With the COVID-19 pandemic not seeming to end anytime soon and its effects seeming to have an impact even long after the economy restarts, recession seems to be a shiny sword of uncertainty hanging on everyone’s head. From a simple family-man all the way to insurance agencies, legacy protection and recession-proofing is something that can set you on the right track.
Here, we shall discuss how insurance agencies can safeguard themselves from a recession in the economy, whether it’s coming or not. Better safe than sorry, right?
Recession-Proofing Insurance Agencies – A Financial Advisor’s View
Diversify Your Investment Portfolio – Preparing for the Worst & Making Good Better
What do insurance companies do very well? What would you say that you as an insurance agent have that no one else can beat you at?
Analyzing risk and taking preemptive action.
And that is exactly what comes into play when investing; analyzing the stock market for risks and taking action accordingly. Or the company as a whole could also invest and earn dividends. The key idea here is to broaden your line-up and not put all your eggs in one basket. And that means not relying on yourself completely as well.
Look at Your Cash Flow Under a Microscope
As an insurance agency, just pick up your cashflow statement, or even the income statement for that matter, and you’ll see the myriad of expenses you make as a company. Some of those expenses you might not even understand unless you’re an accountant.
We’re not asking that you start studying up on them; just that you know where they originate from and make financial scenarios for such expenses. These might be running expenses, but you should have a plan for how you’ll reduce them if recession hits; or is about to.
The most recent example of this was how insurance agencies had to take their businesses online due to the lockdowns. You can also make contingencies for what you’ll do in case you have to tackle numerous claims at once, closing up shop for a while, or more.
Ideal Clients & Their Road Through the Recession
Keeping tabs on your revenue stream and making sure they stay afloat is one of the most important steps you can take when recession-proofing your insurance agency. Easiest and most lucrative way of doing so is by differentiating between regular clients, high-paying clients and riskier clients.
Here is a table to help you understand this point better:
|High-paying, less-claiming clients||Average|
|High-paying, high-claiming clients||High|
|Low-paying, high-claiming clients||Low|
|Low-paying, low-claiming clients||Very low|
Remember, this chart is only for emergencies, not during the normal course of business.
Spreading the Word Without Marketing Expenditure
Word of mouth is a powerful marketing tool; not just because it’s free or brings you new customers ready to convert, but also because it pushes you to give the best possible service to every client. This way, you not only reduce inefficiencies in your workflow, but also generate a new revenue stream for yourself that remains strong long after other avenues have failed; such as when in recession.
Getting ready for what’s next might be more challenging than it may seem; even for the most veteran insurance agents out there. If you’re looking to protect your legacy, either by formulating a well-thought-out legacy plan or by recession-proofing your insurance agency, Legacy Armour can help you take the right steps at the right time. Contact us today via call or mail to learn more.