Utilizing a Growth Mindset to Prepare for Economic Shifts
These days, inflation is inescapable. As the costs associated with doing business and the costs associated with daily life continue to rise, everyone – from financial experts and reporters to business owners and employees – is speculating about what the economy is going to do. While no one has a crystal ball, smart businesses are preparing to take advantage of whatever comes next, even if that’s a recession.
Over the past five-plus years, business has been booming for the transportation industry, with plenty to go around for everyone. If that slows down, those who aren’t prepared for it, could be in a worse position. A recession isn’t a given, but some indicators point to the possibility of one on the horizon, so it’s prudent to prepare on every front, including insurance.
Whatever the economy gives us, businesses with a growth mindset will be in a position not only to survive, but to thrive and grow. Those with a fixed mindset consider insurance to be just another necessary expense taken off their top line. A growth mindset asks: What if you could use your insurance program to leverage whatever the economy gives you?
In a good economy, the stock market is flush with cash. All that money has to go somewhere, and one of most common places for it to go is insurance, particularly commercial insurance in California, since it is such a large market. That creates surplus – more insurance appetite than buyers – which drives costs down because insurance companies are competing to get your business on their books.
When the economy recesses and the market hardens, the opposite happens. With less cash in the market, capital pulls out of insurance and in response, companies restrict their appetite and get pickier. Instead of fighting for business, they start looking for reasons to raise rates or say no, unless you are best in class.
For businesses, that means that at the same time you are facing the threat of revenue going down, you could see a major expense – insurance – go up. But you don’t have to sit by and accept this fate. You can act now to leverage your insurance program and lower your cost structure, so you are more competitive if the economy recesses. If you’ve done the prep to take on more risk and lower your costs, you can use a potential recession as a growth vehicle.
In order to be in a position to do this, you should already be prioritizing proactive risk mitigation and have an active claims management team. The first 24-48 hours after a claim is filed is the most critical timeframe for preventing litigation. If you can say with confidence that you have a team that immediately activates, communicates in real time, works in harmony to resolve claims and prevents litigation, your claims management process is probably where it needs to be.
The second prerequisite for being positioned to take on more risk is to be high performing. Is your CSA (Compliance, Safety, Accountability) score in the top 25% of all operators in the industry? In order to get the best insurance offerings, you need to be best in class. Insurance companies want to see you in the green when it comes to CSA scores. Generally speaking, to be in the best position to take on more risk, you also want your loss history to be 35% or less in relation to premiums paid.
Assuming your risk mitigation & claims management are up to par, the next step is to evaluate how you are telling your story. How are you positioning your company as best in class so insurance companies still want to fight for your business regardless of whether the insurance and economic market is hard or soft?
Underwriters consume insurance quotes and requests the same way they always have. From most brokers, they receive digital apps in black and white that include a loss summary, a fleet schedule, a driver schedule and similar information. To fill in the blanks and understand your full story, underwriters go online. They put themselves in the shoes of a customer or potential employee, consuming everything they can find about a company – from brand videos to employee reviews through these unique perspectives. They want to know what people are saying about a company as a work environment because happy employees lead to quality service and that means lower risk.
Regardless of the market conditions, underwriters want good deals. A company that already looks good on paper can really set itself apart with an online brand that includes great Indeed scores, rave Glassdoor reviews, and well-produced brand videos about company culture. All these things are risk factors for insurance companies and underwriters are looking for red flags, or the absence of them.
When it comes to what your online brand communicates, you have two options: take control and dictate the story, or passively allow others to create your story for you. At Trucking Proud, we help our clients be champions of their own stories.
If you are proactively telling your story, your risk mitigation and claims management programs, as well as CSA scores are best in class, combined with a growth mindset, there are options available to position your insurance program as an asset to help you: higher deductibles and captives. Companies with 100+ units potentially qualify for higher deductible programs of $100,000 or more, which can yield a 50% or more reduction in rate/premium, depending on your claim history. For companies that are high performing but have less than 100 units, large deductibles are less of an option, but captives can be utilized to lower your insurance costs over the long term. Both of these insuring options will still need to consume your story in a way that paints the most positive picture possible.
Could the economy recess? It could. But the companies that embrace this information, take control of their story, take some risk, and leverage insurance as an asset are going to grow through any conditions. Those that sit back and let whatever happens happen have a higher likelihood of being hurt by insurance costs.
If you have a growth mindset and choose to prepare your company for whatever may come, we can help. At Trucking Proud, we have products that can help you lower your insurance costs by taking on more strategic risk, whether that’s moving into a larger deductible or into captives. Not only that, we can help you overhaul your external brand, tell your story and bring your company to life for those consuming it online.