Business Risk and Insurance: Advising Clients on Reducing Risk

To excel as an insurance agent, you need to do more than just push policies. Closing deals is great, but if you want to keep those sales going and grow long term, then you also have to build relationships with clients. That means communicating with clients in ways beyond sales pitches. One area that’s ripe for discussion is the connection between business risk and insurance.

Business owners face a variety of risks that they can try to address with insurance, such as those related to property damage, cyber attacks, liability concerns, and more. While selling policies to business owners that potentially mitigate these risks can be part of the solution, insurance agents can often add value and strengthen client relationships by also advising clients on how to reduce risks.

In this article, we’ll examine how insurance agents can help clients better navigate business risks, both in terms of how they operate their organizations and how they use insurance to further protect against risk.

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Review Business Practices

If insurance agents want to advise business owners on risk, a good place to start is by helping them review their business practices. Since business risk typically doesn’t just affect one area, insurance agents can use their knowledge gained from working with multiple types of businesses to advise clients on best practices across multiple disciplines. Some examples include:

Leadership

The way a company is structured and the way that business leaders focus on risk can make a big difference in terms of the overall challenges a business faces and its ability to respond to risks.

“Risk management, particularly loss control, begins at the top of any organization. If the head of [a] company makes it a point to emphasize safety, compliance, and lawful and ethical behavior, the rest of the organization is more likely to follow suit,” notes the Insurance Information Institute.

So, insurance agents might be able to communicate this importance to business owners, rather than letting them think they can pass off 100 percent of their risk concerns to department managers, for example. 

Technology

The technology that a business uses can also make a big impact on risk, both in terms of the business risks that technology creates and the ability for technology to mitigate risk.

For example, insurance agents might be able to advise clients on what they’re seeing in terms of cyber risk as companies add technologies to enable remote work. At the same time, insurance agents might have insights into what types of software companies are using to monitor cyber threats. Or, perhaps they’re aware of discounts that carriers provide for the use of certain technologies that reduce risk, like security systems. 

Finance

If business risks like cyber attacks or floods come to fruition, that can directly affect the bottom line, especially if there are gaps in insurance coverage. So, insurance agents might want to advise clients to review their financial practices, like budgeting, so that they can get through periods where risks become realities.

Insurance agents also might be able to advise business owners on other types of financial practices that don’t necessarily pertain directly to insurance, but discussing this area could help strengthen relationships. For example, if a business owner is trying to handle bookkeeping on their own, that can lead to unnecessary errors. Perhaps insurance agents have worked with other clients who have already gone through this type of issue on their own, and the agent can relay the story of how another client was able to reduce financial risk by using an external bookkeeper.  

Natural Disaster Preparedness

Another important business risk that’s often increasing is the threat of natural disasters, particularly those fueled by climate change. Even though insurance agents might not be climate experts, they might still have insights that they can share to reduce risk, such as if installing certain flood sensors could lead to reduced insurance premiums while also reducing the potential for damage.

As Deloitte notes, “carriers can incentivize policyholders who invest in mitigating climate-related risks and containing related claims through adaptation measures,” such as with discounts. “Individual insurers can also leverage and support industry-wide efforts to educate policyholders and lawmakers about how to fortify properties against severe weather events.”

Review Insurance Policies

In addition to reviewing business practices with clients, insurance agents can also help advise on business risks by reviewing insurance policies.

For example, a client might not realize that they have a liability policy that does not cover cyber attacks. An insurance agent could walk the client through their policy to make sure they understand what is and what isn’t covered so that they can then make more informed decisions. If a business feels like it can’t afford any downtime, for instance, then it could add business interruption insurance.

Likewise, insurance agents can review areas such as coverage limits to make sure that a client’s policy aligns with their risk level. If a client has recently expanded their business, for example, they may have more that’s financially at stake. So, their current coverage limits might not be enough. Thus, insurance agents who take the time to walk clients through areas like this can end up in win-win situations, where clients buy larger policies while potentially reducing their financial risk.

Offering The Review

These types of reviews can occur as part of the annual renewal process. Rather than just sending clients a renewal notice, meeting with them could reveal these types of opportunities to adjust and expand policies. Insurance agents can also leave the door open for clients to schedule policy reviews with them whenever they go through a business change, such as hiring more employees or opening a new location.

This type of review could also apply to making sure clients know how to use their coverage in the event that a risk does come to fruition. The longer it takes to submit an insurance claim and receive payment, the more risk a client might face, such as if they aren’t in a position to handle out-of-pocket expenses and they need to get up and running again quickly. By understanding what to do in the event a situation like a natural disaster occurs, clients can reduce their risk and might appreciate your support.

Provide Helpful Resources

Overall, agents can do a lot to advise organizations when it comes to business risk and insurance. While agents might not be experts in every area of risk, they can provide helpful resources to clients that add value and strengthen relationships. For example, insurance agents can share:

• Stories about what they’ve seen similar types of companies do to address business risks
• Content such as blog posts and reports that provide helpful information on tackling relevant business risks
• Connections to other business owners or professionals in their networks who can help others manage certain risks

In doing so, insurance agents can elevate themselves to a more trusted position. That way, even if you don’t offer the cheapest policies, clients may be more willing to stick with you due to the value you provide. In turn, that can lead to benefits like higher renewal rates, expanded coverage among existing clients, and referrals that help you add new clients.