5 Ways to Help Comm. Clients Navigate a Hardening Market

5 Ways to Help Commercial Clients Navigate a Hardening Market

written by Brendan Zyvoloski, Zywave

The commercial insurance market has reached a crossroads at a time when many aspects of the industry are changing. This change is happening at a pace that has never been seen before. Digital innovations, changing consumer behaviors and consolidation in the independent brokerage channel are all influencing how insurance is sold and the expectations businesses place on their independent insurance agent.

All of this is occurring alongside a hardening market for property-casualty insurance. This market is characterized by stricter underwriting standards, reduced capacity, restricted coverage and less competition among insurance carriers for new business. While the hardening market is largely driven by high-level macro trends—including increasing claims costs, catastrophic losses, reduced investment certainty, social inflation, rising reinsurance costs and more—the net result for most businesses is that they are paying more for their insurance.

Alongside these rising costs, your clients are also facing dynamic short- and long-term trends in their respective industries, as well as the fallout from the COVID-19 pandemic. The bottom line is that businesses need insurance and risk management partners they can trust now more than ever.

While current market conditions are challenging, they also present an opportunity for insurance brokers and agents to separate themselves from their competition. They play a critical role in helping businesses navigate the insurance market. While this is true in soft markets, it’s especially important when the market is hardening. Those that will fare the best in a hard market are those who focus on quality service and guidance rather than strictly cost.

Here are five strategies to best position your agency and clients for the current market:

1) Stay Informed

Your clients rely on you to provide tailored guidance. This starts by understanding the current market conditions yourself.

The best agents not only have a good sense of high-level pricing trends, but also the conditions that their clients are likely to experience. You need to have a handle on how market conditions are affecting businesses with similar risk profiles. Having this understanding will allow you to provide meaningful advice to your clients on how they can address this market from a coverage standpoint, as well as a risk management perspective.

Now is a great time to think about ways to strengthen your relationship with insurance carriers. Having a good sense of how insurance carriers and their underwriters view the current market will give you a leg up.

2) Take the Time to Explain the Market to Your Clients

No one likes bad news. This is especially true for commercial insurance buyers who may see dramatic premium increases. However, bad news is even worse when it comes as a surprise.

In the current market, agents should be transparent with clients when it comes to potential price increases. Doing so will help your clients manage their expectations and allow them to properly budget for increased insurance costs. Providing this information well ahead of renewal has the added benefits of giving you ample time to develop a solid plan for positioning your clients’ risks to underwriters.

3) Be a True Risk Management Partner

It’s no secret that many insurance carriers are tightening up continued on page 30

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1st Quarter Results & A Look Ahead

written by Jim Campbell, Partner, Reagan Consulting

sponsored by our partners at

According to an “advance” estimate released by the Bureau of Economic Analysis last week, the U.S. economy shrank at an annualized rate of 4.8% in Q1 which translates to an actual decline of 1.2% for the quarter. This estimate, likely to be revised in late-May, represents an end to the consistently positive growth achieved in recent years and the biggest drop in U.S. economic activity since the Great Recession.

Real GDP: Percent Change from Preceding Quarter Real GDP: Percent Change from Preceding Quarter

2.5% 3.5% 2.9%

1.1% 3.1%

2.0% 2.1% 2.1%

Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019

-4.8%

Q1 2020

Source: U.S. Bureau of Economic Analysis. Data seasonally adjusted at annual rates Source: U.S. Bureau of Economic Analysis. Data seasonally adjusted at annual rates.

Since the pandemic-driven lockdowns were not enacted until March, the impact on Q1 results was limited. Most economists anticipate a much steeper decline in second-quarter activity, especially with sectors of the economy largely shut down all of April. Early forecasts suggest the annualized Q2 contraction will likely be at least 25% and may be as much as 40% or more. Given the virtual certainty of a Q2 contraction, it can be argued the U.S. economy is effectively already in recession, technically defined as two consecutive quarters of negative growth.

Against this broader economic backdrop, several publicly traded brokers reported Q1 results last week. Following are a few highlights:

Brown & Brown reported Q1 organic growth of 5.6%, up slightly from 5.2% for Q4 2019. According to CEO, Powell Brown, the company is anticipating the biggest pandemic-driven impact to financial performance will be realized in Q3, although Q2 growth could also be negative. Full-year organic growth is expected to fall within a range of slightly positive to down by lowto-mid single digits.

