Insurance agents deal with managing a client risk on a daily basis. Most agents, however, only perceive their own business risk on a theoretical basis. Insurance agencies are businesses, and they face a bevy of risks, many of them non-apparent and some of them downright unthinkable. It is easy to ignore the obvious when protecting others. However, knowing and assessing potential and common risks that many businesses face helps to avoid any surprises, retains your integrity as an owner, and mitigates any negative impact to your agency’s name and sales.
Risk Management at Your Agency
The Institute of Risk Management defines risk as "The combination of the probability of an event and its consequence,” with possibly positive or negative outcomes. Effectively managing risk means better outcomes. However, managing it requires not only acknowledging the possibilities, but also understanding the best means of avoiding or dealing with risks. As the saying goes, “Expect the unexpected”. Easier said than done of course but simply reviewing your operations, areas of sensitivity or vulnerability, and identifying possible problems areas is worth the initial process to avoid future problems. Once implemented, a risk management program must become an integral part of any agency’s business plan.
The Threat: The inability to hire effective producers and knowledgeable employees may bring some insurance agencies to a grinding halt if one or two key people you’ve relied on have left or will leave at some point in the future. A backfill process is essential if you rely heavily on someone to keep your insurance marketing campaigns in full swing, to keep the phones ringing, or to tackle essential administrative tasks. For most small insurance agencies, it is a lack of trained, dedicated, and capable individuals to perform the many tasks involved in the insurance business that causes the greatest risk. Not because those people are not out there, but hiring the right person is no easy or quick process.
The Proactive Response: Develop a hiring plan that fits with area demographics. Instituting a comprehensive training program helps individuals understand the industry and enables them to contribute to the business quickly. Attend local job fairs and develop contacts with local high schools, business schools, and colleges, which regularly produce graduates eager to find a job. Consider offering internships to students, or even part-time employment to someone interested in joining the firm after graduation.
Finding good job candidates is but half the battle, however. Keeping good employees means creating a business culture that demonstrates their value to the company.
- Provide supportive and engaging training
- Maintain open communication channels with all employees
- Consider employee input in determining agency goals
- Foster a pleasant and stimulating work environment
Additional resource: Eight Odd Interview Questions and What They Tell You About Someone
Not Keeping Up With the Joneses
The threat: Just like every other business in the world, insurance agencies must constantly change so that they meet the needs of their clients. Do not underestimate the power of change. Avoiding change gives competitors the opportunity to appear more appealing, leading to clients seeking services elsewhere.
Simple economics compel many agencies to eke out a few more years with older equipment or stale client lists. However, doing so rarely results in real savings. Using an outmoded agency management system leads to reduced productivity and slower processing. Old equipment can even affect marketing and sales material quality. Beyond that, there is the issue of competing with new insurance business models. Many consumers now shop for insurance completely online, from initial research to final policy purchase. Technology is the key to success for most firms, but only when kept up-to-date, and properly used by everyone.
The Proactive Response: Embrace change. Change need not bring about a loss of the qualities that made an agency unique in the past. It means improving those elements to better suit the client of the future. Think of technology and information gathering as a business investment rather than just an expense. Being aware of insurance industry changes sustains an agency’s viability in the marketplace.
Develop and implement a technology strategy that identifies both short-term and long-term goals that consider not just the agency, but also clients’ experiences. Adapting to a client base demanding more technological innovation allows agencies to compete against online big-box insurance providers. Everything from online estimates, to online applications, to paying premiums online must be considered, and then implemented so that services are accessible via multiple platforms.
Attention to Technology
The Threat: It’s not just the outdated computers and other technology make processes slower for all involved. Business runs on technology, and when it fails, chaos ensues. It is logical to assume that older equipment will give out and cause major headaches. However, even new technology, when not properly backed-up and secured, can lead to devastating consequences as well.
Just a few hours of computer down time without any permanent data loss or security breach may result in a lot of lost business.
Think of all the items stored within an agency’s IT system:
- Client contact data
- Policy data
- Carrier contacts
Beyond losing data, the risk of someone accessing personal information can wreak havoc for clients for years to come.
The Proactive Response: Take the time, spend the money, and ensure the proper backup of all technology in the agency, that all security encryption is up-to-date, that all anti-virus software is used all the time, and that the tech support professionals are on speed dial.
The Irony of Insurance Agencies at Risk
Having “insurance” as part of a business’s name does not make it impervious to risk. Agencies must take the same measures that other businesses do in order to protect their livelihood. Identifying risks, understanding their potential magnitude, and then creating action plans to deal with the risks means better business for everyone.