Organizations routinely acknowledge crises, commission studies, launch initiatives — and change almost nothing. This pattern has a name.
Executive Summary
Kevin Henderson, the CEO of Indenseo, argues that the insurance industry's talent and technology challenges are not driven by external scarcity but by internal decision-making failures rooted in satisficing—settling for "good enough" rather than pursuing optimal solutions.This mindset manifests across human capital (upskilling existing staff instead of attracting top talent), technology (patching legacy systems rather than modernizing) and finance (relying on rate hikes instead of operational transformation), creating systemic inefficiencies and competitive risk.
Carriers must shift to optimization, he advises. In short, they must broaden talent pools, eliminate bias, measure real output, capture institutional knowledge through AI, and prioritize transformative initiatives over incremental fixes.
Late last year, Henderson also wrote the article, "Why Insurance Telematics Integrations Fail" for Carrier Management.
Herbert Simon received the Nobel Prize in Economics in 1978 for dismantling the myth of the rational optimizer. His central contribution was the concept of bounded rationality: agents cannot know all alternatives, calculate all probabilities or perfectly rank all outcomes. This cognitive constraint necessitates satisficing—a portmanteau of “satisfy” and “suffice” describing a process where decision-makers forgo the search for the absolute best option in favor of one that meets a predetermined threshold of acceptability.
The distinction matters: optimizing requires identifying all possible alternatives, determining all consequences, and selecting the single alternative that maximizes the objective function. Satisficing sets an aspiration level, searches sequentially, selects the first alternative that meets the threshold, and stops immediately.
Every insurance executive has heard statistics about the number of insurance veterans expected to exit the industry in this decade and reports about millennials’ lack of interest in insurance careers.
Boards discuss it. Consultants study it. HR departments launch initiatives. And nothing changes.
The paradox isn’t unique to insurance. Decades of McKinsey research document that diverse teams outperform economically, yet companies in the top quartile for diversity are only 35 to 39 percent more likely to outperform on profitability—a gap that should have closed long ago if firms were actually optimizing. The CEO-ego-driven AOL-Time Warner merger destroyed $99 billion in shareholder value through cultural incompatibility that due diligence should have identified. The Boeing 737 MAX crisis cost the company over $21 billion because schedule pressure overrode engineering requirements that executives knew existed.