Marsh & McLennan reported Q1 growth in underlying revenue of 5%. However, the outlook for 2020 has changed in light of the current crisis. Revised forecasts anticipate modest declines in underlying revenue for full-year 2020, with deepest declines expected in the second and third quarters. Modestly positive underlying revenue growth for full-year 2020 remains a possibility, depending on the pace of recovery. age Segment of 3.1%, including a negative 3.2% COVID-related adjustment to estimated revenues. This adjustment anticipates Q1 revenues will be affected by future audits, cancellations, midterm adjustments, decreases in estimated covered lives, and/or decreases from volume and loss ratio sensitive contingent contracts. While the company does expect to see some declines in client exposure units, further premium rate increases may partially offset these declines. Although negative growth is possible for Q2 and Q3, the expectation is for positive growth in Q4 with full-year 2020 growth flat to modestly negative. At this point, management expects 2021 growth to return to 2019 levels.

The economic data and financial results released over the past week provide some clarity into Q1 and indicate some future expectations as outlined below:

Strong Start. The pre-COVID environment yielded strong results for the U.S. economy and for the insurance brokerage industry specifically. Both entered the year in a position of strength. If continued, 2020 may well have been a banner year for organic growth in insurance distribution. And while this course has been severely altered, the strong start and related momentum should provide some cushion to soften the blow from post-COVID results and help support full-year 2020 results for agents and brokers.

Potential for Strong Finish. Q2 may be the economic low point with a sharp contraction virtually assured. But we’re also seeing the early stages of the economic reopening in Q2. Assuming the pace of reopening gains momentum through the quarter, recovery may be underway by Q3. Economists will debate the shape of the recovery, but a strong recovery in the second half of the year seems possible. According to Treasury Secretary Steven Mnuchin, “As we begin to reopen the economy in May and June, you’re going to see the economy really bounce back in July, August and September.”

We are facing an unprecedented challenge and uncertainty remains high. In the words of the great philosopher, Yogi Berra, “It’s tough to make predictions, especially if it’s about the future.” What appears certain is U.S. economic results for Q2 will be ugly. Many businesses, including agents and brokers, will feel the effects for at least the next two quarters. But this crisis will pass and the economy will reboot. Perhaps soon. And for insurance agents and brokers, there are reasons to expect that a strong, successful, and growing firm entering 2020 will be a strong, successful, and growing firm entering 2021. Reprinted with permission from Reagan Consulting, Inc. u

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ISO's New MicroBOP

Get Ready to Rumble in the Micro-Business Market written by Joseph Lam & Jessica Dias

The economic disruption caused by COVID-19 has left millions of people unemployed – at what many say is the highest rate since the Great Depression. In considering the future, those who've lost their jobs may think about starting a homebased business as the crisis eases or perhaps working more independently. This could create an expansion of the microbusiness market – businesses with few or no employees that often operate out of homes or shared spaces.

Agents and insurers are already eager to tap into this space because it's rife with potential profit and attractive for many reasons. There are often no sites to visit and inspect; and many micro-businessowners prefer online service, letting agents pass-through sales to insurers quickly. Owners may have insurance needs they're unaware of, providing agents with the potential to cross-sell coverages as the business grows. They can start with a businessowners package and expand into auto and life. Once trust is established, agents can help contribute to the business's growth with tailored insurance solutions to ensure that insurance needs keep up with business expansion. This has been a proven way for agents to develop relationships and increase sales.

All of this adds to the potential of the micro-business market. But because the segment is unique, traditional coverages and approaches often don't work. Agents and insurers need to develop a deeper understanding of the market and find new ways to properly penetrate it – today and especially as it grows in the future

Market Overview: The Expanding MicroBiz Universe

Micro-businesses dominate the small business space in the sheer number of their operations:

80% of all U.S. businesses have no employees. 1 69% of entrepreneurs start their business in their home. 2 About 50% of all firms are home-based. 3

As more entrepreneurs eschew traditional jobs to work in micro-businesses, they're providing a widening variety of popular services that generally fall into three models:

Home-based businesses: These operations are primarily conducted out of the home but can take place at other locations, like a home baker selling products in a farmers' market.

