Those of us who own insurance agencies are no strangers to industry challenges. The COVID-19 pandemic brought several of the latest issues racing to the forefront as individuals left the workforce in record numbers.
The “Great Retirement,” digital disruption caused by insurtech, the worst inflation we’ve seen in decades, profitability pressures, managing your risks, taking care of new client expectations, and old technology…the list goes on and on when it comes to insurance industry challenges.
I know firsthand that these challenges exist in the insurance industry, an industry dominated by the Baby Boomer generation. So, how can insurance leaders overcome these challenges and protect the business? What steps can you take to Future Proof your agency short and long term?
In this article, you’ll learn more about how to solve some of the major challenges faced by independent insurance agents.
The Great Retirement and Your Insurance Agency
Although it’s not just the insurance industry facing The Great Retirement, it’s likely that your agency could feel the impact. Maybe you’re the insurance agent looking to retire. Maybe it’s one of your producers. It could be incredibly dedicated support staff member .
This shortage is impacting industries nationwide. It is certainly hitting the insurance industry, too. As one of the largest generations nears retirement followed by one of the smallest generations (Gen X), there are not enough workers to fill the open positions that are being created every day. Since the pandemic changed everything, some articles have reported a shortage of workers that simply did not return to work for various reasons.
It's important to realize that the talent shortage is not going to go away for at least a generation. So, agency owners must rethink not only how they will allow team members to work, and from where, but how they will modify their culture and compensation to become or remain attractive competitors for top talent.
It is my belief that many remote workers, especially those who have children, chose not to return to work because they recognized the benefits of working remotely. That’s not to say that working from a remote location is all fun and games (or always easy). It is only to say that it is often a better solution for many people.
So, once businesses began the push to demand workers return to the “brick-and-mortar” life, the workers who could once stay home and did not need to work outside of the home might have sought fully remote jobs in lieu of returning, while others may have turned to side hustles.
So, if you’re looking to find employees to replace those who are retiring, you need to think in a way that is more conducive to what employees really want and need.
The Effects of Inflation on Businesses
COVID-19 brought along its own set of problems when it grabbed hold of the entire world. Inflation continues to soar in the United States. I touched on what causes inflation as well as how long we may see (as an industry and as consumers) the price of insurance premiums rise in a previous blog. As businesses have to raise pricing from the grocery store to insurance of any kind, consumers have continued to shoulder the brunt of those increases.
With the cost of repairs, such as replacing an engine, rebuilding a transmission, or even smaller repairs, such as replacing a side panel, continuing to rise because of the unavailability of parts, the average claim cost has also gone up. Largely in part due to the increase in cost, supply issues, and even the price of the skilled workers needed to carry out the repairs. The labor shortage means that skilled workers are able to raise their rates for the same product they provided before. This, in turn, is driving insurance premium prices higher, and that cost must be reflected in order to ensure that claims can be paid out when they are filed.
Unfortunately, as insurance agents, we can’t solve the issue. What we can do is our job: carefully designing risk management programs and using the choices of carriers we offer as independent agents to give our clients the options they need. Where can we find the savings for our clients and potential clients that they both want and need without sacrificing their coverage? Can you bundle their policies? Can you find better rates with a different carrier? What about focusing on new lines of business for existing clients? Don’t focus so much on the increase in premium. Instead, look at what you can do that captive agents can’t.
Digital Disruption and Insurtech
In the constant and ongoing ‘fight for customers,’ digital technology has taken off in the insurance industry. With investments surging in insurtech worldwide, the growth has jumped from $1 billion in 2004 to $14.6 billion in 2021. I find this not just impressive (and smart) but mindboggling, too, even though I love insurtech. It shows that insurtech continues to drive digital innovation and disrupt the insurance industry ecosystem.
If you’re ready for your agency to become a leader, then it’s time to embrace insurtech, especially if you’re ready to drive more growth and have positive customer interactions.
And here’s a little secret as someone with lots of experience: insurtech doesn’t have to be hard to learn, no matter your age. I podcast. I Zoom. I’ve declared that geography is dead, thanks to insurtech. It makes a huge positive difference when you find and use the right tech products for your agency.
Scaling Profitability: Can It Be Easy for Your Agency?
