We are right in the middle of a hard market in commercial insurance. It's particularly difficult for business insurance such as commercial auto, but commercial property/casualty insurance and liability insurance are also increasing. Here’s how you can take advantage of the current hard market to grow your market share, protect your investment returns and even capture new clients.
What is a hard insurance market?
The market in the insurance industry works in cycles, with the market cycle getting “harder” and “softer” every decade or so. To put it simply, in a hard market it is more difficult to find coverage, and insurance companies issue fewer policies and charge more for them.
In our current market conditions, with the crisis brought on by COVID, insurance carriers are exercising risk management (as they do) through insurance rate increases and harder requirements for issuing insurance, so they have fewer insurance coverages to deal with during a difficult time for the economy.
There are opportunities in hard markets
Before you start worrying, you should know that I think hard markets are absolutely awesome for insurance agencies. In the first place, premiums are going up, and so are your commissions... but that's just the beginning of the opportunities for an insurance agency in a hard market.
The real big opportunity is that all the business is on the streets, because people want to control their costs. When you add a hard market in a recession, like we're in right now, everybody is concerned about saving money on their insurance. If you're aggressive, you're going to write a lot of new business, because let's face it, many agencies are asleep at the switch - they're not playing very good defense, and taking business away from them just isn't very hard. So a hard market is a huge opportunity!
How to take advantage of a hard insurance market
Get ahead with retention by advising your existing clients
To make sure that you're taking full advantage of a hard market you must, first of all, be really playing preventative defense. You need to hang on to the customers you've already got by getting well in front of the hard market, letting them know that, “Hey, your prices are going to go up. But you don't need to worry about it, we're going to cover the market for you. We're independent agents, and we're going to get quotes from all the best carriers and do everything possible to reduce your costs.”
Scoop new clients by being an advisor for them
The second thing is knowing that this is really the time to be an advisor to clients - especially those who are not yet your clients. Take some time to meet with prospects, and analyze their entire insurance package and the way they're covered - you're bound to find that there are mistakes the incumbent agent is making, and those mistakes are costing them money. In a soft market, the money may not be a very big deal to the business owner, but in a hard market, it's much more likely that those cost increases are going to be painful. And so, being an advisor and focusing on coverage is another huge opportunity in a hard market.
Be sure you're marketing the right way
One of the things that you need to do to take full advantage of a hard market is to be sure that you're marketing aggressively, and that you're approaching and attracting every prospect that you possibly can.
These are the two main approaches to marketing in a hard market:
The first approach is niche marketing: target market focus on the business that your carriers really want to write or an industry that is really competitive right now. Become the absolute expert on a valuable aspect of the insurance industry, and target the clients who can benefit the most from your expertise. Don’t worry if it’s too focused and not mainstream - you will get the volume of clients you need with the next strategy.
One of the great things that Zoom and COVID have introduced is that geography doesn't matter anymore. So if you're really good at writing a particular class of business, branch out into other states, broaden your marketing, and use zoom to be face to face with more people and make more money.
Your market can be laser-focused, and you will still get all the customers you can handle because you can market and sell nationwide using technology.
Rethink your roster of insurance producers
Here's something else to think about that, frankly, isn't very pleasant, and many agency owners don't want to think about: you may have some producers who aren't really producers. In other words, they're on your staff, they get paid commission, they sell insurance, but they aren't very good.
Frankly, a commercial insurance producer worth the name ought to be producing $75,000 to $100,000 of new business commissions every year. Do you have producers that aren't at that level? And are you paying them more than 35% commission?
If either or both of those are true, maybe it's time for those people to become account managers or to work for another agency, and for you to take the dollars that you save and go hire some aggressive, ambitious, driven people who are real producers. The best time to add producers, real producers, to your agency is during a hard market.
Talk to an insurance agency coach
Get ahead with retention by advising your existing clients
There are many other ways you can benefit from a hard market, and at OAA we're having these conversations with agency owners all the time. If you'd like some more suggestions, please feel free to reach out to us - our coaches have been through this many times before and are full of wisdom and sound advice.
Always keen on helping others make their dreams come true, Tony and his team have helped independent agents grow into more than 250 independent agencies. This has made OAA the number one ranked Strategic Master Agency of SIAA for the last 5 years, and one of Oklahoma's 25 Best Companies to Work for.
Tony loves to share his knowledge, insight and wisdom through his bestselling books as well as in free mediums including podcasts and blogs.
Tony and his family are members of Crossings Community Church, and he is very active in community initiatives: he’s chairman of It’s My Community Initiative, Inc., a nonprofit working with disadvantaged people in Oklahoma City; and chairman of the Oklahoma Board of Juvenile Affairs., and he has served through many other organizations including the Salvation Army, Last Frontier Council of the Boy Scouts of America, and the Rotary Club.
In his spare time, Tony enjoys time with his family. He’s also an active outdoorsman and instrument-rated commercial pilot.