Frank Pennachio has more than 30 years of experience in the insurance industry as an agency owner and producer. In 2009, he sold his agency and co-founded Oceanus Partners, a ReSource Pro company. He is now a full-time trainer and consultant to insurance organizations.
Current recession is a chance for insurance professionals to lead
The economic impact of the pandemic has businesses looking for ways to cut costs and improve cash flow. Previously, we explained how insurance brokers can continue to lead clients and prospects during this unprecedented time. Now, brokers have an opportunity to advise through the economic downturn and ongoing challenges of doing business during COVID-19.
Here are three ways brokers can help their clients conserve cash and identify money that is locked up.
1. Find out if your clients are eligible for relief
Although many carriers are proactively offering premium deferments and other forms of relief at this time, not all of them are apt to do so without a request. It’s a good idea to check whether your clients are eligible and help them start the process. A deferment may not offer a huge amount of relief, but it can still make an impact.
Premium deferments will eventually come to an end, however, and businesses will still need to conserve cash. For a more immediate cost reduction, brokers should look to lower Workers’ Compensation and General Liability policies exposure basis where appropriate.
2. Request temporary premium changes, but avoid removing coverage
Be aware that clients may ask to reduce or remove coverage in order to lower costs. If confronted with such a request, brokers should respond with a leadership conversation, as hastily reducing or removing coverage during a precarious time may bring more harm than good.
Depending on the request, brokers can ask carriers to make changes to premiums based on reduced exposures with vehicle fleets, as well. For instance, if a client is suspending a number of their vehicles, the brokers can ask the carrier to reduce the auto liability premiums. Or, if the business vehicles are logging fewer miles, engage in a conversation to determine whether the carrier will offer some relief. Not all of these requests will be approved, but in many situations, it’s the best an insurance broker can do.
3. Negotiate collateral for large accounts
On large accounts, brokers may find that the business is on a loss sensitive rating plan. If so, the business has likely put up collateral as a requirement to qualify for the plan. This would be a good time to inquire about the appropriateness of the collateral. If the collateral is unnecessarily high, there is an opportunity to negotiate a reduction and free up some capital.
Negotiating collateral may require the services of an actuary or analytics software, but before engaging with either, call the underwriter first and explore whether or not the collateral can be reduced. In many cases, the collateral has not been reviewed for a long period of time, and upon review, it may be obvious to the underwriter that the collateral level should be adjusted. In the event the underwriter resists, invest time or money to assess current, actuarial-based loss projections.
The benefit of reducing collateral will be to either directly free up cash if the plan is secured by an assignable Certificate of Deposit or other cash equivalent, or reduce the costs of a Letter of Credit.
Contribute what you can
Brokers cannot stand on the sidelines during this recession. Do what you can to assist your clients and prospects. No matter how small the contribution, they’ll remember.
Looking for more techniques to pique interest in buyers? Let’s talk.
