Adjust your value proposition to fit new risks

This past year, new risks are emerging that are affecting insurance agencies. According to a McKinsey & Co. report, “… while insurance as an industry may be slow to change, its risk environment is not.” Amid the developing risks in the digital realm, the physical environment and the mid-pandemic world, your agency is figuring out how to adapt its value proposition to meet customers’ needs. This article will discuss some areas to consider when re-evaluating your agency’s offerings.

What is value proposition?

Your agency’s value proposition is arguably the most vital element of your overall marketing messaging. A value proposition explains how your product solves customers’ problems or improves their situations. Let’s face it, it’s not always easy for agencies to differentiate from one another. From our work helping insurance agencies get sales appointments with their prospects, differentiating (on paper) has proven to be the most challenging piece of the sales process—but it is the most important first step toward an effective sales strategy. To consistently provide value and remain competitive in the market, adapt your value proposition based on the world around you.

The digital world

An important facet of the insurance industry is digitalization, and the potential risks of new technology. A few of the latest market drivers include an increase in use of cloud-based technology, stricter government regulations and heightening threats to personal property. The new and unexplored world involving AI also will pose some new risks—particularly around confidentiality. These drivers encourage plenty of opportunities, ranging from rapid economic development to globalization, making it imperative that your business proposition reflects these growth expectations. However, consider the challenges that digitization will bring, such as potential crime incidents and deceiving terms and conditions.

Cyber liability insurance can protect data and protect from cyberattacks and hacking. With all these factors in mind, there is no denying that the demand for cyber liability insurance won’t be going away any time soon. If cyber liability insurance is one of your agency’s main competencies, be sure to advertise your successes within this line of coverage, and come up with a clear value proposition to that end. While businesses are aware of the risk, if they haven’t lived through a problem, they need clear understanding of the true risks posed and what they stand to lose.

The physical world

Not only does the digital world require adjustments, but the physical world does, too. One of the more critical elements to consider is changes in the environment. According to Partner Engineering and Science, there are three main environmental issues: vapor intrusion, radon gas exposure and emerging contaminants. These hazards can be expensive to the commercial real-estate industry, which affects insurance. Similarly, climate change is affecting profits negatively. As Forbes stated, with impacts such as sea-level changes and increasing water intrusion after storms, climate poses a “significant threat to both residential and commercial buildings and can negatively impact a real estate investment.”

These rising environmental issues result in higher costs for business owners, so insurance policies are adjusted to compensate for the additional costs. Commercial insurance is more vulnerable to a changing economy than other lines. The prominent changes in the environment will affect employee benefits and costs to the employer for commercial spaces. It is evident that these environmental problems won’t go away any time soon, so you may want to consider adjusting your offerings accordingly to capitalize on this trend.

The post-pandemic world

According to McKinsey & Co., pandemics tend to affect so many people and businesses at the same time, they “are typically considered uninsurable by the market alone.” As a result, there is “the possibility for insurers and governments to collaborate further on improved pandemic risk assessment, risk communication, and financial protection.” While each line of insurance may be impacted by the pandemic differently, there will likely be a decline in premiums as a whole.

According to The Washington Post, the unemployment rate hit 14.7% in April 2020 during the nationwide lockdown. Can that happen again? UI leveled off in 2022-2023 to the usual average of between 3 and 4% but the spike we saw was mind-blowing. Some construction companies turned to independent contractors and temp workers for tasks such as painting. However, these companies found that the people they hired were not insured, and it created a major risk to them. With so many new risks, it is imperative for insurance agencies to adapt their value proposition to fit these possible conditions.  For example, though company-offered health benefits always have been a retention strategy—now more than ever, small businesses must figure out a way to offer them, given the tight labor market to find and retain talent. As the agent writing the business, ask yourself how you can best fit the needs of prospects and adjust during this time.

In conclusion, there are a variety of changes in the world and, as a result, plenty of new risks are emerging that will affect insurance agencies. Adjusting your agency’s value proposition to meet prospects’ needs is important with the current risks in the pandemic world, the physical environment, and the digital realm. How will your agency adapt to these three risks, and then update your value proposition so prospects and clients know you’ve made the change? Overall, you will benefit the most by tailoring your value proposition to these trends.

This article originally appeared in the January 2021 issue of PIA Magazine and was updated in August 2023.