Boom, Bust and Insurance: How the Economy Impacts Your Business
From E&O insurance to disaster insurance to health insurance, everyone needs to prepare for an emergency. Everyone needs to have insurance, yet many do not. The economic climate can impact the amount of insurance, the speed of renewals, and the success of individuals and companies that you're insuring.
During difficult economic times, you may lose clients. Businesses that you insure may fold. Individuals may move away to areas with a lower cost of living or may decide not to obtain coverage. They may also cash in insurance policies such as whole life insurance in order to save or use those funds. Difficult economic times can undermine your customer base.
Economic difficulties can also cause your clients to change their behavior regarding the amount of their insurance. If they don't cancel, they may need to switch to a different plan, and that plan may have lower payments. Economic difficulties can also impact your cash flow, as customers may renew later as they wait to have the funds to do so.
Lowering the Insurance Requirements
There's another challenging way that insurance is connected to a failing market. Clients who lose their insurable assets or whose assets fall in value will need to purchase less insurance. For example, if housing prices fall to a fraction of the previous price, homeowners may require less insurance and pay lower premiums, resulting in less money for your business.
An Impact on Investments
Insurance companies move their income into investment vehicles. Unfortunately, a global recession and economic crisis can make it difficult to move your money and gain income from your investments. For example, if you have invested in real estate, falling real estate prices can impact your company's bottom line. While you can't change real estate prices, diversifying your portfolio will help your business manage during difficult economic times.
Insurance Success in Tough Times
In tough economic times, your current and prospective clients may feel like they can't afford insurance, but if disaster comes, they can't afford not to have it. Different insurance plans offer different add-ons and deductibles. Educate clients on their options and make sure that they know how inexpensive certain plans can be. If you notice that a client has not renewed, make contact and don't be afraid to offer alternatives for those who are trying to get insurance but just don't have the funds to stick with their old plan. Make sure that you diversify your products as well, so that if one industry fails, you can turn to another niche product that is doing much better. Diversify your investment portfolio as well, so that you'll be protected if a specific industry is in trouble.
You're working to understand how you can be successful in your insurance business, even when economic times are tough. You need to connect with others who are struggling with the same issues. With the American Agents Alliance, you'll find a score of membership benefits such as discounted E&O insurance, discounted products & services for your insurance agency and you'll also find a network of agents like you who are there to share and support the insurance industry.