Supporting personal lines clients during uncertain economic times
Nationwide’s latest Agency Forward survey indicates that economic uncertainty is changing consumer behavior. From the gas pump to the grocery store, many are adjusting their budgets and dining out or driving less to meet their financial needs. Independent insurance agents are also taking note of the belt-tightening mindset, with just over half expecting customers in the next six months to reduce their insurance coverage or limits to prepare for a possible recession. But economic uncertainty brings opportunity by opening the door for agents to educate their customers and demonstrate their value as someone clients can count on to look out for their best interests during tough economic times.
Consumer economic outlook
Consumers have a negative outlook on economic conditions, with over 4 in 10 reporting in Nationwide’s most recent survey that their personal financial situation has worsened over the past six months. Looking ahead at the next six months, they also have a less-than-rosy outlook, with most expecting interest rates and inflation to climb, fueling recession worries. The three top consumer takeaways from the economic outlook survey include the following:
- Inflation and economic uncertainty are top concerns, negatively impacting mental health. When thinking about their personal finances, the majority of consumers are concerned about inflation (77%) or an economic downturn in the United States (71%). Two-thirds agree their personal financial situation has been negatively impacted by inflation over the past six months, which has also negatively impacted mental health for over half of consumers, especially Generation Z.
- Economic uncertainty is impacting perceptions of job security. Thinking about how a potential recession or economic downturn in the United States may impact them, 4 in 10 consumers are concerned about losing their job, being furloughed or taking a pay cut. Additionally, about 1 in 4 employed consumers report that employees at their organization have been asked to take on more responsibilities without additional compensation in the past six months, and about 1 in 5 have seen hiring slowdowns.
- Consumers are reconsidering their insurance coverage as tough economic times loom. Nearly half of consumers expect their insurance premiums to increase over the next six months, and most are considering reviewing or have already reviewed their insurance policies in the past six months. Of interest, most have or plan to contact their insurance agent in the next six months to discuss coverage or have already looked or will look for ways to save on premiums for their existing policies. Consumers proactively looking for ways to protect their wallets enables agents to listen and offer cost-saving strategies in line with their client’s insurance needs.
Independent insurance agent economic outlook
Despite having a more positive outlook on current business conditions, roughly half or more principal agents report negative impacts from inflation, interest rate hikes and a tight labor market. For the next six months, inflation is principal agents’ top concern. There is also concern about customers changing insurance carriers, which may be related to the fact that agents expect premiums to rise.
In line with consumer survey results, roughly two-thirds of independent insurance agents expect insurance premiums to rise in the coming months, potentially offsetting the negative impacts of inflation and other market conditions. Two-thirds of principal agents also report seeing their revenue increase or hold steady over the past six months, perhaps contributing to their optimism about business conditions.
Similar to past economic downturns, almost two-thirds of independent agents recall customers reducing their insurance coverage or limits during recessionary times to manage their expenses. Most agents also report an uptick in customers attempting to renegotiate their policies in the past six months as a result of rising interest rates, with 9 in 10 agents also saying insurance premiums are rising for their customers.
Support personal lines clients through education and cost-savings
While people may be feeling anxious about unexpected expenses and financial hardship, independent agents can ease their concerns about insurance by taking a more consultative approach and offering discount opportunities to help manage insurance costs. More specifically, they can use these strategies:
Focus on consultation services rather than price
Independent agents excel at understanding their customers and tailoring insurance solutions to meet those needs. Now is an ideal time to demonstrate that value by offering personal lines clients coverage reviews to ensure they are both properly insured and taking advantage of carrier discounts. When meeting with customers, agents should listen to their needs and concerns, then offer solutions with an eye toward ways to save. They should not hesitate to meet client objections around new approaches, such as higher deductibles, placing their insurance with one carrier or using telematics, which offers greater discounts with better driving. Regardless of customers’ adoption of any cost-saving ideas, offering expertise and potential ways to save goes a long way in showing that agents care.
Educate clients on product discounts
Price matters, so reducing expenses always feels good, especially during economic downturns. Based on a client’s home and auto insurance needs, agents should educate them on how to ensure their insurance keeps up with their life and the potential carrier discounts they may qualify for. At Nationwide, discounts vary by location and include:
- Going paperless—Opting for email when bills, documents and other important insurance notices are available online reduces both paper waste and costs, a win-win.
- Quoting early—Quoting in advance of coverage start may save an extra 5% on a premium.
- Updating bill payment method—Paying in full or through a recurring EFT (electronic fund transfer) may yield reduced premiums.
- Choosing telematics—Electing a usage-based auto insurance program, such as SmartMiles and SmartRide, enables insureds to save up to a 40% discount based on mileage and safe driving practices.
- Bundling home and auto policies—Multiline policies for auto and home can bring up to 20% in savings.
- Installing Smart Home protection devices—Using innovative ways to help keep a home safe from water damage, break-ins, fires and more with support from in-home protection devices offers up to a 10% discount through the Smart Home.
- Earning home improvement credits—Renovating a home’s plumbing, heating, cooling or electrical systems, as well as roof, may qualify for additional discounts.
- Opting for higher deductibles— Increasing deductibles for home and auto may offer premium reduction opportunities.
- Remaining claims-free—By avoiding losses, homeowners may qualify for a lower premium on their insurance when they stay claims-free.
Also, agents must not forget to educate homeowners about replacement cost values, as rising material and labor costs can lead to being underinsured.
Turn challenging economic times into opportunities
Shifting from selling on price to demonstrating the value of working with the right insurance partner—one who is looking out for a client’s best interests with the right coverages and solutions to keep premiums as low as possible—sets an agent apart as a trusted advisor.
Nationwide partnered with Edelman Data & Intelligence to conduct a 15-minute national online survey of 2,000 general population consumers nationally represented by age, gender, race and region; 200 Gen Z consumers; and 401 independent insurance agents, including principals, producers and customer service representatives. The survey was fielded from Sept. 6-19, 2022. As a member in good standing with The Insights Association as well as ESOMAR Edelman Data & Intelligence conducts all research in accordance with local, national and international laws as well as in line with all Market Research Standards and Guidelines.