Inflation and Insurance: Here's How You Can Help Protect Your Clients
Inflation is seeing unprecedented rates, caused by a perfect storm of conflicting factors. From the slow economic recovery after the pandemic to supply chain issues, worsened by the war in Ukraine, inflation has increased 7.7% over the last 12 months—the highest it’s been since the early 1980s.
But how does the current inflation situation impact insurance?
We’ll dive into that next, along with concrete steps you and your clients can take to help protect their wallets.
Inflation and Insurance: How They’re Impacting Your Wallet
High inflation means that the buying power of your money is lower. You simply can’t buy as much with the same amount of money as you could previously, and insurance is no exception. But how exactly does that play out when it comes to insurance coverage?
Policies Being Purchased
With pursestrings being tightened across the country, insurance is an easy item to cut out of the budget without an immediate decrease in quality of life. But surprisingly, life insurance policies have been on the rise since the pandemic. The total number of policies sold jumped 8% YoY, the highest increase since 1983.
It’s clear that the pandemic underscored the importance of life insurance, but what about other policies?
Increased Insurance Claim Costs
The surprising reality is that the purchase of insurance policies across all categories is on the rise, but not in the way we might want. Home insurance, for example, has been strongly impacted by labor and supply shortages, extreme weather risks, and the rising cost of materials. This has led to higher claim costs, rate hikes, and in some extreme cases, insurers fleeing certain high-risk states or not selling policies.
This leaves insurers no choice but to hike rates or go out of business. In fact, one Louisiana insurer raised home insurance rates a whopping 63%, while 11 small regional insurers in Louisiana went out of business. Stories like this abound across the country, and it can leave your clients more worried than ever.
What You Can Do for Your Clients
Inflation and the unknown can be scary. But insurance is designed to protect and give peace of mind. So at a time when insurance of all categories is the last thing on your clients’ minds, it’s time to help guide them toward safeguarding their homes, their loved ones, and their health.
Here’s what you can do.
Educate on Cost
When inflation is skyrocketing, people tend to batten down the hatches and cut their expenses. But the truth is that over half of Americans overestimate the cost of life insurance by as much as three times the actual cost. Agents should focus on educating their clients about the true cost of life insurance and the fact that it’s never more affordable than when they’re young and healthy. To drive that point home, almost 40% of people wish they had purchased policies at a younger age.
Help Them Review Coverage
Money has less buying power than it did when many policies were written, which means that coverage limits could suddenly be inadequate. Should something happen, they may no longer be able to afford to replace or rebuild, leaving them uncomfortably exposed.
Proactively reaching out to your clients and helping them review their coverage will not only help them prevent expensive losses should something happen, but also ensure you become a trusted advisor to them.
Help Them Reduce Risk
Insurers are looking to reduce risk in this perfect storm of inflation and higher claim costs, which can leave some policy holders at risk for non renewal. Help your clients understand what might be increasing their risk in the eyes of insurance providers and suggest ways to reduce that risk across all insurance categories, including:
- Remove risky items around the home like a trampoline, wood stoves, swimming pool, etc. and stay on top of home repairs, installing security systems, and replacing old electric wiring and plumbing.
- Quit smoking, increase exercise, and make healthier lifestyle choices.
- Avoid high risk hobbies like skydiving and mountain biking.
- Choose a safe model for your vehicle and install anti-theft devices.
Helping to reduce your clients’ risk levels will give them a better chance at policy renewal, lowered rates, and more affordable repair/rebuild costs should something happen.
Emphasis on Digital
The pandemic pushed many people into purchasing life insurance online, which was expected given the lockdowns. But it’s translating to strong numbers, even still: companies with digital capabilities are seeing a 30-50% increase in online life insurance sales since January 2020. Unfortunately, agent-driven sales are decreasing, down by as much as 50%.
Agents are certainly not immune to the effects of inflation, and those that make digital a major part of their brand are going to see success. Ramp up your social media presence, and website activity, and make your content accessible. If you can’t afford to see your sales drop as much as 50% (and who can?), then it’s time to embrace the future of insurance.
The Bottom Line: Insurance Is Key During Uncertainty
Everyone is worried about inflation and its impact on our wallets, but foregoing insurance isn’t the answer. In fact, insurance is designed to help protect against uncertainty. As an insurance agent, it’s your responsibility to help your clients weather the storm and come out stronger than ever.
Agents that do will net themselves clients for life and a stronger book of business. Agents that refuse to adapt will see their books of business dwindle, it’s as simple as that.
Need a leg up? ConsumerCoverage Agent Marketplace gives you high-quality, high-intent leads that need insurance now. You might not be able to control the economy, but you can choose your leadgen strategy, and working smarter, not harder, is more critical than ever.