Tips for Contingency Planning For Insurance Agency Owners

In my last post I wrote about emergencies that happen to pilots and entrepreneurs. I pointed out that emergencies consume most of our mental energy and focus. I also noted that it’s often the case that the primary emergency isn’t the thing that is ultimately the most dangerous. Often, it’s something we didn’t see coming because we were so focused on the other, lesser emergency.How can we be sure that when we face emergencies in our business lives that we are prepared, not only to deal with them, but also to make sure we are not consumed by something else in the meantime? Plan, monitor, and check.

Pilots are a worthwhile group of people to consider in this respect. Pilots: 

• monitor their situation constantly
• assess their current status and risk
• consider constantly their options in the event of emergency
• have a preplanned set of actions ready in the event of emergency
• use a checklist to make sure they haven’t overlooked anything when dealing with an emergency

This is an excellent template to use in running our insurance businesses!

Most of the things that can kill a small business are known: cash flow, loss of customers, loss of product to sell, employee problems, economic downturns, etc. There are usually some things unique to a given industry that also can kill you: a hardening insurance market, insurance carriers changing how they deal with agencies, etc. The important thing is to consider what the risks are, so that they are identified.

Then, for each risk consider how you would recognize the early warning signs that something is about to happen. You don’t need to dwell on these things, but having identified them, monitor your situation so you’ll recognize a problem before it gets out of control. As you monitor your business, you need to regularly and constantly assess your status.

This is the part where you need to ask yourself questions about what is going on, whether anything unusual is developing, and if it is, what your options may be for dealing with it. Have your sales been decreasing? Are your employees complaining a lot about something? Are insurance companies treating you differently or changing your quotas? Pay attention to the signs, and read them for warning signs.

Pilots consider their options before the emergency strikes. For example, if the engine fails right now I can land on that road directly in front of me. Similarly, a well prepared business person has preplanned contingency actions for the minor or major catastrophes that can happen - your best insurance agent quits, a buy-sell agreement comes through, your main carrier lowers their commissions. This plan is reviewed periodically as the business owner considers their options. If your sales have been low for a few months, it’s time to take action: talk to your sales team, invest in marketing, lower your expenses, expand your operations... Act while there is still plenty of time to course-correct instead of just thinking it will go away on its own.

Finally, the pilot uses a checklist to be sure he didn’t forget to deal with all the important issues in an emergency.  He doesn’t want to be killed by the smoke while worrying about the fire. The well-prepared business person also has thought about all the things that need to be reviewed when an emergency strikes, and they have a checklist somewhere to make sure everything is covered. A good example of this is the event of succession and estate planning - if something were to happen to you, who will run your insurance agency? A family member? A member of staff? Business contingency planning must include all possible scenarios, so that if they come to pass you can deal with them smoothly and effectively.

Remember the three main elements of insurance agency contingency planning:

• Plan: Know the signs for most possible situations, and have a list of actions at hand in case they happen.
• Monitor: identify signs of things going wrong before they actually go wrong.
• Check: follow your handy checklist if you see enough warning signs, to control a bad situation before it becomes critical

Consider how you’ll respond when an emergency strikes, for it will surely happen!