'Glass half full': Insurance brokers have positive outlook for 2021
An Aon Programs' study and Moody's analysis assert that the challenges of 2020 are unlikely to plague agents and brokers in the new year.
Insurance agents and brokers have been put through the wringer in 2020. Thankfully, all signs are pointing to a silver lining in the new year, especially as the distribution of COVID-19 vaccines is expected to uplift the economy and promote well-being.
According to a recent study by Aon Programs, an Aon Affinity business, 93% of insurance agents and brokers are approaching the new year with a “glass half full” mindset.
“The reality we face is that 2021 is essentially the ‘unplannable’ year,” said Chad Levine, executive vice president and chief strategy officer of Aon Affinity, in a statement. “But agents still need a flexible roadmap to guide them along the way. And our data tells us they are certainly thinking that way — examining every aspect of their customer experience with a fresh eye.”
Planning for a successful year
The Aon Programs study surveyed nearly 500 U.S. agents and brokers between October 12-18, 2020, and found three themes that resonated with brokers in 2020 and will continue to define business in the new year.
1. Virtual business. Despite the seismic shift to digital operations during the COVID-19 pandemic, only 6% of brokers who participated in the survey said they plan to be fully virtual by 2021. Also, fewer than half of the brokers (43%) revealed that most of their meetings are virtual, with 28% saying they’re attending in-person business meetings as usual. About one out of four brokers said they could be open to in-person meetings in 2021 but are uncomfortable with that setting currently.
2. Marketing tools. Social media will be a major focus for brokers in 2021, with 33% believing that social platforms will boost their businesses. Facebook and LinkedIn, in particular, are where agents see the best return on their investments to reach new markets and prospects. Webinars, virtual events, and email blasts are other marketing methods brokers said they would rely on next year.
3. Business shifts. If it’s not broke, don’t fix it —that’s how many brokers view their business as the year comes to a close, with 34% reporting no major changes in the pipeline for 2021. However, some agents do plan to invest in critical areas of the business, such as professional development (24%), new client retention programs (17%) and product offerings (14%). Regarding new products, brokers see value in adding offerings for professional services firms (21%), catastrophe (17%), nonprofit organizations (13%) and health care providers (11%).
“From our perspective, brokers are working hard and planning to make 2021 one of their most successful years yet,” Levine said. “Dedication to planning, even at a time like this, will make all of the difference in an agency’s success.”
Stability ahead despite economic hardships
A new analysis from Moody’s supports the findings of the Aon Programs’ survey by asserting a stable outlook for insurance agents and brokers in 2021. Specifically, Moody’s predicts brokers will maintain fairly stable EBITDA (earnings before interest, taxes, depreciation, and amortization) margins and debt-to-EBITDA ratios despite the pandemic and economic disruptions of 2020.
“Insurance brokers can navigate economic uncertainty based on their good value proposition, partly variable cost structure, low capital expenditures and healthy cash flow,” Moody’s Vice President Bruce Ballentine said in a release. “The brokers implemented cost-saving measures as the coronavirus pandemic took hold. They shifted to remote work, reduced discretionary spending, postponed nonessential capital expenditures, and slowed the pace of acquisitions, helping stabilize their earnings and free cash flow.”
Moody’s sees a recovering economy and rising P&C rates as being one of the foundations for a stable insurance broker channel in the new year. In 2021, Moody’s expects G-20 economies to grow 4.9%, followed by 3.8% growth in 2022, depending on how the pandemic continues to be managed. The credit rating company also predicts insurance brokers will achieve organic growth in the low single digits for all of 2020 and higher growth in 2021 despite declined broker revenue in the first half of 2020.
Additionally, brokers lowered borrowing rates, extended debt maturities, boosted liquidity, and funded acquisitions successfully in 2020. Because of this, Moody’s anticipates brokers will be able to repay or refinance debts in 2021.
Register now for the free webinar “Prepare for the Top 3 Emerging Trends in the P&C Industry,” happening on Thursday, Jan. 21, 2021, at 2 p.m. ET.
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