When you incorporate the right digital insurtech solutions, you have the opportunity to meet and exceed customer expectations. By meeting them in a positive way that they want to use, you will begin to retain those customers, creating an entirely new customer loyalty landscape.
So, how do you do something to scale profitability that builds retention and even brings in new clients? First, you need to know what your clients want and what they need. For that, ask them. Reach out to your clients. What do they like? What insurance products do they need? What do other apps and websites have that they actually use?
What do other independent insurance agent sites and apps have? Make sure you’re looking at popular ones. Remember that we’re talking about scaling your profitability. You want and need what your clients want and need. You’re looking for convenience for your clients and even potential clients.
Risk Mitigation and the Insurance Landscape
Risk management is a crucial aspect of every business, but it’s of particular interest to those of us who are part of the insurance landscape. Of course, you and I both know that we face underwriting risk management. Yet, there are other risks. Let’s take cybersecurity as an example. It’s not just insurtech that creates this risk. If you take debit and credit cards or use the internet (and I know you do.), congratulations — your insurance agency needs to mitigate the risk of cybersecurity.
You help to protect your business by evaluating your possible risk areas involved in cybersecurity, working to find solutions to prevent them from happening to you, and putting in the work to reduce the risk. Some points that you may want to take under the advisement of a cybersecurity professional who routinely works with independent insurance agencies when you are evaluating the challenges facing your business may include:
Identifying the risks that exist for your agency
Analyzing the risks to determine how much of each risk is acceptable; this is something you may need the help of a cybersecurity expert who understands the regulations for the insurance industry
Evaluate your risk assessment
Find the right solution for each risk; is there a solution that solves more than one risk? You should also create a cybersecurity policy for your agency that employees must follow, including a section for remote employees
Monitor and review the risks facing your business
Become aware of any new risks you think are facing your agency and talk with your cybersecurity expert
Understanding & Managing Customer Expectations
When adjusting your business model and beginning to incorporate new practices into your everyday work life, meeting customer expectations should be placed near the top of your list.
So, how do you discern how to meet customer expectations and ensure that they have a good experience? It may seem difficult. I can’t read minds, can you?
But, using tools such as artificial intelligence to help enhance their visit to your webpage, using the right tech to track what they do, or answering simple questions in a survey through email can have amazing results.
Think about your own experiences with things that keep you with your agents, your favorite stores, and ordering from your favorite apps. Are you in love with food or grocery delivery? Which app is your favorite and why? Which app would you use more if it had just this one thing?
Remember that even if it doesn’t yet exist, there are people who are so skilled and talented, regardless of a college degree, that what you see in your mind, it can be brought to life.
How Legacy Technologies Hurt Your Insurance Agency
We all know that “one person” in our family has to be dragged (maybe even kicking and screaming) into current technology. It could be someone you work with (even though it’s likely understanding workplace tech is required for the job). The older generation in the insurance industry, whether they’re ready to retire or plan to keep on keepin’ on often must be convinced to begin using (or buying) technology for the office.
With the new insurtech that is making a move onto the scene, legacy systems may seem like a great idea. After all, aren’t newer systems…expensive? They are an investment, I’ll give you that.
But, here’s the thing about that. All Legacy technologies require IT maintenance for upkeep and to keep them running with newer computers (Windows 10 and 11, anyone?). Notice I didn’t say anything about cloud drives, cybersecurity, data protection regulations, or any of the other newer and more commonly used pieces of your tech stack. Should roughly 80% of your IT budget go to maintaining and updating these systems?
Legacy technologies are inflexible, and they just aren’t all that great at their jobs. Sure, they were great when they came out. But they can’t continue to grow with your agency, offer new products, or provide the customer management that your clients really want.
And what about your employees? Do you think they want to use something so slow and hard to use? Newer tech is much easier for existing employees to use, and it makes attracting young, talented employees more feasible. Those employees don’t just go where the money is, they’re going to go where they are comfortable…they’re digital natives.
Solve Your Insurance Agency Challenges
The landscape surrounding insurance companies continues to evolve quickly. Like many industries, the insurance industry has become a race to not be left behind because many independent agents embrace technology to yield them a competitive advantage. They realize how it can help them serve their customers. However, with the new technology and changes that are taking place, agencies can often feel overwhelmed. I can help.
Check out my ebook today to help protect your agency.
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.