Insurance agency survival strategies: Lessons from COVID-19
We were prepared to manage a business interruption event. We did not expect a revenue interruption event.
As insurance professionals, we make a living by helping others be prepared.
So here’s a question: Was your insurance business ready for the pandemic of 2020?
If you asked me that question on February 1, I would have said, Yes, we are ready. Our agency had been leaning into technology and remote work capabilities for a while, so we were prepared to manage a business interruption event from a logistics perspective.
What we did not expect was a revenue interruption event. Even though we were deemed an essential business, and we have been technically open for business, our new business revenue has plummeted. In a typical April, we process 200 insurance applications a day. This April, we averaged eight applications a day.
While it’s a dismal situation, I remain optimistic. Our agency will survive. Below, I’ve outlined a few of my key takeaways to help all of us in the industry be more prepared in the future.
Eight agency survival tips
Lesson No. 1: Generate revenue from as many sources as possible.
When I look at the reasons our revenues have been annihilated, it largely comes down to a few key dependencies that were all impacted at the same time. For example:
- Centers of Influence. A significant portion of our business is generated by our RightRater app, used by car dealerships to provide auto insurance at point of sale, and used by mortgage providers to provide home insurance at point of sale. Car dealerships have been closed, which has resulted in a 92% reduction in sales through our RightRater app.
- Cash Flow. We have a number of customers who are unbanked or for some reason prefer to pay their premiums by walking into a retail brick and mortar location. With those locations closed, 31% of those premiums are not being paid.
- Tax season is when business booms for us. Our three biggest months are February, March and April, which is when people spend their tax refunds. This year, tax refunds are being spent on survival instead of new cars and houses.
- Lines of Business. Ninety-four percent of our business is in personal lines. I suspect that agencies with a more balanced split between personal and commercial are faring better in these conditions.
Lesson No. 2: The world provides clues… if you listen.
My son had been travelling in Asia when the outbreak started. I was concerned about him, so I was paying close attention to world events. That external focus helped me get ahead of government regulations. By late February, well ahead of any stay-at-home orders, we had already started transitioning our team. By March 13, no one was coming into the office.
Lesson No. 3: Technology makes you nimble.
The reason we could lead change is because we had already invested in technology. We traded our landlines for a telephony system and automated quotes and renewals with an AI-driven system a few years ago. We had also already integrated texting, electronic signatures, electronic policy delivery and paperless file storage. Thanks to our technology position, working at home was the simple part of the equation. All we needed was a few more laptops and we were set.
Lesson No. 4: Keeping your keepers is the top priority.
Great talent is essential and the game changer that will help us recover quickly. We’ve fortunately been able to keep the majority of our team working. On April 1, we implemented a 10% furlough and in late April, we transitioned to a 20% furlough. Payroll is our largest expense, and these small adjustments made a huge difference in our balance sheet.
Lesson No. 5: There’s no such thing as too much communication.
When you go to a remote work model, communication is more essential than ever. We started a daily check-in video call every morning. I was surprised to see that these calls were lasting an hour or more. By gauging body language, it wasn’t hard to see that there was a lot of fear. I now include an emotional check by asking “Is everyone OK?” and allowing time for people to share their feelings. Most of us have never been through anything like this. In addition to the daily team check-in, I started calling employees individually and sending out a video message of reassurance to my team every Friday.
Lesson No. 6: Simple gestures can make a big impact.
When you’re having to furlough your team, it’s easy to think you should also cut all team expenditures, but that may not be the best approach. In our case, we realized we had a lot of gear in the office, earmarked for sponsorships. We decided to use that gear to have goodie bags delivered to all our team members along with a note letting them know we were thinking of them. This small expenditure generated a big lift in morale.
Seeing that, we decided to do something else. The following week, we sent every employee a $50 Amazon gift card. The total expenditure was $3,000. That seems like a lot to spend right now, but it’s a small investment to help preserve my team, which I see as my company’s most important asset. This small gesture changed the energy of our company. It was as if they suddenly realized that everything really would be OK.
Lesson No. 7: Chatbots work.
We deployed a chatbot to serve customers on our website in June of 2019. During this pandemic, our chatbot (known as insurBot) saved us. She pops up and offers guidance anytime a visitor arrives on our site. The majority of visitors engage with her and are able to self-service. “Talk with Humans” is always an option, but surprisingly few choose it. At this point, I honestly cannot imagine life without our insurBot. While our revenues have been down, our call volume has been steady. A lot of policyholders are looking for payment arrangements, and our InsurBot has taken care of them.
Lesson No. 8: Cash is king.
Going into this, I had more capital available than I thought I really needed. Now I know that even with that much capital, I would not be able to cover payroll for four months with a fraction of my usual revenue coming in. The lesson: Save more than you think you’ll need. While we’re starting to see a rebound, we know that this could happen again in the fall or winter. My goal is to build up enough cash over the summer to cover at least two months of payroll.
Final thoughts
COVID-19 has been brutal on many fronts, but it’s also served as a valuable wake-up call. I’ll be the first to confess to complacency. When business is good, it’s easy to focus on growth and neglect protection strategies. Yet, here we are in the business of protecting others. We can’t be the cobblers whose children have no shoes. As the nation’s protectors, we must continuously act to protect the future of our own businesses. Let’s use this period of adversity to emerge stronger.
Jeff Arnold (jeffa@rightsure.com) is the president of Rightsure Insurance Group in Tucson, Ariz., and author of the books “The Art of the Insurance Deal” as well as a new book, “How to Beat Your Insurance Company,” which educates consumers on how to pay less for insurance. To learn more, visit jeffarnold.com.
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