Shared-space businesses: These are businesses that rotate to share space and include pop-up vendors, mobile shops, automated vending, and offices with coworking members. Gig economy workers: The gig economy generally refers to workers who hold temporary positions, organizations that contract with independent workers for short-term engagements, and other part-time models.

All these segments are expanding rapidly, as indicated by research:

Through shared kitchens, the food delivery market could grow from $35 billion to $365 billion by 2030. 4 According to a 2017 Cake & Arrow analysis,5 in 2014, 34 percent of the U.S. labor force – 54 million to 68 million people – was composed of independent workers in the gig economy; that is anticipated to increase to 40 percent by 2020.

Not Just Your Typical Small Commercial Market

The factors that make micro-businesses work are what make them different from traditional commercial businesses. Without structure coverages, there are often limited property exposures. One of the challenges in insuring micro-businesses is also the mindset that often comes with an entrepreneur. Home-based businessowners may believe personal insurance policies cover the activity or the cost of coverage is too high. Pricing may be a barrier for insurers trying to enter the market. Also, new micro-businessowners can find insurance policies difficult to comprehend and purchasing insurance overwhelming. Many simply don't understand the need for insurance. All this contributes to a reluctance to seek coverage.

It also creates a vast untapped market for agents and insurers: Verisk research reveals that 43 percent of small businesses with under 100 employees are uninsured.6 Many more are extremely underinsured for the risks they face.

The Solution? The Right Tools

To arm agents and insurers with the proper tools to handle micro-businesses, ISO, a Verisk business, created the MicroBusinessowners Program. Designed for micro-businesses of four employees or fewer, it offers basic coverages without the extras that traditional brick-and-mortar businesses may need. This keeps costs low, provides property and liability coverage subject to the policy that was procured, and considers the unique needs of micro-businesses:

1. Micro-businesses are on the go: Since the potential customer's business is often not tied to a defined location, this continued on page 44

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Daniel Talks Agency Technology: Agency Management Systems pt. 3

What Are the Questions You Should be Asking? compiled by Daniel Smith, CAE

What are the key pieces of technology for the modern agency? How should you implement them and train your staff to use them? In this series I will look into agency technology and specific systems and how you can implement them at your agency.

In the second article in this series, we talked about what questions you should be asking to sort through the systems and find the one that's best for your agency. We're going to continue that in this edition with important questions agents should be keeping in mind and answers from the agents, system providers and others we received feedback from.

We often hear that agents, “pay too much for a system their people can’t even use.” What can agents do to better measure the ROI from their system?

Michael Doran, President, SIS/Partner Platform: Two things: The process (data conversion, timing, training, back-ups and general logistics) of successfully moving from current AMS to a new one and differentiating between what is shown on a demonstration of software and what is actually possible. Agents are done a huge disservice when given a “silver bullet” approach to running their business – it doesn’t exist. Changing agency management systems has it’s challenges and if you choose the wrong provider, it’ll will bring your agency to a crawl.

Jenna Kleiber, Director of Marketing & Sales for Jenesis Software: Choosing a system that will fit their needs without overwhelming their staff with features they may not use will help with their ROI. If offered different training options, be sure to choose the one that fits your staff's learning styles the best. The training provided with the system is a key part of being able to measure your ROI. Agency owners need to be involved and committed requiring the training to be completed in a timely manner.

Brent Sheppard, President, Xanatek, Inc.: It’s important to evaluate the individual needs of an agency – what do I need this system to do for me? How can I get my staff to use the system correctly? There are so many bells and whistles available in systems that may not be used by a small agency, but necessary for larger agencies. Training is important in this aspect too, as in how new staff are trained and supported. How will they learn to use a system if another staff member who doesn’t use it trains them? To measure ROI, they should not just look at the overall profitability for new business or retention, but consider the technology as a business investment and asset to minimize E&O exposure. Another way to look at this is How much am I paying for the features I will not be using? Can I get the features I need in a system without paying for all the bells and whistles?

With ROI in mind, what do you feel are some of the top ways that the right system can help agencies sell more and operate more efficiently?

