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The pandemic continues to impact the risk management profiles of many businesses. Distributors can address the challenges for clients — and themselves.

By Bart Shachnow, Sales Performance Director, Zurich North America

The pandemic is still with us, and new variants are complicating and elongating our recovery from this health and economic crisis. In 2020, I shared ideas that brokers might find useful in their customer relationships. Over a year later, many of them still apply.

We are still seeing some hard market conditions (though moderating somewhat). Labor shortages remain highly problematic, especially in sectors like retail and hospitality. And global supply chains are still highly vulnerable. The massive cargo ship Ever Given that bottled up the Suez Canal highlighted the fact that 12% of world trade passes through that waterway. A fire at a chip plant in Japan continues to slow down auto manufacturing globally. Many public swimming pools in the U.S. had to close this year because of an ongoing shortage of chlorine resulting from a fire at a chlorine plant in Louisiana that supplies about one-third of pool chlorine in the U.S.

I opened my article back in 2020 saying that our customers need us now more than ever. I still believe that. Here’s an update on why.

Risk management is STILL the top priority

The most important financial planning priority to any business is protecting it from catastrophic loss exposures. Some insurance brokers do not fully buy into this, which does a disservice to their clients and themselves.

Loss exposures come in many forms: financial, reputational and manmade and/or natural disasters. Business objectives, like rolling out a new product or expanding into a new market — no matter how well planned or executed — can be immediately imperiled, disrupted or prevented by an unexpected event.

One area of opportunity is helping our customers create and implement business continuity and resiliency plans. What is the company’s plan if its manufacturing operation goes offline due to a fire or flood? Or its supply chain is disrupted? Or if it is the victim of a cyber attack? Very few companies have contingency plans that address these issues.

In addition to being prepared when a major loss event happens, demonstrating to a carrier that a company has a comprehensive and robust continuity and resiliency plan will also favorably impact the underwriting process, potentially translating into broader coverage at better rates.

Risk management is an investment companies need to make, especially in these uncertain times. Employees will refuse to work for companies with unsafe workplace conditions, and customers will similarly refuse to do business with organizations that put their own employees or customers at risk. Yes, I appreciate that the industry has made great strides in educating clients about total cost of risk (TCOR). But where I feel TCOR has been deficient is failing to clearly establish why risk management is the top priority, instead of just one important priority among others.

In effect, the risk management and insurance planning work you do is the most important guidance your customers receive. Embrace that reality and work diligently to explain to your clients why that is true, especially to those who are not totally convinced. (See above.)

Customers are paying closer attention to their financials

Most businesses continue to look for ways to reduce what they perceive to be discretionary spending. Unfortunately, insurance and risk management expenses fall into this category for many of our customers. This is an attitude you need to address.

Approach budgeting with your customer to include both total risk management and insurance outlays, and develop a plan that operationalizes all aspects of risk management (avoidance, reduction, retention and transfer). Demonstrate how your plan will aggressively and creatively employ both non-insurance and insurance solutions to help effectively protect their organization. Emphasize the broad range of risk management strategies that involve little or no cost. COVID-19-related examples include hybrid workforce approaches and rotating shifts. This kind of emphasis can help reinforce with the customer that you’re not focused on merely selling them more insurance.

Remember that labor issues will continue to prevail, and a major challenge for employers is the ability to attract, retain, motivate and compensate a quality work force. That’s where a well-thought out, well-designed and (especially) an effectively communicated employee benefits program comes into play. The insurance industry has created a broad range of products that will be attractive to employees, affordable to employers and which can meet the needs of a demographically diverse work force. Break down any barriers that exist between the P&C and employee benefits departments in your agency. Territoriality and non-communication between these two departments sabotages many great sales opportunities.

Of course, review the broad range of cost-saving strategies related to your customer’s insurance program, like premium financing arrangements, increased deductibles and self-insured retentions (SIRs), reduced limits, etc. At the same time, put your insurance spend into a context that your customer can understand. For example, are they willing to spend 2% of their cash flow to protect 95% of their assets and reputation?

Get reacquainted with your customers

The businesses you arranged insurance for 12-18 months ago are probably not the same companies now. Their financial circumstances, business models, plans and/or projections are likely to have changed significantly. Focus on what changes your customers have made and think proactively and creatively about solving resulting risk management and insurance programming issues.

Many may not have survived or are continuing to feel financial stress. Some may have shifted into new lines of business. Invariably their risk profiles will have changed. Insurance carriers will be scrutinizing insureds much more closely.

Engage in honest, open and frequent communication

Higher insurance rates combined with potentially more coverage limitations and exclusions can be frustrating for customers. So being honest, transparent and accessible are still key communication strategies.

Further, it is likely that underwriters will be asking hard questions and for more information. Anticipating that will make you better prepared in your discussions with underwriters. Anticipate underwriting areas of concern and address them proactively. This will increase your credibility with both your customers and your preferred carriers.

Make your expectations clear with your carriers of choice

As mentioned, from now into the foreseeable future, insurance providers are generally going to be more conservative in their underwriting practices. But we’re all in this together, so clarify your expectations about the working relationship you need to have with your carriers.

Specifically, demand that your carriers clearly articulate their underwriting appetite, what their coverages provide, what you need in terms of turnaround times on your quotes and your firm’s servicing needs related to policy changes, endorsements and the like. And getting back to the underwriting process: Demand that underwriters also clearly stipulate what information they need and why they need it. Insurers are just as interested in being time- and cost-efficient as you are. While changing and emerging client information may beget more questions, let’s all try to be as efficient in the data-gathering process as possible.

Finally, in an increasingly complex world, the last thing you need from a carrier is aggravation, so seek out insurance providers that are easy to do business with, empathetic and responsive to your needs. At the same time, any relationship, whether it’s business or personal, is always a two-way street, so understand and be sensitive to carrier requirements that will facilitate ease of doing business.

Don’t stop looking for new business

Yes, the COVID-19 pandemic triggered an economic crisis that continues to challenge the insurance industry. But the pandemic spawned a broad range of new businesses, which will all continue to need robust risk management and insurance programs. Some sectors have seen surges in activity that have created opportunities for business growth.

The housing market is one. According to the National Association of Realtors, the median existing home sales price rose 23.4% over last year, the second highest level since January 1999. Homes on the market typically sold in 17 days. This is due to both low mortgage rates and also supply issues: the demand for housing far exceeds supply by about 5.5 million units.

The U.S. economy is growing at a fast pace (according to the Conference Board, U.S. real GDP will rise about 6% in 2021 versus 2020). While inflation fears have grown, this represents another opportunity for us to help the people we work with, especially the customers who trust and depend on us.

While this time has been challenging for everyone, everywhere, both personally and professionally, how we in the insurance sector respond can make all the difference in the continued recovery.

 

For more information on COVID-19 visit Zurich's Coronavirus Resource Hub