Starting an independent insurance company, or any other business, is a risky affair. You move from a secure position with a fixed income and foreseeable future to a place where uncertainty is the new normal. Some may think this is more true today than ever, given the economic ramifications of COVID-19.
I see it very differently. For those with the preparation, mindset and courage to move forward with their dream, this may be the best time in history to start an independent agency.
Why? History has shown that recessions and economic turmoil provide significant opportunities for new business start-ups. Today, in the insurance industry, you will find three conditions that provide fertile ground for the entrepreneur willing to take the risk and for existing institutions to adapt and thrive.
First, there are more opportunities for business growth. With massive unemployment and a shrinking economy, everyone is trying to cut costs. That means almost every insurance policy in the country is up for grabs. Existing insurance agencies spend time and attention playing defense, and history shows that many will not do what it takes.
Agencies also find it easier to get hired during a recession, when airlines dealing with declines in sales tend to moderate price increases to maintain their operations and market share. New agencies can access the products they want to sell.
Finally, hard markets always present great opportunities for new agencies. We have entered 2020 with hardening in commercial real estate and continued hardening in commercial and personal cars, and COVID-19 has reduced availability and higher prices along some lines and in some markets.
The second condition that is conducive to new start-ups is lower costs, and costs fall in a recession. Commercial vacancies are rising, office space and real estate become cheaper, equipment falls in price and becomes more readily available. Pretty much everything a new business needs to get started goes down in price, including talent.
New technologies embraced during COVID-19 also reduce operating costs while increasing speed and efficiency. This is a great combination for new agents, who can set up their business from scratch with this technology and gain an edge in the market against the incumbent operators.
External technologies such as Zoom are also valuable for seeking, selling, and relationship building, providing cheaper opportunities for a new agency to dramatically expand its market – wherever insurance sells and maintains. This is a trend that existing agencies should also embrace.
Increased talent pool
Finally, higher unemployment gives savvy entrepreneurs more opportunities to hire talented people, often with creative or lower pay. In today's environment, this talent may also see start-ups as more attractive – especially those who create work environments with the technology, mentorship, and flexible work policies that young workers want today.
While recessions always grow the talent pool, our current economic situation is unique because the same technology now widely adopted for prospecting and sales (Zoom, etc.) can be used to recruit and manage employees from anywhere. This is a great opportunity for new agencies, especially those in remote areas with low employment.
A unique coincidence
Some of the conditions described above are typically available during a recession; some are unique to the current environment. I see them combine to create incredible and unique opportunities for a start-up agency. That's why I think the next few years really are the best time in our history to start a new independent insurance company.
For existing agencies, it is time to take the same circumstances into account and adjust their operations so that they can remain competitive with a new crop of start-ups.
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