Recession Readiness: How Brokers Can Prepare Themselves And Their Clients

As the macroeconomic environment continues to shift, there is always the potential rising risk of a recession. The baseline view for the U.S. economy is one that is slowing – but still growing. While Goldman Sachs estimates the possibility of a recession at 30%,⁴ the recent rise in gas prices and other essential items affects how consumers make financial decisions and impacts industries such as shipping and trucking, transportation, energy, and travel.

Even so, it’s always a good idea for brokers to have an understanding how economic downturns impact the insurance industry and its clients – and to be proactive rather than defensive. By anticipating potential challenges, firms can help reduce client attrition, create opportunities for sustainable growth, become a trusted advisor, and ultimately help clients manage costs responsibly.

The current economic outlook remains uncertain

When economic conditions tighten, insurance-based decisions become more emotional, more urgent, and often riskier. Clients feel pressure to cut costs quickly, reassess priorities, and make changes that can unintentionally weaken their protection. At the same time, downturns often increase certain risks –employment disputes, liability claims, theft, and operational shortcuts – creating a dangerous mismatch between exposure and coverage.

On the positive side, real GDP increased at a 2.0%² annualized rate relative to the prior quarter while the April unemployment rate remained steady at 4.3% (a healthy unemployment rate generally falls between 3.0% and 5.0%).³ However, interest rates remain elevated, keeping borrowing costs high for households and businesses.

In addition, persistently rising prices point to wage pressures, supply-chain strain, and increasing claim severity, all of which can indicate shifts toward a recession. The CPI (Consumer Price Index) is one metric used to measure inflation by tracking price changes of consumer goods and services. The recent increase in consumer prices from 2.4% in February to 3.3% in March 2026⁴ is a concern for businesses and consumers.

Regardless of current or future economic conditions, it is imperative that insurance brokers have a plan in place to manage a financially challenging period and are ready to address clients who try to make faster, more cost-driven insurance decisions.

What brokers should do to prepare for a potential downtown

For brokers, economic downturns can change customer behavior, carrier dynamics, and cash flow patterns – but they also create opportunities for well-run brokerages and agencies to gain market share and stay ahead of the competition. Here are some strategies to keep ahead of economic challenges:

• Protect cash flow first. Cash flow becomes essential during downturns. Tightening follow-ups on unpaid premiums, implementing automated reminders, and reviewing payment plans can increase incoming funds. Scrutinize expenses but avoid cuts that harm retention or service.
• Revamp carrier agreements. Soft markets often trigger carriers to fight for brokers’ business, and this increased competition is a win for clients and the broker. Now is the time to negotiate better premiums, specialized coverage limits, and policy terms to help meet the specific needs of clients. Carriers often demonstrate greater flexibility and more favorable terms as the market gets softer and an increase in compensation incentives to encourage more growth. 
• Adopt a growth mindset. Firms that apply a growth-based strategy will have a competitive advantage. Exploring new business niches and becoming a specialist can create additional growth opportunities. Including more commercial products can offer more predictable income. Challenging economic conditions and a softening market are optimal for attracting new clients seeking more coverage they may not have been able to previously afford or were denied coverage. Growth won’t come from premium increases, so it needs to come from new clients.
• Shift sales strategy. Target resilient segments like healthcare, infrastructure, and essential services. Recession-proof lines like these often hold up better than discretionary coverages. Offer solutions such as higher deductibles, coverage reviews, and tiered options to prevent losing the account.
• Adjust client retention methods. While the main focus should be on growth, retention requires a different approach when clients are stressed financially. Offer complementary lines (umbrella, cyber, Employment Practices Liability Insurance) to increase loyalty and shift communications from “best price” to risk management-based messaging. 
• Retain and re-align your team. Talent disruptions during recessions are expensive and destabilizing. Resist panic layoffs as rehiring costs are more expensive than maintaining strong performers. At the same time, be transparent about business goals and financial health. Firms that keep culture intact come out stronger post-recession.

While these are protection-based methods, recessions can also create expansion opportunities. Watch for books of business available at discounted multiples, high-quality producers displaced by layoffs, and underserved niches ignored by larger competitors.

Preparing clients for the impacts of a recession

During recessions, clients may make rash decisions driven by cash pressure and short-term thinking. These missteps can unintentionally increase risk and long-term costs, often outweighing any immediate savings.

This starts with early outreach to explain how recessions tend to increase certain risks, such as deferred maintenance, operational shortcuts, or coverage gaps created by business or lifestyle changes. Help clients understand the trade-offs of any cost-cutting decisions. Brokers that guide clients through structured coverage reviews, deductible adjustments, and payment-planning options help reduce panic-driven cancellations while reinforcing their value as trusted advisors.

For commercial clients, preparation should focus on how financial stress can quietly increase exposure. Reducing staff, cutting wages, or assigning employees to unfamiliar work can raise legal and contractual risks for employers. Brokers should help business owners manage premium-spend responsibly without undermining core protection. 

For personal lines clients, the emphasis should be on education and communication. Job loss, reduced income, or downsizing can all affect coverage without the insured realizing it. Help individuals reassess vehicles, property usage, and liability needs, while offering flexible payment solutions.

Across both segments, insurance brokers that document advice, communicate consistently, and help clients make informed decisions tend to preserve trust, retention, and long-term stability during economic downturns.

While economic uncertainty and inflationary pressure remain real concerns, conditions can stabilize and periods of volatility are often followed by recovery. For insurance brokers and their clients, the goal isn’t to predict the next economic turn, but to remain resilient through it by maintaining thoughtful coverage decisions, managing costs responsibly, and staying aligned with evolving risks. With disciplined planning and clear communication, uncertainty becomes more manageable, and brokers can move forward with greater confidence, regardless of where the economic cycle heads next.

Contributions to this article by: Keith Captain, FirstChoice President, a MarshBerry Company.

Sources:

1. https://www.goldmansachs.com/insights/articles/the-outlook-for-the-us-consumer-amid-rising-inflation
2. https://www.federalreserve.gov/economy-at-a-glance-gross-domestic-product.htm
3. https://www.federalreserve.gov/economy-at-a-glance-unemployment-rate.htm
4. https://www.bls.gov/charts/consumer-price-index/consumer-price-index-by-category-line-chart.htm

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