It’s something that small agencies don’t like to think about, but disaster can mean the loss or passing of key personnel.
Here, Roland Chan, founder and CEO of FindBob, an InsurTech that helps insurance enterprises manage, engage, retain and acquire insurance distribution talent, offers advice for carriers to share with agency partners about the need for continuity planning.
Seven Reasons for an Agency Continuity Plan
While the world continues to enter challenging and uncertain times ahead, the insurance industry has previously benefited from the lessons learned from Hurricanes Harvey, Florence and Michael on how to be prepared for the COVID-19 outbreak. Agents and agencies across the country have assembled incident management teams, iterated over both the personnel and business continuity impacts. They’ve established early and frequent client communication both on remote working policies and procedures as well as how they will continue to maintain high levels of service through this trying time.
As we’ve all been witnessing, corporations across the globe have been responding to customers through thoughtful letters on how they are prepared to address their needs. As an agent, you’ve likely done this too. Did that client communication include something like this:
“Additionally, and under less than ideal circumstances, I am also prepared for a premature death or disabling condition which would prevent me from meeting your service expectations.”
A recent study conducted by a leading insurer found that 48 percent of all small businesses do not have a business continuity plan. The Federal Emergency Management Agency (FEMA) estimates that 40 percent of businesses do not reopen after a disaster, and another 25 percent fail within their first year. The Big I has assembled some fabulous resources on Disaster Planning here. In the case of many insurance agencies where the structure is a single-owner sole proprietorship, prolonged absence due to disability, retirement, loss of license or death will have a catastrophic impact on the business’ ability to endure.
Don’t fool yourself into thinking because you can communicate with your clients via Skype that you’ve properly stress-tested your business continuity plan. That’s a false positive. A truly robust business continuity plan needs to account for more than loss of facilities.
If you’ve procrastinated to this point despite knowing you need to put a plan in place, and the COVID-19 pandemic isn’t enough to motivate you, here are seven more reasons to ensure that your continuity plan takes into account loss of key personnel.
1. Do it for your Clients
In the event your plan requires activation, the circumstances will undoubtedly be heavy and involuted. Your continuity partner and your loved ones will benefit from having understanding, knowledgeable clients. Not only will your plan ensure they’ll be cared for in your absence, but communicating your plan in advance will also encourage them to be more supportive as well. And what better way to communicate to business owners the value and mechanics of a continuity plan than by demonstrating to them the strength of yours.
2. Do it for your Loved Ones
Those of you who help your clients with estate planning know that it will help their heirs, who may be at a disadvantage, from having to make critical decisions at a difficult time. Your business continuity plan is no different. In many cases, your family will know little about your operation or service model, let alone understand how to transition it to another agent. Spare them the complexity and allow them to focus on dealing with the emotion of your loss.
3. Do it for your Team
During your recovery, how will compensation be split from the revenues your clients generate? Should you pass away, how long will your family receive that income? Will they at all? You simply cannot conclude that compensation will continue in perpetuity, and ironing these things out ahead of time will save you and your team an enormous amount of grief.
4. Do it for your Employees
If your business includes licensed or unlicensed staff, similar to your loved ones, they too may be dealing with an overwhelming amount of emotion. In many cases, they are your directors of first impressions and the strength of their relationships with your clientele will be leveraged in your absence until you are able to return. It’s imperative for them to be effective during this time that they have a solid understanding of the continuity plan and are given the opportunity to participate in its review and updating on a periodic basis.
5. Do it for the Value of Your Life’s Work
It’s clear that for many agents, their practice represents their life’s work. In many cases, it’s their most valuable asset as well. In the event of your death or disability, your business’ value will begin to erode. A continuity plan will help to preserve value in the short term and ensure clients stick around for the long haul. Moreover, it can have a meaningful impact on your estate planning—particularly if a swift sale is required. Part of the process is to have a regular valuation done on your business, which will be useful to facilitate the transaction and measure how expenses will be addressed.
6. Do it to Kickstart Your Succession
The process of building your business continuity plan will reveal a lot about yourself, your team and areas of opportunity required to improve your operation. It is also a fantastic building block for succession. Your business continuity partner could evolve into an ideal succession partner who you transition ownership and leadership to over time.
7. Do it for Growth
Once you’ve established a business continuity plan for yourself, you’ll marvel at how simple it was to complete. Next, if you’re still in growth mode, look around and see what practices or businesses in your area could benefit from also having a robust business continuity plan where you could fill the role of business continuity partner. You’ve now cornered that agent’s business in the event of an unexpected calamity and positioned yourself as their potential next-generation successor.
The likelihood of a founder dying or becoming disabled as a result of the COVID-19 pandemic is an unlikely scenario. Hopefully, these events will prompt professionals to prepare their businesses for both the unlikely and the inevitable scenarios.