Despite the current challenging economic scenario, agents should have an optimistic outlook for the future. Compared to many other industries, insurance has fared relatively well during prior economic crises and the agency distribution system in particular has successfully weathered many storms. These remarks were made by Renaissance Alliance senior executives to attendees at a recent agent webinar on the COVID19 economic outlook. A summary of the webinar was written up and published in this week’s issue of Agency Checklists: InsurOp-Ed: COVID19: Forward-looking economic framework for agency planning.
Renaissance Alliance Executive Chairman Kevin Callahan, CFO Andy Jenn, and Senior VP of Carrier Relationships Bill LaGram offered agents a framework for moving business forward during the COVID19 pandemic. Among the observations presented at the webinar and in the op-ed:
- There’s a shared view that the personal lines business should hold up fairly well. The impact will probably be felt in some of the nonstandard and ancillary types of coverage. With commercial lines, there is less optimism due to a variety of factors exerting downward pressure.
- The consensus is that we will experience a sharp recession and we are likely in the early stages now. Most think it will be in the low double-digit range, but the real wild card is the magnitude or duration of the downturn. Most opinions point to a sharp downturn through the second quarter and then gradual recovery throughout.
- The insurance industry is likely to experience the recovery somewhat differently than most. There is a degree of insulation to our business based on policy cycles. The recovery will likely look more like a bell curve for our industry, which will be slower and less sharp on entry to the recession and probably a little bit slower on recovery. And it is likely that we will experience growth that is closer to flat than what might have been expected on a pre COVID basis.
- The economic impact will not be evenly distributed across industries and for our own business planning going forward, it’s important to keep informed about those that are hardest hit. Roughly 46% of the job losses have fallen in the areas of food services, customer services, and sales. The restaurant industry, for example, has lost more than three million jobs since March 1. It should be noted as the pandemic continues to play out beyond the initial impact, other industries may suffer hardship and losses depending on duration and magnitude of the crisis.
- Just as we must be alert to the industries that suffer hardships, we must be on the lookout for emerging businesses and the new opportunities they present. Just as some as some traditional business segments will contract or diminish, new segments will start to form. On the commercial lines side, we need to watch how our communities react to this crisis and how innovative people respond and create solutions to some of the problems that have emerged in this crisis.
Click to read the full op-ed in Agency Checklists.
Read Kevin Callahan’s related post: COVID19: Insurance executive perspectives about navigating the coming months in your insurance agency