Aflac CEO: ‘Everything you do should not work’

AMOS1For 22 years, Dan Amos has run Aflac, a Columbus-based supplemental insurer that his father and two uncles founded in 1955. Amos, 60, spent 10 years in sales at the company before becoming president, chief operating officer and then CEO in 1990.

Since then, annual sales have climbed from $2.7 billion to $22 billion, partly because Amos broadened the company’s insurance offerings and started an ad campaign featuring a duck in the U.S. and Japan, its most important market. He talks about taking risks, a key decision he made following the Japanese nuclear disaster last year and how he dealt with a controversy surrounding the duck.

Q: How did your sales background help you run the company?

A: We’re a marketing company. We don’t sell a tangible product. It’s not like you’re drinking a Coca-Cola. In our case, it’s just a promise on a piece of paper that in a time of need, we’ll be there.

So you have to understand how to sell to understand why people buy. I realized when I became CEO that we had to develop a brand. We also had to broaden the product base. That came from a sales background. I knew our distribution channel could sell additional products. You learn it from dealing with consumers. If you come from the financial side, you don’t ever have to deal with consumers.

Q: Twelve years ago, you came up with an innovative branding campaign using a duck that you’re still using. Where did the idea come from and what’s a key takeaway?

A: The advertising agency never thought we would do it because the Aflac duck was making fun of our name. You have to be willing to be bold. They brought us three ideas, and then at the last moment they mentioned a fourth, but said it was crazy.

I said I’ll do anything that’s in good taste. I’m not going to do something raunchy just to get people to remember our name. I was scared to death, because you had the rock of Prudential and all these conservative insurance company marketing campaigns at that time. Here we are making fun of our name, and there is nothing funny about filing insurance claims and being sick.

What I would say is don’t limit yourself to traditional ways of looking at things. You’ll never break out if you do that. I knew it was a hit when people started writing in wanting a duck.

Q: A controversy erupted last year when the longtime voice of the duck, Gilbert Gottfried, made insensitive jokes on his Twitter account after the tsunami that caused the Japanese nuclear disaster. Would you please discuss how you handled that?

A: I fired him on the spot. I gotta protect the brand. We’ve got hundreds of millions of dollars invested in the brand.

We didn’t have time to call consultants. What he did is going to insult everyone in Japan, our most important market. If you listen to your lawyers, you’ll never react fast. They always recommend wait and see.

I’m convinced our integrity was enhanced because we acted quickly. If we didn’t, it would not have done any good. If I had waited to make a decision in two weeks, the media would have focused on it every day. We cut it off and ended it. We pulled our commercials.

Sometimes luck is in your favor. We had made a silent movie style commercial with the duck in 2005. We pulled it out of the archives, updated it and started running it again.

Q: Even though your company sells insurance to reduce customer risk, you’re a big believer in taking risks. Would you please discuss?

A: You’re not going to hit all home runs. If you’re not making a mistake, then you’re not taking enough chances. You need a certain amount of failure. We tried a cartoon duck at one point. It didn’t work and we pulled it. Everything you do should not work.

At the same time, there are three principles of risk management: Don’t risk a lot for a little. Don’t risk more than you can afford to lose. And consider the odds.

When I see something’s not going to work, I don’t keep it going too long. I cut my losses.

Q: Speaking of risks, you took one last year after the nuclear accident in Japan. Would you please explain?

A: Here’s the dilemma. Seventy-five percent of our earnings come from Japan. The tsunami hits last year. For the first time, you got a nuclear accident and you don’t know what the real risk is.

So what do I do as a CEO? Every other major insurance company wasn’t saying how it would affect them because they didn’t know. But if I don’t say anything, our stock’s going to get killed because people hate uncertainty. If I do say something and I’m wrong, then I’m going to get killed. So I jump on a plane, fly to Tokyo and evaluate what’s going on.

I know my costs. We insure one of four households for policies that include a death benefit. About 20,000 people died, so you got to assume 5,000 people are probably our policyholders. They’ve also got medical insurance. I talked to our people and I realized that we’ve got the costs covered in reserves. So I think we can still make our sales target, and I go on the media circuit and I said that.

We made the target, but there’s a risk of being out front. The simplest thing to do was not to say a word. But if I had not said that I think we’re going to be all right, our stock would have tanked. You’ve got to know your business and have the gut feel. Crisis management is instinct.

Each week, Sunday Business Editor Henry Unger has a candid conversation, called “5 Questions for the Boss,” with a top executive in Georgia.  Some remarks are edited for length and style.

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