Strategic Resources for Your Insurance Agency

COVID-19 Impact on Insurance Agencies & What You Can Do

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The COVID-19 pandemic has clobbered the U.S. economy, causing it to shrink by 31% in the second quarter of 2020. Sectors such as hospitality and travel have experienced devastating drops in revenue, as the necessity of social distancing has discouraged people from eating out and flying. However, insurance agencies have also not been immune to the changes.

The effects on short-term revenue have been mixed. Personal lines claims activity is down, which should improve profit-sharing bonuses. However, that may be offset by premium credits insurers have applied to recognize reduced driving and short-term suspension of premium payments. In commercial lines, agencies that insure businesses in the hard-hit sectors are seeing reduced premiums and commissions at best and lost clients at worst, as some businesses close forever.

Like so many other businesses, agencies have adapted to having much of their workforces offsite. Some localities required businesses to shift to remote work, but some agencies did so voluntarily to protect their employees’ health. This has challenged managers’ ability to supervise the work and encourage collaboration.

It’s not only employees who are remote; agencies’ clients are, too. Due to concerns about transmission of the virus, agents increasingly find themselves working with clients via video chats and phone calls, rather than in person. In addition, agencies that had not considered creating self-service portals before the pandemic are doing so  now. A recent Applied Systems survey found that the percentage of agencies offering self-service had increased 50%.

Despite social distancing, agencies still have opportunities to be an important presence for their clients. Using their websites, social media and digital outreach tools, they can provide informative content, answer clients’ questions, and remind them about measures they can take to prevent losses, especially when a change of seasons ushers in hurricane or winter weather risks.

One looming threat is the potential for future errors and omissions lawsuits. Businesses shuttered or curtailed by government-mandated shutdowns have sought business interruption insurance coverage. Carriers have tended to deny these claims due to policy exclusions and the absence of physical damage. Some businesses have sued their carriers; those who don’t succeed may turn their eyes on their insurance agents as a source of recovery. Clients may sue their agents for allegedly failing to obtain adequate coverage against pandemic losses.

The sizzling agency mergers and acquisitions market has also felt the effects. OPTIS Partners reported M&A in activity for the first six months of 2020 fell to the lowest level in three years.

It’s a time of whiplash-like change, but there are things agencies can do to adapt and thrive: 

        Become an information resource by producing content on websites and social media that will help your clients. This can include links to public health and government assistance programs, in addition to insurance information.

        Agencies that have not been using cloud technology should do so now. Many agency management systems use this technology, enabling staff to access customer records, quote and service policies, and process claims wherever they are working.

        Help your stressed-out employees cope with the fear and uncertainty of these times, not to mention anxious clients.

        Keep pursuing new business. Contrary to general conditions, some businesses are doing better in the current environment. For example, the companies delivering all those packages people are ordering online are growing. Agencies should grab opportunities to write these accounts. 

The pandemic has changed the way all businesses operate. Like their clients and carriers, insurance agencies are being challenged in ways they never expected. Adapting is never easy. However, agencies who meet these demands will emerge on the other side stronger than their peers. 

 

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