Negotiation has been a critical skill for me for most of my career. I’ve worked as a product actuary, represented a major distributor, and now I’m a reinsurance intermediary.
Technical actuarial skills were never my strength. However, I’m often able to get parties
with differing goals to find a common ground, enabling a project to be completed to everyone’s satisfaction. The parties may not, and if fact should not, end up feeling like the sole winner, but they don’t come out feeling like a loser either.

There are common tactics I’ve used in my negotiations. They are:

• Empathy

• Subvert your ego

• Avoid confrontation

• Preparation

• Understand the personal side

Empathy

The dictionary definition of empathy is “intellectual identification of oneself with
another”. Empathy is my negotiation equivalent of the real estate maxim – location,
location, location. There are business tasks to be accomplished. Put yourself in the
business position of the other party or parties. What do they need to accomplish? This is
a good checkpoint on the viability of the discussion. If the groups’ goals are
diametrically and unalterably opposed, then it is better to recognize it early and move on.
Persistence in the wrong situation can damage the relationship.
Subvert Your Ego
A successful negotiated outcome can often be torpedoed by the desire to get public and
personal recognition for the success. Typically the negotiator / mediator must subsume
their ego to the successful completion of the task. Emphasize the contributions of the
other party. Your professional and personal rewards will naturally follow as you become
known as someone who can get things done.

Avoid Confrontation

Successful negotiations should not have a loser, which is typically the outcome of a
confrontation. Confrontation is caused by hardened positions. While you should work to
avoid hardened positions, inevitably there will be occasions where they will have to be
addressed. Provide the party with new or additional information to be considered. Don’t
ask them for a response right away. Give them time to consider the information and
provide their response at a later time and venue.

Preparation

Learn as much as you can about the other party’s goals, concerns, and interests before the
discussions and negotiations begin. Do they have budget constraints or a staffing crunch?
Can you develop an understanding of the internal political process that the other side’s
approval will have to go through? This knowledge can prevent you from going down a
dead end path of negotiation, opening up more fruitful paths.

Understand the Personal Side

We are talking about business discussions, but there is always a person on the other side.
I’ve negotiated with other actuaries, marketers, salespeople, systems analysts,
accountants, and lawyers. Knowing a person’s background often provides insight into
their thought process. While the other party is not normally a friend, a good personal
relationship will facilitate the discussion. Off-the-record discussions may lay the
groundwork for subsequent on-the-record discussions.
I’ll explain how I have applied these processes to some of my own tasks.
As a product actuary, I was presented with a situation by sales and marketing. Our term
insurance product was not competitive in a certain critical market segment. In this case,
the market segment was small business owners with the need for large amounts of
inexpensive life insurance. They tended to be in their 50’s and 60’s. As the discussion
progressed, I explained what product features and structure were expensive. A single set
of YRT rates had to be adequate to cover the expected mortality of newly underwritten
lives as well as lives underwritten many years ago. Marketing and sales was able to
narrow the issue age range of the new product to mitigate this problem. The privilege to
convert a term policy to permanent insurance without underwriting was also expensive.
Marketing and sales was able to more specifically define and shorten the number of years
for the conversion privilege that this target market required. To a stranger, the
parameters of the new product looked a bit strange, but it suited the target need very well.
The resulting sales were favorable and the product profitability was acceptable. Each
side was able to empathize with the needs and constraints of the other, the winning
outcome was the product that was needed, and the discussion took place without any
confrontational grandstanding by either side.
When I represented a major insurance distributor, I was often called upon to negotiate
arrangements with major insurance company manufacturers. Having been a
manufacturer in the past, I was able to empathize with the insurance company. The
process needed a negotiator to accomplish what was to both parties benefit – the
establishment of a manufacturing / distribution relationship that was satisfactory to both
sides. It was important to not insert another individual ego into the process. My
historical knowledge of and relationship with many of the individuals on both sides of the
table helped me facilitate what can sometimes become an acrimonious discussion.
My current situation as a reinsurance intermediary requires me to develop, structure, and
negotiate reinsurance capacity between a ceding company and a reinsurer. I deal in
situations where reinsurance is not readily available. It is critical to empathize with both
the ceding company and the reinsurer. Determine what core risks the ceding company
desires coverage for. Discover what reinsurer desires or objections need to be satisfied.
My prepared knowledge of the reinsurance community provides a strong starting point.
Then, all parties must enter into a willing and open discussion to find the sweet spot that
matches the desires and goals of both sides. The important winners are the ceding
company and the reinsurer, not the intermediary.

Pay attention to these tactics, and you may well find that negotiating becomes more of a
science than art.

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