I’m old enough to remember the stories about the stores in Moscow in the old Soviet Union days. Most of them had bare shelves most of the time and a line would quickly form on rumors that they might have anything to sell. In the free market world in which we live, it would be pretty difficult to survive with nothing left to sell!
And yet, that is a very distinct possibility for independent insurance agents in the middle part of the U.S. This is especially true of those agents who specialize in, or only write, personal lines of insurance.
Unprecedented bad weather across the U.S. combined with historically bad weather in the central plains and lackluster investment earnings have left insurance companies scratching their heads, or furiously working spreadsheets, in an effort to come up with a way to make money. One thing has come through loud and clear in recent meetings with the premier carriers we represent: there will be less product for agents to sell in the near future.
Bare shelves anyone?
The reality for many agents in the very near future will be nothing to sell! If you don’t believe me, start talking to insurance company people. They are simply going to move their product (insurance) to markets where they can make money. Now, they may leave some of it to sell in the tough markets, but it is going to be rationed.
So, how can you make sure you have something to sell to your customers in times like these? Here are my best suggestions for survival and even prosperity (remember there is always opportunity in adversity for those who look for it):
- Pick your customers carefully. When you only have a few policies to sell, sell them to people who will be loyal, and who have less likelihood of generating losses.
- Move customers where they belong. Don’t put customers in preferred tiers if they don’t belong there.
- Concentrate your business. You may not be able to keep every company contract. That’s a reality. So, play defense by consolidating your book. Carriers always cancel agents from the bottom up (in terms of size).
- Quit selling on price. Prices everywhere are going to be high and customers will shop. Offer value. Don’t leave money on the table. Don’t play games with rating systems! Carriers have unprecedented tools to examine books and are going to catch, and fire, cheats.
- Customers with losses should not be written with your best carriers. Period. Remember, product is going to get tight! It will go to agents with the best loss ratios.
- Get as big as you can! It’s always harder to terminate big relationships than small. A carrier has a tougher time cancelling a $20 million dollar book than a $100,000 one. Fact of life. Join OAA if you haven’t already. When the storm comes, there is safety in big numbers.
- Honor your commitments. Whatever they are. Especially production and loss commitments.
- If you lose a carrier, be gracious and friendly as you wrap things up. Remember, you will likely survive and prosper and you may want them back someday.