Inflation is a buzzword in the financial world, but what does it mean for insurance agencies? What is the impact of inflation on an insurance agency, and how does that (sometimes cataclysmic impact) trickle down to agents, employees, and consumers?
The Impact of Inflation on Insurance Agents
Insurance agents must push through objections from consumers when quoting insurance policies. In short, consumers have less buying power, while insurance premiums are rising. It can be difficult to sell insurance in this environment.
At the same time, the insurance producer has less buying power when their commissions are paid unless the premiums paid by their customers continue to go up. Effectively, the candle’s getting burned at both ends.
How Does Inflation Impact Insurance Clients?
Inflation hits consumers when they must pay their premiums that are likely seeing increases. As mentioned, they have less buying power, because at the same time, everything costs more, meaning that the limits within every policy are constantly rising.
For example, a client who purchases homeowner’s insurance for a home they bought for $250,000 a few years ago may need $400,000 or more just to rebuild the house in the event of a total loss. As a result, the limit value of the homeowner’s policy jumps and so does the premium.
In the case of auto insurance, the cost to fix a car that has more high-value technology built into its sensors and safety features increases the cost to repair every accident and in turn, increases the cost of the insurance premiums. Layer this on top of the rising cost of the vehicle – new or used – and the premiums are likely to rise significantly in times of inflation.
In short, everyone is stifled by a lack of buying power caused by rampant inflation.
How Does Inflation Impact Insurance Agency Owners and Stakeholders?
Insurance agency owners and stakeholders are at their wit’s end determining how best to spend their funds, hire staff, provide benefits, and invest in the future. Moreover, agency owners who wish to sell are getting less back on the dollar when the contract’s signed.
In the event of a sudden succession, the partners who wish to buy in have less buying power, which could derail a succession plan from the get-go—especially if the insurance used to back the succession plan is no longer valuable enough to pay for a said succession plan.
Contact Secured Advantage for Insurance Agency Support
Reach out to our team at Secured Advantage for support when you want to improve the financial state of your business. We help insurance agencies join a larger network, save on E&O, EPLI, and D&O coverage, increase profit-sharing revenue, and even plan for succession, retirement, and more. We’re happy to help you achieve your goals and operate on your level today.