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7 Ways to Recession-Proof Your Agency

As talk of a recession accelerates, here are seven ways to keep you, your employees, your agency, and your insureds safe from any economic downturn.
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7 ways to recession-proof your agency

Despite the effect on other industries, the insurance industry has weathered recessions in the past and emerged thriving. During the Great Recession in 2009, the insurance industry saw a net loss of $60 billion, caused mainly by $40 billion in underwriting losses. Fortunately, there was a rapid bounce back sooner than anticipated.

As talk of a recession accelerates, here are seven ways to keep you, your employees, your agency, and your insureds safe from any economic downturn:

1) Control your cash flow. It's never a bad idea to delve deeper into your agency's monthly finances, even if you're confident about what's happening. The endgame of such an endeavor is to look at your business from as many angles as possible and to develop plans in the event you are required to confront difficult financial situations.

Specifically, being mindful of the following information and formulating strategies will protect your insurance agency during a recession:

  • Your cash flow amount.
  • Your money reserves.
  • Your course of action if your online business decreases significantly.
  • Your backup plan if the physical location of your insurance agency needs to be shut down.

2) Pinpoint your ideal client. Concentrate on securing clients who will not only be purchasing policies from your agency but also advocating for your business, especially when market conditions become unfavorable.

Review existing client profiles and concentrate your business development efforts on those prospective clients that will most benefit from the insurance products that are in your agency's wheelhouse.

3) Reexamine your messaging. When things get rough financially, people will begin tightening their belts at every opportunity. While insurance shouldn't be one of those reductions, for some, it is. Creating a message outlining the multitude of reasons people should use your insurance agency will help.

That requires creating key messages that are positive, consistent, and relevant. Proactive messaging is very important. Encourage customers and prospective customers to consider insuring themselves for unforeseen perils.

Prior to and during a recession, this will help attract clients because you will be establishing yourself as the expert your potential clients need, and they will gravitate toward you. This will lead to a more loyal customer base.

4) Consider different options for diversification. Broadening your product offering is one of the best ways to survive a recession. If the primary focus of your agency is property-casualty insurance, consider adding other products like life insurance, business insurance, premium financing, and more.

Another route to take is to expand your agency's geographical coverage. Don't think of yourself as being relegated to one specific region; instead, conduct research into different locations that would profit from the products you offer. It will be far easier to weather the chaos caused by a recession when your agency's foundation is diverse and flexible. 

5) Level up your income streams. Even in the face of financial hardships, people need insurance. However, it's also important to remember that many will give up their coverage so that other needs are met, like rent, car loans, and utilities. Policies considered optional might be dropped by even the most responsible individuals, and you and your agents will feel the financial effects of those non-renewed policies.

You can mitigate the size of that financial hit by increasing your income streams. This can be done through your agency's operations. For example, present more affordable policies or payment options to your clients so you won't have to lose the client altogether. Continue your due diligence and confirm you didn't miss anything on top of the applied discounts and bundling you may already offer. This way, your clients continue their coverage, and you help them save money.

6) Utilize your word-of-mouth value. Before the internet came along, word of mouth was the most powerful tool used by insurance agencies to secure business. A client would refer their friends and family to your insurance agency after you had built a relationship with them. You will probably need to employ those traditional selling techniques again to sell policies when facing a recession.

So, how can your agency take advantage of the word-of-mouth method? It's a multi-faceted approach and will always start with your current customers that are the most satisfied. Below are ways to use word-of-mouth to sustain and add more business during a recession:

  • Make your hours of operation flexible. Don't be fixated on the traditional 9 to 5 schedule. Open earlier and close later if that's what's needed to close more business. Digital transformation has likely improved your work-from-home conditions, which gives you this added flexibility to support your clients.
  • Meet your current and potential clients at times and locations convenient to them, providing the customer experience that builds loyalty.
  • Start a referral program for your existing clients. Even a modest token of your appreciation could be a real motivator for your clients, especially when their budgets are feeling the squeeze of a downturn.
  • People may cut back on many things in a recession, but an online presence isn't one of them. Seize upon that opportunity by updating your website to meet modern standards and using catchy videos and images to capture and retain your audience's attention. Take this opportunity to present yourself as the insurance expert people need.

7) Integrate a management tool for your agency. A software program to help streamline your business operations will be a wise investment. You will gain incredible value and a significant return on investment with the right insurance agency management system because of the time it will save you. Further, staying organized will permit you to focus on your relationship with your clients.

Being proactive and incorporating the above can ensure an agency stays ahead of any financial downturn. You have the time to carefully consider your options before the crisis happens and will make better decisions when you're not under stress. Acting before a downturn happens will give you the benefit of making the best decisions.

Chris Farfaras is executive vice president & chief sales officer at Input 1. Input 1 is the insurance industry's leading provider of digital billing services and payment solutions.

Monday, August 15, 2022
Agency Operations & Best Practices