution. And so I wish to continually be rising, however I wish to be a rising in a fashion that we will management. In order the market is altering, it’s opening doorways for us to get into different companies, like, for instance, dental and imaginative and prescient, that we purchased a small firm and we’re into that enterprise and we expect it has potential. And there’s this different enterprise we name [hard to hear], nevertheless it offers with incapacity and dealing with the administration. These are issues I believe are going to develop our enterprise long run. And so I’m excited concerning the future. It’s attention-grabbing instances and with AI and all of the issues which can be on the market, I nonetheless consider customers wish to deal with claims with a person, not a pc.

Brady: Mm hmm.

Amos: And so I at all times see the gross sales pressure as being an necessary alternative. For instance, in our firm, in case you have most cancers claims, we’ve bought particular strains that you just name in which can be, no, it’s all people. No pc pushed. For a wellness declare that you just’re wholesome, you had a check and also you wish to receives a commission on it, the pc will deal with it. However necessary points, we wish to be certain that folks really feel necessary and that they know we care about them. And in order that’s one in all our jobs is to guard our model. You recognize, the Aflac duck is price some huge cash by way of model recognition. And it takes a lifetime to construct a model and it takes about one minute to wreck a model. And the way you shield it and what you do is so necessary.

Brady: I believe one in all my different favourite quotes from you is the truth that, I suppose, insurance policies are offered, not purchased, proper?

Amos: That’s precisely proper.

Brady: Human connection. I believe, I can’t consider wiser phrases than that, and generally we overlook it. Dan, it’s a pleasure to see you. Pleasure to talk with you. And I actually recognize you becoming a member of us.

Amos: Thanks for having me.

Brady: Management Subsequent is edited by Nicole Vergalla. Our audio engineer is Natasha Ortiz. Our govt producer is Chris Joslin. Our producer is Mason Cohn. Our theme is by Jason Snell. Management Subsequent is a manufacturing of Fortune Media.

Management Subsequent episodes are produced by Fortune‘s editorial staff. The views and opinions expressed by podcast audio system and company are solely their very own and don’t replicate the opinions of Deloitte or its personnel. Nor does Deloitte advocate or endorse any people or entities featured on the episodes.