When a fire closed the family-owned Larez restaurant in Carlsbad, N.M., the owners were devastated.
They were unsure how long it would take to reopen and they were worried about lost income. How would they continue to pay their employees? What would happen to the restaurant's customers? Everything the family had worked for was at risk.
Although the fire disrupted their lives and business, the Larez family was lucky in one important respect—they had the right insurance coverage thanks to their independent agent, Cress Insurance Consultants Inc.
As soon as the insurer was informed of the claim, a property claims adjuster was on the way. The restaurant reopened in just two weeks.
However, other businesses in similar circumstance can end up not opening as quickly—or sometimes not at all. For them, an unexpected catastrophe can turn their business dream into a nightmare on Main Street.
Helping clients to avoid disaster can enhance the role of the independent agent as a trusted advisor and lead to opening the door to word-of-mouth referrals and more business from existing clients.
To make that happen, independent agents need to do two things:
- Position themselves as a resource for risk-management and business-continuity ideas.
- Educate clients on how serious a disruption to their business a disaster can be.
Agent as Chief Risk Officer
It makes perfect sense for an independent-insurance agent to be seen as the small-business owners' chief risk officer. After all, knowing the client's business risks is their job.
Independent agents offer valuable information as a result of their on-the-ground experience with a range of clients and their access to a knowledge base of risk-management resources.
Most business owners, however, don't turn first to their independent agent or broker for this advice. Only 10 percent of the business owners in a Traveler's survey titled "Risk Management On Main Street" said they rely on their agents for risk-management advice and guidance. Almost three times as many—28 percent—said they rely on their attorney.
This is a lost opportunity for agents. And that's where the second mandate, educating clients and prospects about the potentially devastating impact of a sudden interruption and shutdown, comes in.
Forty-four percent of small-business owners are operating without a business-continuity plan and 64 percent have never spoken with an agent about developing one, according to the survey.
Small-business owners may simply lack the time. Or they may believe that when a business closes its doors as a result of an interruption, it is a mere hiccup for profits and customers. But the fact is that without business-interruption insurance, short-term shutdowns can easily lead to permanent closures.
What they may think will be a few hours of "closing shop" could turn into days, weeks or even months, leading to severe financial hardship or even bankruptcy. A fire, burst pipe or natural disaster could quickly snowball into a cataclysm. According to the Insurance Information Institute, more than 25 percent of all businesses never reopen their doors following a disaster.
Businesses may also overestimate the staying power and loyalty of their customers. While they may have strong community ties and a committed customer base, customers seeking essential services, from auto repair to accounting, may find they have no choice but to look elsewhere.
Prepare Clients And Be a Hero
Independent agents can draw on a wide range of products to ensure their client's business stays afloat. Business-interruption policies provide coverage for loss of business income while the doors are closed, as well as coverage for extra expense. This can provide an essential cushion by covering cost differences if a business has to relocate while the previous location is unusable.
For example, if the independent agent's commercial client has a fire as a result of an electrical problem, the business owner may be able to move to an open location nearby. This provides the business the opportunity to continue serving customers and maintain a revenue stream.
When an agent advises a client to secure extra-expense insurance, that coverage can help make up the difference in rent, provide paychecks for additional employees and cover the cost of moving.
When advising clients on a package of coverage, producers should remember that business-interruption insurance is an invaluable tool for small businesses and should be made a part of any insurance plan. Lack of awareness and preparedness, coupled with false assumptions, can spell disaster for small businesses.
By offering risk-management and business-continuity expertise, agents can gain credibility, attract new customers, expand existing accounts and, if an unforeseen event strikes, become a bona fide hero to their clients.
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