Rushang Shah, VP of Marketing for Hawksoft: Efficient workflows with a streamlined set of steps or screens allow CSRs and Producers to save time that can be reapplied towards meaningful activities like relationship-building with clients, quarterly check-ins, and community engagement that will help your agency’s brand.

The right system will offer insureds the ability to self-service the most important needs 24/7. For example, insureds should be able to generate a Certificate of Insurance for existing cert holders or add new cert holders at midnight — without the need to wait until the morning to speak with the agent.

Use automation to alert staff in the agency about the most important things they need to attend to (ie, prioritize the list of tasks by urgent/important). Often, people spend the majority of their time doing things that are urgent but not important. What if the software could help prioritize for you based a series of rules the agency creates?

Cam Winterburn, President at NetVu Nashville and Agent at Winterburn & Associates Insurance, LLC: I honestly think most true management systems are dropping the ball on the selling aspect – so I'll skip that. What they are doing is maximizing efficiencies on service. Anything that you can integrate with a system or automate within a system saves time. This allows you to spend more time on building connections, selling, or many other things that can generate revenue for your agency.

Shaun McNeil, VP of Sales for EZ Lynx: Use system data to fill in the sales pipeline. If the system is smart, it’ll never let you forget a prospect. Automate repetitive, non-revenue generating tasks, like retention efforts. How much is 1 point of retention worth to the agency? How about 8 points? Focus on

client relationship & service touchpoints from simple things like B-day campaigns and cancellation notices to more complex like certificate self-service. Systems have gotten smarter. Agencies who avoid CL downloads should reconsider as systems no longer overwrite them.

Stuart Ganis, SVP-Sales and Business Development for ITC: When Producers use a system in the sales process for commercial submissions, it makes Account Management a breeze. When everyone (yes, you too Producers) documents every conversation with clients, it makes the system worth every dime. I used to ask our agents, “If you’re abducted by an alien tonight, can I manage your accounts as if you were here?” It’s a great way increase ROI on management systems.

When your downloads are set up correctly and you’re using most or all features, it changes everything including culture in your agency. I don’t know if you can measure the true ROI considering efficiency in sales, support and the ability to protect yourself from E&O exposure. The best way to get ROI from a system is to learn it and prioritize usage.

How do you feel training and utilization of a system has improved, or needs to improve, in the current marketplace?

Kleiber, Jenesis: Training and utilization have come a long way in the last 15 years. There didn't use to be a lot of help when you bought a system. Now, there are videos you can refer to anytime, webinars and live one-on-one training/help, as well as chats available where you can ask specific questions when needed. Some systems, like Jenesis, even come with a certification process to ensure that your users will be comfortable using the system before moving forward on their own without their trainer. This leaves less room for them to become overwhelmed and potentially giving up altogether.

Doran, PartnerPlatform: Agencies have three primary areas to focus on learning: Insurance Products, Service and Sales Skills, and then how technology support those critical components. The best agencies have adopted a learning culture whether they call it that or not. Know your options for learning and make time to learn – individually and as a team or agency. Be intentional and consistent. AMS providers should be doing this at no cost to the agency. To charge additional is counter to serving the agency and gets in the way of agency progress.

Shah, Hawksoft: As with most other software platforms, users tend to only use 40% of the platform's features. One way to increase feature awareness is to have a contextual help system (often shown with bubbles or tooltips). These will show an overlay on the software the first time a user engages a workflow. It teaches at the point and time of highest need – when the user is wanting to engage the workflow.

Winterburn, NetVu Nashville: I think this is an area where they can truly improve. Nobody seems to have a true onboarding workflow for a new employee, and the big systems are so vast – with multiple different workflows – that it would

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be hard to do. We have been able to use a screen record system to host quick videos to walk employees through frequent problems in our system. I think an on demand library like this would really help on a larger scale.

Sheppard, Xanatek: Training needs to be flexible, especially with smaller agencies. The ability to do it at the agent’s convenience is important, as they can’t always schedule out, or commit, based on business needs. But training needs to be affordable, as well as convenient, otherwise the agency will never complete the training – thus never fully utilizing it either.

