Following a rough 2020, primarily because of the COVID-19 pandemic, a lot of businesses have suffered. Although not quite the same as a recession, for many it felt very similar. Fortunately, the economy is bouncing back as people return to work and again start buying products and services.
However, the experience that everyone had in 2020 is a good reminder that insurance agency owners need to take the appropriate steps to protect their businesses. By being proactive, if and when another recession hits, agencies won’t be caught off guard.
Adopt a Proactive Mindset
If you own an insurance agency and want to protect it against the financial woes associated with a recession, you’re in luck. There are many ways to go about this. The following are seven examples of what you can do to keep your company, yourself, your agents, and even the clients you serve safe.
Get a Good Handle on Your Cash Flow Situation
Even if you believe you know what’s going on with the agency’s monthly finances, it never hurts to delve a little deeper. The goal is to develop plans for a variety of financial situations. Doing this in advance prevents you from scrambling to come up with a viable solution in the middle of a recession.
In particular, you need to know several things, including:
- The amount of cash flow you have
- The amount of money in reserves
- What you would do if your online business increases significantly
- The best way to handle a lot of claims for one particular area of the agency
- The proper way to deal with a client/product relationship that experiences a big change
- What you would do if you had to shut down the physical location of your insurance agency
Knowing this information and devising plans accordingly will protect your insurance agency during a recession.
Identify Your Ideal Client
Especially when it comes to unfavorable market conditions, you want to focus your efforts on securing clients who will not only buy policies from your agency but also help promote the business.
Look for clients who understand the need for and feel enthusiastic about having insurance coverage. Also, review client profiles. Then, develop a plan to build a stronger relationship with those who benefit from your agency the most.
Create a Powerful Message
When financial times get rough, people begin to cut corners wherever they can. Although that shouldn’t include insurance, unfortunately for some, it does. That’s why it’s up to you to create a message that outlines the many reasons people should use your insurance agency.
That entails providing both current clients and prospects with specific information that convinces them your insurance agency is the best fit for their needs. For one thing, this will help attract clients, even during a recession. For another, you’ll end up with clients who remain loyal to your agency.
Consider Different Options for Diversification
If you ever face a recession, one of the best ways to survive is to broaden your product offering. In other words, if your agency currently focuses on life insurance, think about selling other products like auto insurance, homeowner’s insurance, business insurance, and so on.
Another way to diversify your agency is to expand the geographical area you cover. Rather than boxing yourself into a corner, research different locations that would benefit from the services you sell. Without question, having a flexible and diverse business structure will make it easier to ride out the storm of a recession.
Increase Income Streams
Remember, even though people need insurance when facing financial hardships, some will forgo coverage so they can pay for their rent, car, and groceries. Even those who do the responsible thing of having insurance may drop policies they consider optional. As the owner of an insurance agency, that means you and your agents will struggle financially as well.
However, if you increase your income streams, you wouldn’t take as big of a hit during a recession. You can do that as part of your agency’s operations. For instance, instead of losing a client completely, provide them with more affordable policy options. While you probably already apply discounts and bundling, make sure you don’t miss anything. This keeps your clients covered while saving them money.
Don’t Dismiss the Value of Word of Mouth
Before the internet, insurance agencies secured a significant amount of business through word of mouth. After building a relationship with a client, that individual then tells their family and friends about your business. During a recession, you may need to go back to using some “old school” techniques of selling policies.
So, how can you make the word-of-mouth approach work for your agency? This happens in several ways, although it always starts with your current satisfied customers. Here are some examples of things you can do to maintain and increase business during a recession through word of mouth.
- Establish more flexible business hours. Instead of keeping your agency open from 9 to 5, open earlier and stay later. Also, offer to meet current and potential clients at a time and location that’s most convenient for them.
- Offer bonuses for referrals who become clients of your insurance agency. Especially during a difficult financial period, money talks. Even something as small as a $50 referral fee would go a long way in getting the word out about your company.
- Get creative with your advertising and marketing strategies. Even in a recession, most people still have an internet connection. Take advantage of that. Start by having a professional website Then, to grab and retain attention, use compelling videos, images, stories, and live streams. In this case, you want to position yourself as an expert in the insurance industry.
Utilize an Insurance Agency Management Tool
Finally, invest in a software program that will help streamline your business operations. The right insurance agency management system provides incredible value. It will save you time, keep you organized, and allow you to focus on building lasting relationships with the right clients.