Business is tough right now, but there’s a lot you can do to get ready for a shift to more favorable conditions. Insurance agencies should start to prepare today since many strategies take time to implement. Where will your agency be when the market turns soft?
This market is unprecedented – one of the hardest since 2004. Due to higher risks and decreasing profitability, many insurance agencies and their clients are experiencing unique challenges for the first time. Even if you’ve experienced unfavorable conditions in the past, this one is unlike other hard markets.
Maybe you’re tired of hearing about the hard market, but the good news is there are opportunities in these tough times. Here are the top five things that agencies should be doing today to prepare for tomorrow:
- Win the competition for talent. Get ahead of the other agencies by analyzing the elements that attract top performers. Do you have an attractive culture? Is your hiring process clear and easy? What about onboarding, training, and talent retention strategy – could anything be done to improve these strategic areas? Evaluate if you have the right people in the right places so you can hit the ground running when it comes time to hire.
- Create a growth strategy. Identify growth mechanisms that can help you prepare for the market shift, such as adjusting your marketing strategy, developing producer training, or seeking out new business. Instituting a growth culture is a valuable way to inspire the right focus in your people. Things like setting new goals and expectations, along with incentives, can help you and your team uncover sources of revenue when the economy recovers.
It’s important to note that growth strategies should align with your business’s unique strengths, resources, and long-term goals. Additionally, successful growth strategies often require careful planning, market research, and adaptation to changing market conditions, so start planning today.
- Update your perpetuation plan. If you don’t have a short-term or long-term plan to transition your business, this should be at the top of your list. Consider if you want to perpetuate internally, sell, or merge with another agency. There are risks and benefits to each of these approaches but there’s also a lot of misleading information. For example, did you know that the “three-generation rule” (a belief that family businesses don’t last past three generations) is actually a myth? On average, family businesses last far longer than typical companies do.1 A good plan can take years to build and implement. Getting educated on the best options for your firm’s future is a good first step.
- Improve your use of data. Well run agencies use data to influence their business decisions. By working with the right agency network, you can get financial comparisons to your peers, data on year-over-year premium and revenue growth, and production data by carrier. Benchmarking is essential to not only measure performance of your firm’s current state, but also set realistic goals comparative to peers of similar size. Data is also useful to gain insights and help producers understand their selling environment and make shifts that drive growth. Embrace a culture of continuous improvement, where you regularly evaluate your business processes, strategies, and performance metrics to identify opportunities for optimization.
- Improve your compensation models. A hard market may mean you can’t give raises and bonuses like you would in a soft market, but there are options to keep your producers engaged and productive. Competitive compensation packages can entice talented individuals to join the company and discourage them from seeking opportunities elsewhere. Review compensation reports and industry trends to gain a better understanding of how compensation is evolving over time. Understanding data on the average salaries and benefits packages for different positions is particularly useful during salary negotiations or when making job offers.
The market will eventually make the turn. If you’ve solidified your role as a trusted advisor and executed on the right things, you’ll thrive in a competitive market and capitalize on new opportunities. Because when hard markets turn soft, you don’t want to be left behind.
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