ACG - Agency Consulting Group

The PIPELINE

A national monthly newsletter for agency principals dedicated to agency management topic

THE EFFECTS OF A NEW ADMINISTRATION ON THE INSURANCE INDUSTRY PREDICTIONS

By now everyone has exhausted themselves congratulating themselves or driving daggers into their hearts over the election of Donald Trump to the Presidency. For some it is TETOWAKI (The End of The World As We Know It) and for others it is near the second coming.

In reality it will be neither. In a few weeks President Trump will be inaugurated. Like his predecessors he will find Washington gridlock frustrating and his hair, like all others who have achieved this office, will either fall out or turn grey from the stress of being the most powerful man in the world. Like our own business conversions in succession and perpetuation planning, the success of the Trump administration will depend on his ability to manage a thousand tasks simultaneously. And, like our own transitions in the insurance agency business, his success will depend on the human assets on which he draws to fight the battles and on his coordination and decision making abilities.

50% of the nation doesn’t believe in his ability to be successful in this job. But most will not purposely act to harm or defeat his initiatives. We MUST wish him well because the results of his labors will affect each and every one of us. We will all watch the play progress and will decide by our votes in 2020 whether his effort bore fruit or failed.

But how will a Trump administration affect the insurance industry and, more specifically, the insurance agency industry? Since I expect to be here in 2020, let’s see how good a prognosticator I can be...

1. OBAMACARE is a goner. Many health insurance agencies gave up and sold or closed in the last several years. Obamacare was too complex for them (as it was for everyone) and they chose to leave the market instead of learning the intricacies to explain them to the clients. The proactive agencies who chose to become knowledgeable in the Affordable Care Act changed their practices over the last several years and made a very good living consulting to individuals and businesses to help them plough the furrows of the new health care program. The changes that will be implemented quickly by President Trump will be another great opportunity for agents to help individuals, small businesses and medium sized businesses transition from the ACA to a health care system based on open competition across state lines and a reliance on HSA’s as a primary tool. We suggest that you follow the new program as it matures and learn all you can about it. It is important to you and to your customers. If you are one of our Asset Protection Model Agencies, more concerned with protecting your clients’ assets than in selling product, you will have the opportunity to do both in the next several years.

2. Business Tax Rates: Expect lower tax rates for agencies as small businesses. The immediate results will be higher values for agencies simply because of greater earning potential. If you take the extra money and spend it, so be it. But the smart agents will use the extra income to sponsor more/better employees and producers and to purchase agencies and market to grow your businesses.

3. Less Regulation – a Double-Edged Sword – One of Trump’s promises was a reduction in the choking regulation that keeps businesses from spending their money on growth instead of on administering the regulations. This will open the door to growth in many industries including health care related businesses. BUILD YOUR EXPERTISE IN THE HEALTH INDUSTRY—It will provide you an excellent market. The downside to less regulation will be more mistakes and lawsuits. This bodes well for the sale of liability and umbrella policies but I expect the loss exposure to increase as well, boosting rates for and somewhat restricting these important coverages. But, remember, we are like stockbrokers. As long as the policies are available we are paid commissions – the higher the rates, the more the commissions.

4. Jobs – If it isn’t lip service, this is a direct implication on the growth of our businesses. More jobs results in greater need for personal and business insurance. Watch the numbers and direction of job creation in your state and market accordingly.

5. Middle Class Tax Relief and Simplification – 35% tax cuts for the middle class means more disposable income and greater opportunities to save money. This will need more asset protection for existing clients.

6. NAFTA and Trans-Pacific Partnership – Watch these carefully. The extent of re-negotiation on NAFTA and the withdrawal from the T-P won’t affect us immediately but could create substantially more blue-collar jobs in the second half of Trump’s first term. More jobs, more insurance needs...

As you can see from my prognostication, whatever success President Trump has on business-related initiatives the results will be good for our service industry. IF YOU ARE PROACTIVE INSTEAD OF REACTIVE TO THE RESULTS OF THESE INITIATIVES your agency will prosper over the next four years.