Cultivating an ecosystem of trust for a new generation of small business ownersA new report from Cake & Arrow explores how their research with small business owners over the past several years revealed at once the failures of the insurance industry to meet the needs of these businesses when the pandemic struck, while also surfacing opportunities for the industry to help these businesses recover, deepen their networks of support, and ultimately create more resilience in the future.
Small businesses have a long road to recovery ahead. For some, it could take years to return to their pre-Covid baseline. Independent agents, with the inroads and infrastructure to connect small business owners, can play a vital role in quickening the recovery, rebuilding trust with the insurance industry, and creating resilience for small businesses in the future. How can the insurance industry support and enable them?
Insurance And The Small Biz Recovery
Two years into the global pandemic, it’s no secret that small businesses have experienced more than their fair share of the fallout. Hundreds of thou- sands have permanently closed their doors, while those that have managed to survive continue to face an uncertain future. Just as things were starting to look like they might be getting back to normal, high inflation, climbing interest rates, supply chain issues and an increasingly competitive labor market have lead to mounting uncertainty.
It’s clear that for small businesses, the effects of the pandemic are far from over, and if a return to “normal” is even possible, it’s not happening tomorrow. In all likelihood, the way that small businesses operate in the future will look fundamentally different; a new normal is inevitable.
If existing small businesses are to survive and new ones are to emerge and play their essential role in revitalizing local economies post-Covid, extreme changes to their operating models, to technology, to staffing models and labor practices will be imperative, requiring support and collaboration across the ecosystem of product and service companies (such as insurance) that surround and support these businesses. All of this requires time, money, and resources, of course, but also a fresh look at the vulnerabilities that existed for small businesses long before the pandemic
A Missed Opportunity To Support Small business Owners
Over the past several years, Cake & Arrow has engaged in dozens of 1:1 conversations with small business owners, looking to better understand the effects of Covid on their businesses, how they navigated the crisis, and what lessons the insurance industry can take from their experiences.
What came to light in their research has as much to do with the specific impact of Covid as it does to do with the fault lines and vulnerabilities that have plagued small businesses for years, making the effects of the pandemic all the more catastrophic. Staffing problems, financial instability, operational inefficiencies, and a lack of structural and institutional support are all issues that have emerged in their research, and while worsened by the pandemic, for the most part pre-dated it. For an industry predicated on creating resilience and stability for businesses and supporting them in times of crisis, insurance largely disappointed small business owners. Most we spoke with not only felt that their insurance companies did not meet the needs of their businesses before the pandemic, but also felt abandoned by them when the pandemic struck.
In fact, when we asked small business owners about their experience with insurance and the pandemic, we found that:
1.) Most had zero to little trust in their insurance companies to begin with and didn’t expect much from them when the pandemic struck.
2.) While initially reaching out to their insurance agents, most came up empty handed, feeling that while their insurance agents wanted to help, their hands were tied by the carriers.
3.) While most trust and like their agents and brokers, they have a narrow view of what their agents can do for them, seeing agents as little more than a resource to find insurance and explain their policies.
4.). Many cobbled together ad hoc support systems in the aftermath of the pandemic–turning to fellow business owners, accountants, and friends– while still feeling bereft of the guidance and support they needed.
5.)The smaller the business, the more disconnected and unsupported the business owners felt, with fewer resources to turn to.
Empowering Independent Agents To Empower And Connect Their Customers
As small business owners carve out a new path for- ward and seek to retool and remodel their business- es to be more digital, more financially resilient, and to operate more efficiently, one of the keys to their success will lie in being better connected to digitally-enabled and trustworthy support, guidance, and expertise, especially in times of need. The insurance industry can play an important role in filling this void, using some of the tools and resources already at its disposal and directing their digital transformation efforts toward repositioning the industry as a place for small business owners to connect, network, compare notes, and find the support and expertise they need for the business to thrive. The key to doing so lies with agents.
Covid has clearly deepened the challenges of small business owners and insurance agents are needed more than ever. Yet many remain ill-equipped to meet these challenges. Despite their essential role in distribution, the agent/broker model is deficient, and customers are the ones who suffer.
“Fixing” the customer experience in insurance isn’t about technology or tools, it’s about trust. And the key to building trust with small business owners is building trust with agents. Cake & Arrow’s research shows that many agents and brokers feel threatened by insurance carrier efforts to “improve customer experience” and often view things like self-servicing tools for customers as an attempt to bypass agents and cut out the middle man (ie. the agent). Building trust with agents, and ultimately with customers, demands that carriers acknowledge and respect the relationships that agents have cultivated with customers, and empower them to deepen these relationships.
This starts by continuing to improve upon ease of doing business for agents. Cake & Arrow’s research has consistently found that a good user experience is key to building trust. The easier it is to work with a carrier, the more an agent will trust them. This requires research, not just with customers but with agents as well. Surveying, observing, and listening to agents to better understand their needs, attitudes, behaviors and mindsets will help carriers improve the agent experience, strengthening rapport and deepening trust.
Finally, carriers should do every- thing they can to empower agents to do more for their customers–not only equipping them with the technology, the tools, and the kinds of products and services their small businesses customers need to build resilience and better run their businesses in the post-Covid world, but with tools and technology to help their customers better connect with one another. Strengthening and seeding these relation- ships – between customer and customer and customer and agent at a grassroots level will not only help these business owners become more resilient, but will cultivate an entire ecosystem of trust, one that connects customers, agents, and carriers.
Three Visions For The Future Independent Agent
Empowered, digitally enabled independent agents have the opportunity to be at the heart of the post-Covid small business recovery. While some carriers have made substantial progress on their digital transformation efforts and on improving EDB for agents over the course of the past year, all insurance leaders should explore innovative ways to leverage the bonds of the trust independent agents have with their customers and customers have with one another. To do so is to deliver more value to customers and ultimately rebuild trust in the insurance industry. In the this section we’ll review three visions of independent agents that can help the industry reimagine the agent-broker paradigm for the modern age and better serve small business owners as they seek to rebuild their businesses after Covid.
Cultivating An Ecosystem Of Trust
For too long, the insurance industry has struggled to engender trust with their customers. In this regard, the pandemic didn’t do the industry any favors, especially when it comes to small businesses. Over and over again, Cake & Arrow research has found that trust starts small. It begins with trust in a neighbor, a friend, a family member, a colleague and grows outward and upward from there. Extending through a network of local and personal ties, via various analog and digital channels and touchpoints, trust at the individual level begets trust at the institutional level. Independent agents who can strengthen these networks of neighbors, friends, business owners, and community members will be rewarded with the trust and loyalty they cultivate among these networks. It’s a dynamic that insurance carriers benefit from too. Trust flourishes when agents are empowered with the tools not just to relate to their customers, but to help their customers relate to one another in meaningful ways. By empowering agents in this way, insurance carriers too can reap the rewards of trust and loyalty that naturally spring forth.