Business owners rethink their insurance as recession fears persist

A new Agency Forward survey from Nationwide (PDF)  shows small and middle market business owners are increasingly worried about U.S. economic conditions: two-thirds expect a recession in the next six months and 72% of them say it will be the same or even worse than the Great Recession of 2007-2009.

Compared to September 2022, far fewer – just 19% of small business owners and 39% of mid-market business owners – rate business conditions in the U.S. as favorable. The primary drivers behind this economic angst? Persistent inflation and rising interest rates.

• About three quarters of small (72%) and mid-sized businesses (75%) cite inflation as their most pressing challenge, both up 11 points since Sept. 2022.
• Increased interest rates are a close second with 62% of mid-market business owners (+4 points) and 50% of small business owners (+15 points) saying they’re a continued challenge.

Reversing pandemic cuts

In contrast to their bleak outlook on the economy, most business owners actually feel the conditions for their specific business are good or excellent. As a result, many are adapting their business to return to pre-pandemic norms and meet increased demand.

• Scaling their workforce – 21% of small business owners and 42% of mid-market business owners have hired new workers in the past 6 months, up 8 points and 18 points, respectively, from the fall. Businesses have also slashed layoffs in that period.
• Controlling supply chain disruptions – Fewer small business owners (21%, an 8-point decline) say supply chain disruption is a top challenge for them today compared to the fall, but a consistent 31% of mid-market business owners continue to see it as a significant issue for their business.
• Extending operating hours – After many businesses reduced operating hours throughout the pandemic to maximize resources, only 10% of small business owners (-7 points) and 14% of mid-market owners (-11 points) have reduced hours in the past 6 months.

“Most business owners seem to have found their footing as they continue to navigate the effects high inflation and interest rates are having on their businesses,” said Russ Johnston, President of Commercial Lines, Excess & Surplus and Specialty Insurance at Nationwide. “As they endure the tight labor market to add staff, get back to traditional operating hours, and manage supply chain disruptions, it’s critical they’re working closely with their insurance agent to fully understand their risks and the layers of protection they need.”

Cutting costs and reevaluating insurance

Despite the optimism in their own business conditions and efforts to grow their workforce, cutting costs is still a top priority for 63% of small businesses and 49% of mid-market businesses. And many are having conversations with their insurance agent to explore cost-savings opportunities.

• 39% of small business owners and 47% of mid-market owners have checked their policies online in the past 6 months.
• 28% of small and 34% of mid-market owners have contacted their agent to discuss their coverage.
• 18% of small and 27% of mid-market owners have asked their agent to requote their policy with different carriers to find a better price or coverage.

“Though business owners are confident in their own operations, they’re also beginning to prepare for a recession in the near future and are looking to their agents for advice. Agents who can meet these needs will be best positioned to grow their relationships when economic concerns recede,” said Johnston. “In a hardening insurance market, carrier-provided risk management resources or restructuring policies to increase deductible amounts are a couple ways agents can help provide peace of mind and premium relief to clients today without compromising long-term protection.”

In uncertain times, agent expertise and risk mitigation are critical

More business owners report working with agents today than in the fall - 62% of small business owners (+9 points) and 81% of mid-market business owners (+11 points). Half or more small business owners and three quarters or more mid-market owners say they’re likely to talk to their agent about inflation and rising interest rates.

Risk identification and mitigation is also top of mind. About half of small business owners (47%) and 67% of mid-market owners are proactively planning for potential crises (PDF) . A third of small businesses and two-thirds of mid-market businesses are also performing risk management audits.

“Commercial customers rely heavily on the industry-specific expertise their insurance agent and carriers can bring to the table,” said Johnston. “The survey results demonstrate that business owners view agents as more than just insurance experts, they also look to them as valued business advisors to help them through challenging times.”

Survey methodology:
Nationwide partnered with Edelman Data & Intelligence to conduct a 15-minute online survey among a sample of 400 small business owners and 400 middle market business owners between March 30 and April 28, 2023. As a member in good standing with The Insights Association as well as ESOMAR Edelman Data and Intelligence conducts all research in accordance with local, national and international laws as well as in line with all Market Research Standards and Guidelines.