The headlines are filled with news that could be discouraging, especially for insurance agency owners who want to continue growing their business. But behind the headlines, there are opportunities for insurance producers to use this to their advantage.
One of the first things to recognize as you develop (and refine) your business plan for 2024 is that there are certain factors that are absolutely out of your control. Yet there are many other factors you have the power to manage and use to your benefit.
2023 P/C Losses Soar to New Heights
“The U.S. property/casualty (P/C) industry recorded a $24.5 billion net underwriting loss in the first half of 2023, nearly eclipsing the $26.5 billion in total losses recorded for all of 2022,” according to a mid-year assessment in a special AM Best report.
Christopher Graham, senior industry research analyst, AM Best, says, “Secondary perils continued to drive poor loss experience as we see in the catastrophe losses for the first half of 2023.”
The personal lines segment was the leading area for this decline in underwriting results. Insurers continue to be faced with rising loss costs above average catastrophe activity contributing to profitability declines. AM Best subscribers can read the full six-page report here.
Agency Opportunity
Rising rates are pushing consumers to shop for better rates. And while better rates are important to today’s consumers, they also expect (and deserve) superior treatment when they’re dealing with a loss. Focusing on both your current clients and prospects can contribute to a more stable bottom line.
For current clients, take a proactive approach to rising premiums by communicating with your clients to give them a heads-up about a likely increase in their bills, including a brief explanation about the fact that this is an industry trend due to catastrophic losses and inflation – it’s not something your agency chose to do. Also educated them about the tighter underwriting across the market which can make changing coverage providers difficult. This communication can be in the form of a letter, email or blog post – or even all three. Learn about the DO’s and DON’Ts of social media marketing for insurance agencies.
Express that you and your team will continue to be there for them and look forward to building on your existing relationship. It’s also important to equip your front-line staff with knowledge about the trends and provide them with talking points they can use with clients.
For prospective clients, express that you appreciate having an opportunity to provide quotes on their insurance and then put the rest of your consultative selling skills to work to lay the foundation for a comprehensive relationship with them.
The Impact of Inflation and Rising Interest Rates
Of course, poor underwriting results and increased premiums aren’t the only thing that affects consumers’ ability (and willingness) to pay for these higher-priced insurance products. Inflation has been hitting the United States with a vengeance and interest rates are higher than we’ve seen in decades.
However, the pace of inflation is slowing and the Federal Reserve has indicated it anticipates cutting rates three times in 2024. While this is good news, the impact won’t be felt overnight and housing costs remain high. (Read the perspective of multiple economists here.)
Agency Opportunity
When consumers are paying more for their mortgages, interest on auto purchases and credit cards, utilities and even basic necessities like groceries, insurance seems like a place where they can cut corners because they won’t experience an immediate pain point. Yet, reducing their insurance coverage for life, disability, homeowner/renter, auto, personal liability, etc., can ultimately put them into a more precarious financial position if a catastrophe (or even a minor loss) occurs. This is especially true today with a personal savings rate in August (2023) of only 3.9%, “well below a decades-long average of roughly 8.9%, according to the latest data from the U.S. Bureau of Economic Analysis.”
Money is tight for a large segment of the population, so investing time into helping your clients make smart, strategic decisions about their insurance will help them in the long-run – and potentially generate referrals for your agency.
Managing Tougher Underwriting Guidelines
As insurance carriers update their risk portfolios based on a myriad of factors – including the impact of increased catastrophic events and rising costs to rebuild insured properties – they’re tightening their underwriting guidelines, making it more difficult (or impossible) for some individuals or businesses to secure much-needed insurance at a reasonable rate.
Agency Opportunity
With many things in life and business, establishing realistic expectations can soften the blow of unwelcome information. When working with clients to purchase new insurance products or helping prospects renew or apply for policies, it’s essential that you spend time educating the consumer on the current insurance environment, which affects underwriting requirements, coverages, and policy prices.
You can help your clients and prospects understand what actions they can take to address some of the more underwriting guidelines within their control – such as smoking cessation, driving more safely, making sure they have working smoke detectors, robust data security features (for commercial clients), and more. You can also share cost-savings options such as bundling policies, electronic payments, and paperless billing. While some of these items deliver small cost reductions, today’s consumers will appreciate your efforts to help them save money wherever they can.
Making the Most of 2024
Here are a few final suggestions to prepare your agency as 2024 kicks into high gear:
- Continue to stay on top of industry trends and keep ahead of your competitors with any needed business pivots.
- Invest in your staff, providing them with timely industry knowledge and training for delivering superior customer service.
- Expect the unexpected. When you’re well-prepared with a business strategy and an accurate assessment of your financial position, you can adapt and take advantage of growth opportunities.
We’re here to help you.
Our team is ready to support you throughout the new year – and beyond – providing you with specialized financing products designed to assist you with the next steps in your ongoing success. And if you feel it’s time to consider acquiring another agency, our consultative staff has the expertise to support this stage of your growth.
All of us at First Mid Agency Finance wish you a healthy, happy, and prosperous new year!