The average agency only uses 40% of what they have. Agents need to continue to learn after they purchase a system. All the vendors have multiple ways to learn about the system, but to truly utilize what is there, they need to set aside time for the entire staff to learn the new features that are being added. Time is also needed to revisit items they already know. Many times the office is doing the same process in different ways throughout the office. Take the time to make sure your office is utilizing the system most efficiently!

Are there other thoughts/comments you’d like to have considered?

McNeil, EZLynx: Look beyond the system to the provider’s business model & ownership. Some longstanding and larger software system providers have started to demand 3, 5 even 7 year contracts. Annual price increases with no promise of future innovation. Ask yourself, what business conditions drive this kind of behavior? Debt, frequent ownership transition, growth mainly through acquisition or even an aging product platform may all be factors. Regardless, intent, focus and priorities of any partner matter.

Ganis, ITC: Price is important, but don’t go with the cheapest product on the market. Insurance Agents (me included) complain about clients being price sensitive but then make price one of the top weights in their decision-making process. You get what you pay for and in the grand scheme of things, a 10- 20% difference in price shouldn’t be the deciding factor. Don’t settle because of price, choose a system that works for you.

Doran, PartnerPlatform: It’s worth noting that data conversion and agency transitions are not all created equal and what was once acceptable (or at least accepted) is no longer the case. For any AMS provider, if time has not been spent developing the necessary details for a successful conversion, then it requires a transparent conversation. Every AMS does conversions for a living and some much better than others. Agencies need to check references and understand the anticipated work that will fall on their shoulders during this time and build that time and cost into the transition.

More to Come

We'll continue this article series with a comparison of systems and functions in the next issue of The Tennessee Insuror. u

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Future Leaders Spotlight presented by

Nima Hayati • Third Door Insurance - Nashville

Nima Hayati's parents came to the US for school back in 1977. After he was born, they decided to stay, gain their citizenship, and start a life in Nashville. He credits his parents with much of his success, including the lesson of how to work hard for the things you want. Although he says they barely spoke

Nima Hayati English when they came to of Third Door

Insurance the U.S., he credits their hard work at their jobs, earning college degrees, and raising a successful family all while trying to fit in to the American culture. Nima says overcoming the challenges they went through helped shape the foundation of his work ethic, competitive drive and desire to succeed.

The Insuror: Can you tell us a little about your current job title and responsibilities?

Nima: My partner Chad Boruff and I started Third Door Insurance at the end of 2019. We have two shops, one in Nashville which is the home office and a satellite location in Knoxville. I myself handle more of the operations side of things. Recruiting, developing employees and carrier relationships as well as monitoring sales activities and driving production. Chad handles more of the day-to-day sales side of things. He manages our producers and helps with sales strategies, cultivation of ideas and client relationships.

The Insuror: What can you tell us about your educational background?

Nima: I studied Marketing and Business Administration at Middle Tennessee State University. I was also highly involved in the sales program. I participated on the sales team within the marketing department and attended several sales competitions throughout the Southeast. After college I was hired by Federated Insurance and moved to Minnesota where I studied and attended insurance classes for almost 12 months. By the time I got out of their training program I was more knowledgeable than most insurance producers that have been in the job for five years. The training I received from Federated was outstanding! The experience I gained from working for that company really helped me understand not only the insurance products but also the insurance industry in general. It set the foundation of owning and running our agency that we have today.

The Insuror: How and why did you get your career in the insurance industry started?

Nima: Funny story actually. There were two careers that I did not want to explore after graduating college. One, a car salesman, and two, an insurance salesman. It seemed like on every job board, tons of auto dealers were hiring for sales people and every insurance agency, broker – you name it – was hiring for producers. Every phone call I would get was a recruiter pitching me for an insurance salesman job. I thought those jobs were dime a dozen and they didn't seem special. I didn't want to be just another sales person.

When Federated approached me and explained the career path, the training, and what the job entails with the incentives and how you truly have to build relationships with clients in order to gain success, that intrigued me. It interested me enough to go on a four month interview process and then move to Minnesota for a 12 month training program. Fast forward 13 years later, now I own my own insurance agency! Funny how things work out.

The Insuror: Do you have any influences/role models in the industry?

