Agent expertise & guidance are vital as businesses seek cost savings
Discover the four questions to ask when working to manage insurance costs for commercial clients.
Inflation appears to finally be cooling, but America’s business owners are still feeling the heat of high prices and rising interest rates. An Agency Forward survey from Nationwide revealed confidence in the U.S. economy among small and middle-market business owners has eroded over the past six months, culminating in fears of a recession on the horizon. Around 72% of those who expect a downturn believe it will be similar or worse than the Great Recession of 2007-2009.
Despite their negative outlook at a macro level, however, most small and middle-market business owners actually feel optimistic about the conditions for their own business as they manage uncertain circumstances. Still, controlling expenses is a priority — and many are looking at their commercial insurance policies to explore cost-cutting opportunities.
Returning to pre-pandemic practices
About half of small business owners and three-quarters of mid-market owners rate business conditions for their own company as good or excellent. As a result, many have ramped up their operations or reversed pandemic-era cutbacks over the past six months:
- Scaling their workforce: Twenty-one percent of small business owners and 42% of mid-market business owners have hired new workers, up significantly since the fall.
- Extending operating hours: After many owners cut back on operating hours to maximize limited resources, far fewer businesses are operating on reduced hours today.
Optimizing expenses, including insurance, is top of mind
Compared to last fall, business owners report being more planful as they navigate economic conditions and anticipate a potential slowdown. Half of mid-market owners and 6 in 10 small business owners have looked for ways to reduce their expenses within the past six months. A quarter or more have also met with a financial advisor or used personal savings to support their business.
Many are also reviewing their current insurance policies in search of savings. Roughly 30% of small and mid-market owners have contacted their agents in the past six months to discuss their coverage. Another 18% of small and 27% of mid-market owners have asked their agents to requote their policy with a different carrier to find a better price or coverage.
Agents are vital to preventing coverage gaps
As economic concerns continue to weigh on business owners, insurance agents can play an important role in helping to bring options to the table without compromising their protection.
Here are four questions to ask as you serve commercial customers:
1. Are appropriate coverages in place for new or changing exposures?
Shopping based on price alone can be dangerous for your customers, especially those with evolving operations. In the food services industry, for example, the rising frequency of online ordering and mobile payment – while easier for the customer — can bring new and different cyber exposures into play for business owners. Before seeking cost-savings opportunities, it’s important for agents to ensure no coverage gaps exist based on where operations stand today and where they’re headed.
2. Can restructuring policies provide relief?
Restructuring policy terms or increasing deductible amounts could be an effective way to provide premium relief for owners in a strong capital position who are comfortable taking on more risk. Before considering this for clients, however, it’s critical to make sure strong risk mitigation tactics are in place.
3. Are clients proactively managing risk?
Look to your carrier partners to share technical expertise and industry-specific resources that can help mitigate clients’ risks and avoid costly disruptions down the line – this is especially important for the 53% of small business owners and 33% of mid-market owners who do not report having contingency planning in place if a crisis were to occur.
4. Am I working with strong and stable carriers?
A top consideration for business owners when purchasing insurance is working with a carrier that has financial strength and stability. In times of uncertainty, it’s even more important to make sure the carriers you recommend are positioned favorably to meet their promises to customers.
Challenging times present strong opportunities for agents to showcase the expertise and consultative services business owners need to make confident decisions with their insurance protection. Agents who are able to step up in these times will be well-positioned to extend their relationships with commercial clients in the future.
Tony Fenton is the vice president of underwriting & product for commercial lines at Nationwide. With more than 25 years in the insurance industry, he is an experienced professional in the leadership of multi-line commercial property & casualty operations.
Opinions expressed here are the author’s own.
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