Agility: Why do insurance agencies need a business continuity plan? What’s the benefit?
Moberg: Agencies have a greater need than many other businesses as they are the “go to” for assistance for their clients following a disaster. The ability to help their clients following a local disaster is where the rubber meets the road. Being properly prepared instills confidence in the agency staff as well as the agency’s clients.
Not being prepared to open your doors following a local disaster can be very costly as well. In many cases the agency staff will need help as much as the agency clients. Does the plan address the needs of all involved? Having worked with a number of agencies following Hugo, Andrew, Katrina and numerous other storms, those with effective plans recovered much more quickly, and with far less economic loss, in fact a good client of mine with an excellent recovery plan, including generators, supplies, access plans for staff, never closed their doors except for the day of the storm. As a result they were not only able to assist their own clients, many local people who were unable to find their agents came to them for help because their lights were on. As a result the agency wrote over $100K new revenue following the storm from people they helped.
Although it may not be a direct E&O exposure, the inability of the agency to respond to the insured’s needs on a timely basis following a loss only adds to the distress of the client potentially creating anger, and the feeling by the client that they should pursue legal action to get results.
Agility: A lot of agencies see disaster recovery/business continuity planning as a “nice to have” not a “need to have.” Why is that?
Moberg: Usually, these agencies have never personally experienced a disaster that directly affected them. A foolish excuse for them just as it is for their clients. Agencies need to set the example for their clients. Our industry is well aware of how a major loss can affect a business. Many businesses that experience a major loss never reopen their doors. Agencies don’t have the option to just close. Our relationship with our clients is one that assumes we will be there to service our clients following a loss.
Agility: What is the single biggest disaster recovery/business continuity mistake that agencies make?
Moberg: Not taking the need seriously, feeling it can’t happen to them. An agency does not have to be coastal, or in a high risk area for a specific peril to be at risk. All businesses face the possibility of a fire, tornado, etc. Also, the plan needs to be tested at least annually, and communicated with the staff. Everyone needs to know the plan. I was with an agency recently when they ran a series of drills. Of the 60 plus people in the agency only 2 knew where the AED was located, and they discovered the battery was dead.
As far as Agility goes, many agencies do not fully understand how the process works in case of a disaster, and may not be properly insured. I advise agencies to make sure they review their own property coverage and make sure they have enough additional expense coverage to pay for an insurable Agility event.
Agility: What, if any, are the differences between what a smaller independent agent should plan for versus a larger agency when it comes to disaster planning?
Moberg: Smaller agencies may have less resources to prepare a plan, or to pay for a recovery service. However, the larger agency may have the advantage of multiple locations to help them move operations in case one location is out of service. Bottom line however is they all need a plan.
Good disaster recovery plans are available from many of the state associations. We provide a plan to every agency we audit.
Agility: Do you have any recommendations for educational resources you could share with other agency leaders?
Moberg: Subscribe to the Agility online news letters, read the many articles that have been published over the years. One of the best was written by a Charleston, SC agent following Hugo. He described all the things they did wrong in detail. Talk to agencies that have been through a disaster. They can tell you where their plans worked and where they didn’t.
– Eric Moberg
Download Agility’s infographic “6 Steps to Prepare Your Insurance Agency ” for simple steps you can take to prepare your agency for a disaster.