Double Whammy

It starts with the housing market. Then it seeps into construction, typically residential followed by commercial. Then it travels to manufacturing, then retail, then hospitality. It differs by region. It might be worse in San Francisco or Las Vegas than in Sacramento or Scottsdale. It may even vary within a state, north versus south, urban versus suburban.

It shows up in layoffs and hiring freezes, fewer car and home sales, increased foreclosures and credit denials, less travel and dining out, reduced payrolls and receipts. It spreads. Some people even contend talking about it makes it worse.

It, of course, is the “R” word. Recession.

Eventually, a recession affects insurance agents or, more accurately, their customers. Main Street agents are hurt perhaps more than big agencies, but it really depends on their book of business. As an upstate New York agent says, “An agent’s business is a direct reflection of his clients’ business. So if clients are affected by [a recession,] the agents are as well.”

Agents are well aware of what’s happening in their local economy. They know it well — because they see it in their customers’ eyes.

As Arizona agent Jeff LaScala says, “When houses are selling and moving, people have the opportunity to shop their coverage, making contact with an agent, perhaps not only to insure the home, but to review the auto or to add an umbrella. The activity is extremely important. This stagnant [climate] is the biggest problem with a recession.”

Without a doubt, customers are feeling the effects of the impending recession. And if that weren’t enough, agents are facing a double-whammy caused by the “S” words. Soft market.

For the most part, agents are more concerned about the soft market continuing to eat into their books and profits than they are about any harm from a recession. If allowed to choose, most would take a recession over a prolonged soft market any day. But in today’s economy, agents and brokers are dealing with the unfortunate “double whammy,” when the potential recession is coinciding with a soft market.

Are agents equipped to handle both?

This issue of Insurance Journal explores that question, reporting on how agents are faring in this economy and market, and what strategies might help.

One of the soundest pieces of advice is from Paul Hering, CEO for San Diego-based B&B Co., who cautions about making major changes or cutbacks just because times are tight, and competition is tough. Take advantage when others panic, he advises.

“Not unlike the stock market where the objective is to buy low and sell high, in our business when times are tough, good things can happen.”

Hering noted his company is using the soft market and recessionary period to recruit talent when more people are looking for jobs, to make mergers, and to position itself to prosper when the economy strengthens.

Yes, there may be a soft market — and even a recession. But perhaps the double-whammy should be viewed as somewhat of a break, in that the downtime in business can provide agents and brokers with a period to reposition themselves and take advantage of opportunities when times turn around.

Topics Agencies Market