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For The Manager: If the next disaster hit your area, would you be ready?

I HAVE worked with many independent agencies in Southern Louisiana, and quite a few are located in New Orleans. I have visited New Orleans twice since Hurricane Katrina hit, and the devastation is worse than television could ever convey. I believe

By Chris Burand | Updated on December 31, 2005

I HAVE worked with many independent agencies in Southern Louisiana, and quite a few are located in New Orleans. I have visited New Orleans twice since Hurricane Katrina hit, and the devastation is worse than television could ever convey. I believe that well-managed agencies will survive this difficult time. Unfortunately, many that were unprepared will end up in bankruptcy. To avoid their fate, I highly recommend you take the following steps. All of them will increase your agency’s value; so even if you think you never will suffer a catastrophe, there is no reason not to implement these steps immediately.

1) Get in trust! I doubt that many agencies that were not in trust will survive Katrina. (To be in trust, cash plus premiums receivable, divided by premiums payable, must be greater than 1.0–preferably 1.1). In a catastrophe, insurance companies rightly are going to want the money they are owed, but customers are going to quit paying. An agency that is out of trust essentially has already spent customer money and is relying on next month’s customer payments to meet this month’s company bills. This is an unethical (and stupid) practice.

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