Nima: I do, and funny enough it is another ex-Federated employee who started their own agency in Columbia, South Carolina. As a matter of fact, he was my roommate and study partner while we were both in training in Minnesota. Bryan and his partner started their agency a few years before Chad and I did. He had already gone through the hurdles of dealing with carriers, hiring producers, and all the other challenges we come across when starting an agency. I bounced ideas, thoughts, and concerns off of him prior to us even starting our agency.

We still currently talk at least once a month if not more about what's going on in our companies and how we are growing. We constantly are helping each other with ideas of how we can get better. It really helps to have an advocate and someone who's already been through the challenges of starting an agency, but also he is in the younger stages of building their agency so you're going through the same challenges together. We come across adversities they haven't seen or vice versa and we share and help and grow because we're in this together and not really competing for business.

The Insuror: Is there any advice you could offer Young Agents or others in the industry to achieve success in their careers?

Nima: Do we have several pages dedicated to the answer to this question? I feel like this is what I do on a day-to-day basis, mentoring, teaching and developing my young producers. Chad and I have a combined 22 years of experience in the business, although still fairly young compared to most other agency owners in the industry. People think that insurance is old and insurance is boring, where it's actually the opposite. It's an evolving industry and we have been forced to change with technology which is a good thing. But it's also a very rewarding and exciting career because not only do we sell a product that gives people a peace of mind, but we step in and help people at their biggest time of need - during a claim. Whether it be a small car accident or a huge tornado that takes out the entire building, they look to us for support during this time and to help put them back to where they were. There is a lot of value in what we do, our job is crucial to our clients, and the relationships we build with our people is extremely important for a long term career.

The advice I would give young industry professionals is this job, this career in insurance isn't about how successful you are in year one. It isn’t about your success in year two or year three. Every year you are working to build your business, your client base and your relationships little by little. Then, after 10, 15, 20 years you can look back and really notice and enjoy the success you have built, the clients you have protected and the relationships you have created.

The Insuror: As an independent agent, you have many partners in this industry, including carriers, MGAs and many more. How do you determine which ones are the right relationships?

Nima: Seems like there are 100 carriers out there who want to partner with you at any given moment. It’s very difficult, it can be very challenging to navigate who and which ones are the right fit. What we look for is a partnership. It's not about who can give us the most commission, the best year-end bonuses, the most extravagant incentive trips. Those things are nice and important, but it's not what grows an agency. When we look at carriers we ask questions like, do we get a dedicated underwriter? Is that underwriter directly involved, incentivized, and tied in to help us grow and retain profitable business? We ask what the growth projection looks like for that carrier and our state. And lastly, we ask about markets. Is this carrier one who will decline an opportunity because they had one shock loss a few years ago, or do the underwriters have flexibility in allowing that quote to go through? There is not an easy answer to this question because sometimes it's trial and error. We spent probably six months trying to decide whether our agency was the right fit for an MGA and we decided against it. We want to grow organically. We wanted to develop relationships with carriers, which in turn has turned into a partnership with many of them helping us grow our agency get to the next level with production. Nima: Thank you for giving me the opportunity to talk about Third Door Insurance. We're excited to be part of Insurors of Tennessee and hope we can be together in person again soon. u

Young Agents '20

Upcoming Events and Information

Our Young Agents Committee strives to offer young insurance professionals with opportunities to network and develop in the industry. We accomplish this by hosting receptions, classes and volunteer opportunities designed to meet the needs of insurance professionals under 40 years of age across Tennessee. Over 500 Insurors members participate in the Young Agents program in some fashion.

With most of our Spring events postponed, our committee will revisit opportunities to hold local events in the next available window of scheduling. We hope you'll join us at a future scheduled Young Agents event or contact us for more information.

Young Agents Committee

Cy Young - Chair President Young-Hughes Insurance Alamo cy@younghughesinsurance.com

Forbes Harris - Region I Producer Harris, Madden & Powell Insurance Memphis fharris@hmpins.com

Matt Felgendreher - Region II Executive Vice President W.C. Dillon Company & Insight Risk Management Nashville mfelgendreher@irmllc.com

Derek Wright - Region III Agent/Principal Graham & Cook Insurance Knoxville derek@grahamandcook.com

For more info, or for any questions on the Young Agents Committee and its programs, please contact Daniel Smith at dsmith@insurors.org or call 615.515.2601. u

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