3 Post-COVID Predictions for the Insurance Industry

Kevin Trokey on April 20, 2020

To say our lives, personal and business, have been different over these past few weeks would be a ridiculous understatement. To say we are all excited to get back to normal would be even more so. However, we won’t be going back to an “old normal,” we’re moving into an entirely “new normal.”

Many predictions seem obvious. Businesses as a whole will have made quantum leaps forward in their use of technology. We will be more comfortable allowing our teams to work remotely. Pants will once again be part of our dress codes. 😳

But, let’s look at the insurance industry in particular. In my opinion, the landscape of insurance agencies is in the midst of the most significant shift ever experienced. Here are three predictions for how I feel it will impact our industry.

PREDICTION 1: There will be fewer agencies, but they will be more relevant than ever

The financial reward for mediocrity in our industry has been excessively high. This was especially true before the passage of ACA. The reduced commissions and bonuses brought about through the MLR (medical loss ratio) provision has reduced levels of compensation. However, mediocre-value brokers (show up for renewal, adequate at reactive service issues, and overly dependent on ball tickets and rounds of golf) have still been able to survive and do quite well.

The COVID crisis is going to change this BIG TIME.

Never before have employers so suddenly and completely had their business world turned upside down. They are facing challenges they couldn’t have conceived of just a few weeks ago, and they are experiencing the problems in numbers that are overwhelming. There has never been a scarier time to own and run a business.

This reality is driving a chasm that is expanding every day, a gap that is separating the value delivered by exceptional agencies and advisors in comparison to that provided by the mediocre.  

It’s time to up your game

I talk to agencies every day that have put themselves on the frontline with their clients, answering questions, and offering advice and services to help them navigate these unprecedented times. Many of the ways they are helping have nothing to do with the benefits programs. I promise you, they have never been more appreciated by their clients than they are right now.

I hope this sounds as if I am describing you and your agency. I hope you are saying, “Of course we’ve upped our game! What else would we do?”

You are better than you realize (some of you anyway)

This may be hard for you to see because of the bell-curve perspective. We all tend to think of ourselves as being in the middle of the curve; we feel we are relatively average or slightly better (I’m talking about what we tell ourselves, not what we tell prospects). You probably think every other agency/advisor is doing the same things for their clients that you are doing for yours.

Sadly, that is NOT the case. There are many employers out there who don’t have an advisor they can turn to, who don’t have an advisor taking a proactive role in providing guidance. I am disgusted by this. To me, it is beyond unacceptable for an employer to not have someone to lean on at a time when they most need help.

Expectations will continue to grow

Employers’ expectations of what they can and will expect from their advisors are growing exponentially. Expectations will continue to grow, even as the COVID crisis passes. The inevitable recession to follow will force businesses to operate more strategically than ever before. They will continue to need help at a level they never expected previously.

Those brokers/advisors who rise to meet this new expectation will find themselves as a more valued and coveted relationship than ever before. Those who fail to meet this new expectation will find themselves out of business.

Not only will mediocrity no longer receive ridiculous financial rewards, but mediocrity will no longer be tolerated. I’d like to say I will miss these mediocre agencies, but they have had their chance. Our industry will be more potent than ever because of this cleansing.

PREDICTION 2: Employers will be slower to embrace self-funding

I have LOVED to see the resurgence of self-funding and value-based insurance design (VBID) that has taken place over the past several years. As with anything, some advisors have approached it the right way, and there are others who, well let’s just leave it at, haven’t.

Self-funding and VBID have always been a bit intimidating for employers. Many have avoided this option from a fear of uncertainty and a lack of understanding as to how these programs work. Those advisors who have been sensitive to these concerns and recognize that self-funding isn’t for everyone have made great strides over the past several years.

The only thing certain is uncertainty

I believe the sudden and complete uncertainty that the COVID crisis delivered is going to set this trend to self-funding back several years. I make this prediction for two fundamental reasons.

First, employers are going to be terrified as to what another unexpected pandemic, or even a rebound of this one, could mean to claims costs in the future.

Second, employers are going to be worried as to how another sudden drop in their number of employees would impact their exposure in a self-funded program. If they make decisions about structuring a self-funded plan based on 500 employees, they are going to worry about how valid those assumptions will be if their number of employees drops significantly.

Yeah, I know

I do understand many of these concerns can be addressed and managed. I also get that these same dynamics will play out in fully-insured programs. I make this prediction purely from the perspective of skittish employers whose risk aversion is going to take a huge spike. The less they understand their options, the more reluctant they will be to trying something new.

Advisors who are sensitive to these concerns and who take the time to educate their clients/prospects will still find an interest in their creative solutions. However, they will also need to be more patient and realistic with the transition timeline. It may take a multi-year plan to fully move a client into a self-funded plan.

I also think that some of the inevitable anxiety will only pass with time. Many employers are going to insist on seeing exactly how the crisis has impacted various plans.

Sadly, not all advisors are going to take such an empathetic approach. The overly aggressive approach many will surely take will be one of the most significant contributors in setting the self-funded trend back. Those brokers who ramp up their attacks on the BUCAHs (Blue Cross Blue Shield, United Healthcare, Cigna, Aetna, Humana) and insist that self-funding is the ONLY option are going to find way fewer employers willing to listen to their rantings than ever before.

There are more than a few brokers out there who are probably wondering how they are going to mend the insurance carrier fences they so aggressively tore down.

PREDICTION 3: Insurance agencies will become effective marketers

Insurance agencies have long lagged behind the rest of the business world in recognizing how critical marketing is to their growth. Most agencies have relied on referrals and networking activities as their sources of new business opportunities.

Maintaining a healthy pipeline of prospects has always been a challenge for those who haven’t embraced marketing. The crisis is going to make overcoming that challenge all but impossible. Forced quarantining has taken away networking opportunities. The shutting down of most businesses has referral sources scrambling to just hold on themselves; they’re not thinking about anyone else. Many agencies’ pipelines have never been emptier. They’ve never felt less in control of their business.

Lessons are being learned

Many agencies are learning that the key to taking control is to change what and how they are communicating. Employers are facing challenges they never conceived of before and are looking for help and guidance at unprecedented levels.

Whether they are explicitly aware of it or not, some agencies are learning marketing lessons that will last well beyond the crisis. Because they have lost in-person opportunities, they have no choice but to turn to blog content, email campaigns, and social media as a way to communicate.

They are figuring out that, to get anyone to pay attention to their communications, the content has to be focused on their audience’s current challenges. And, to get the audience to take action, advisors have to be discussing solutions to the client problems.

Agencies who are doing this aren’t only putting themselves in position for post-crisis success, they are seeing new opportunities come to them right now. Not only will this new-found commitment to marketing help keep their pipelines filled, but this type of marketing activity will also make the sales conversations infinitely easier.

Your turn

So, what do you think? Do you agree or disagree with my predictions? Do you have different predictions of your own? I’d love to hear your thoughts on all of it.

Predictions are, by their very nature, generalizations. Even if predictions generally prove to be accurate, there are always exceptions. Becoming an exception is entirely within your control. You get to decide what your new normal looks like.

  • Not only can you survive intact, but you also can emerge more relevant than ever before.
  • Employers are going to be more bottom-line sensitive out of necessity. You can educate them to a comfort level with new and innovative solutions.
  • Your willingness to embrace marketing will ensure your ability to not only garner the attention of prospects when you call on them but also to have them coming to you, asking for a chance to talk.

I don’t know about you, but to me, this new normal sounds way better than the old one.

Photo by luismolinero

Topics: Leadership + Management, Agency Development, Marketing + Branding