Could Your Agency Pass a Risk Audit?

Our industry was built on a Main Street model in a Father Knows Best world. Some agents haven’t evolved while the world has.

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2017 is here. Are you, your agency and your clients ready for the future? Are you managing your risks for the future like you have in the past? Are your advising your clients about managing their risks like you have in the past? Will this work tomorrow? Our industry is very good at “managing” static risks (those unchanged by society). P&C agents are great at providing counsel or products to address issues of lawsuits and damage to property and loss of its use. Life/financial services/group and individual benefit professionals can counsel or insure risk of death, unplanned aging, accident and sickness, unemployment and other contingencies (special needs child, etc.). See also: Risk Management, in Plain English   What follows focuses on some dynamic risks (those influenced by a changing society), including issues of politics, climate change, energy, economics, government intervention, math (sustainability and solvency), competition and demographics. In the Bible in Luke 4:23, we read, “Physician heal thyself.” Those of us in the insurance world need to take that advice. In a world of dynamic change, insure (and assure) yourself and your clients for the future. Consider these “risks”:
  1. Politics — The election is over. Politics have changed. Two years ago, could you have predicted that the two presidential candidates in the 2016 election political blood bath would be very flawed candidates with 60% negatives? One who barely outran a democratic socialist, and the other who destroyed almost two dozen “traditional” candidates. Our country, economy and the world are dancing to a different beat.
  2. Climate change/natural disasters — I won’t debate if our climate is warming or trending toward the next ice age. I know bad stuff has been happening. Hurricanes, tornadoes, earthquakes (traditional or fracking), the 2016 great flood, droughts, etc. are causing mega-damage, and we the people (as taxpayers or premium payers) must pay for these losses. Money paid to cover losses of yesterday are not available in next year’s budget.
  3. Energy — This is a great place to work when oil is at $80 a barrel. At $40 a barrel, life is tough. Environmentalists think high gas prices are good. Many “working folks” don’t agree. The cost of the great debate on climate change will be paid by “we the people.” The cost will be high.
  4. Economy — Economics will drive tomorrow. Wages, unemployment, marketplace expectations, addiction to government, incentives for innovation (entrepreneurship) or taxing success will be issues. Brexit proved some folks aren’t enamored with the “global economy.” The U.S. presidential election showed the divide between the “more” and “less” government camps. Some want to tax the 1%. Others see the world as 47% as givers and 47% takers. Still others only use benefits, while some pay for benefits they never use. Yesterday’s economy can’t get us to tomorrow’s demands or possibilities.
  5. Government engagement is probably the biggest “insurance coverage” and expense we all pay. Think Medicare, Medicaid (as healthcare and nursing home reinsurer of last resort), VA, ACA, Social Security, NFIP and the U. S. as reinsurer of any disaster or “money need” that is not covered elsewhere. These “premiums” (taxes) are a huge drain on our resources.
  6. Math (sustainability and solvency) — Government programs like the ones mentioned above are like a pipeline. Taxpayers’ money flows in the front end of the line, and benefits flow out of the other end. Because of the political nature of all government programs, there is a valve on the front end of the line that is used to limit the number of dollars flowing in (we don’t want to anger the taxpayers who vote) and a valve on the back end of the line is opened wide to ensure maximum benefits (don’t want to anger beneficiaries who vote). Ultimately, all such systems collapse. Just look at the national debt. (The ACA is one example of the non-sustainability of good intentions.)
  7. Competition — Our industry was built on a Main Street model in a Father Knows Best world. It has survived and prospered. Unfortunately, some agents haven’t evolved while the world they live in has. We are in a Modern Family world shopping in a global economy where Main Street is not as much of an issue as Facebook, Google, Airbnb, Amazon, Uber, artificial intelligence (anticipating needs) and the next disruptive innovation.
  8. Millennials — The greatest generation, the Boomers, is exiting stage left. Now, the Gen Xers, Gen Yers and millennials are taking their place at the wheel. They are as different from me as they can be. This will change what, where, how and when you sell and how you are compensated.
See also: How to ‘Gamify’ Risk Management   Think you’re ready for tomorrow? Think again… Carpe mañana.

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