Best's Review


Life Insurance
[Still] Open for Business

Stay-at-home orders and social distancing measures took a toll on many small businesses, including Main Street agents and brokers. The Paycheck Protection Program may be something of a lifeline for them.
  • Terrence Dopp
  • June 2020
  • print this page

FEELING THE IMPACT: Businesses of all types are experiencing the effect of the COVID-19 shutdown—including insurance agencies and brokerages.
AP Photo/ mpi43/MediaPunch /IPX


Key Points

  • Issue: The pandemic that shuttered businesses deemed nonessential has caused the nation’s gross domestic product to drop. Fast. U.S. GDP shrank 4.8% in the first quarter due to the impact of the novel coronavirus.
  • People: As Main Street businesses shutter, thousands of insurance agents and brokers are feeling the pinch of customers who can’t pay bills or scale back commission-generating coverage.
  • Salve: The Paycheck Protection Program, one component of nearly $3 trillion in federal disaster aid approved since the pandemic began, offers small businesses forgivable loans to cover some expenses if they keep workers.


The image is practically right out of a Norman Rockwell painting. A small-town life insurance agent, huddled with customers around a Midwestern kitchen table. One side buying life insurance. The other serving a client.

But what happens if a global pandemic puts this kind of everyday, all-American business deal on hold for an extended period of time? What if the agents can't do that face-to-face business for fear of catching or spreading the coronavirus? Where can they turn if they find their normal commerce slowed to a trickle through no fault of their own?

One answer just might lie in the federal government's Paycheck Protection Program. That initiative, part of roughly $3 trillion in emergency aid approved to date in Washington, is aimed at helping small businesses limp through the shutdown by extending them forgivable loans to continue paying employees.

“Every stress that small-business America is under is now being felt by independent agencies,” Independent Insurance Agents &Brokers Association Chief Executive Bob Rusbuldt said.

His group counts 25,000 independent agencies across the United States as its members, and they and their clients are currently facing government-mandated closings and restrictions, labor force limitations, supply chain interruptions and the utter suspension of ordinary activities.

Those agents and brokers sell many things—life, property/casualty, health, employee benefit plans and retirement products—from numerous insurance companies. As Rusbuldt sees it, they are the “second line” of businesses to feel the impact of the pandemic: first are the retail and restaurant businesses forced to close their doors; next up are the people who sold them their insurance products and felt the sting of lost business.

“Almost all those businesses are written by independent brokers and agents,” he said. “As time continues, this crisis and challenge continues, independent agencies are on the second line of fire where their clients literally cannot pay their premiums and revenue will drop in some agencies by 20% or more. They're hurting bad.”

Rusbuldt said as part of its engagement, the IIABA recently surveyed Big “I” state and national agent/broker leaders throughout the United States on how they are faring in the uncertain conditions. A majority said that if the current shutdown continues, they would lose 10%-15% of their commercial lines business because clients couldn't pay their premiums.

Announcing earnings in late April, Aflac Chief Executive Daniel P. Amos in part blamed the business disruptions for a 39% drop in revenue the company saw for the period compared to a year earlier. The insurer was also forced to withdraw its adjusted earnings guidance for 2020 due to the pandemic's impacts.

“Sales production in both Japan and the U.S. did begin to fall off in March, and the decline accelerated in the month of April, impacted by a reduction in face-to-face activity,” he said in a statement. “While our respective sales platforms and distribution partners are working to adapt to the new environment, we believe these trends point to depressed sales at least until we see COVID-19 restrictions subside.”

10% to 15%

Percentage of commercial lines business that agents and brokers say could be lost if the COVID-19 shutdown continues.

Source: Independent Insurance Agents & Brokers Association

Feeling the Pinch

The spread of the virus came fast.

It was first detected in China late last year and by March the World Health Organization declared it a global health emergency. As of mid-May, almost four million cases had been registered worldwide, including more than a million in the United States, according to the World Health Organization and the Centers for Disease Control.

By April, all but a handful of U.S. states were placed in lockdown mode.

Next came the economic downsides. They piled on fast at that point as retail businesses and the restaurant industry came to a standstill, followed by others.

The COVID-19 shutdown caused unemployment numbers to soar to levels last seen during the Great Depression.

Federal social distancing guidelines were extended through April 30, and coupled with actions taken by states resulted in most businesses not deemed essential being shuttered. Faced with an economy at a standstill, the White House and some governors are left struggling over when to lift restrictions.

As the situation grew dire in early April, AM Best revised its outlook on the U.S. life industry from stable to negative, citing deteriorating market trends in the near- and medium-term, as well as market dislocations impacting both assets and liabilities. Around the same time, the company shifted its outlook on auto, commercial lines and mortgage insurance to negative as the pandemic's hooks sank in.

Looking to gauge the potential scope of the damage in an April 14 report on the effect of the market downturn on insurers' surpluses, AM Best analysts determined much of that comes down to one unknown: duration. While the report didn't delve into the small-business side of insurance, it did offer a glimpse into the financial conditions it could face industrywide.

Jason Hopper, an associate director in the industry research and analytics department at AM Best who co-authored the report, said that during the 2008 financial crisis, markets lost about half their value over more than a year. This time, they've lost about one-fifth in one to three months.

“So we've lost about one-third of what we did then in a quarter of the time,” Hopper said. “Obviously, no one really knows how it's going to play out over the next year. That's really the landscape that we're trying to deal with at this point.”

Bob Rusbuldt Independent Insurance Agents & Brokers of America

Every stress that small-business America is under is now being felt by independent agencies.

Bob Rusbuldt
Independent Insurance Agents & Brokers of America

Securing a Check

Helping Main Street meet payroll is where the PPP steps in.

It runs through June 30 and the intent behind it was simple: Offer small businesses loans as an incentive to retain workers during the lockdown. The Small Business Administration will forgive them provided all employees are kept on the company's roster for eight weeks and the money is used for payroll, rent, mortgage interest or utilities, according to the SBA's guidelines.

An initial round of $349 billion in funding was included in the $2.3 trillion Coronavirus Aid, Relief, and Economic Security Act. The program quickly ran out of money and another round of $321 billion in aid for small businesses was included in as part of a $484 billion fourth round of disaster relief approved by Congress and President Donald Trump, bringing the total aid to approximately $3 trillion to date.

“Small businesses are struggling to survive and support their employees,” Marc Cadin, CEO of the Association for Advanced Life Underwriting/GAMA International, said. “Most of our members are small-business owners and are still waiting to hear if they will be able to keep their staff on board and establish a path forward.”

For smaller mutual companies, the current environment is unfolding on multiple levels.

First, as far as business operations, like every sector of global commerce, people have been working remotely and the initial uncertainty over business continuity and growing pains has generally gone as well as can be expected, said Neil Alldredge, senior vice president for corporate affairs at the National Association of Mutual Insurance Companies.

Neil Alldredge National Association of Mutual Insurance Companies

There’s still a lot of small [mutual] companies around and they’ve been around for hundreds of years. They’re financially strong, they’re just small and they keep it that way. They’ve been through lots of turmoil in the past and came out just fine.

Neil Alldredge
National Association of Mutual Insurance Companies

Second, and more specifically to insurance and smaller companies, are issues around increased business claims, workers' compensation issues such as how to cover increased claims at the same time as the workforce shrinks and premium volume goes down, he said.

“Evolving isn't the right term—it's almost unknown in terms of the territory,” he said.

“So many people still do buy their insurance from an agent and a lot of times that's still a face-to-face transaction,” he said. “There are certainly a lot of small mutuals that would qualify for the loans.”

He said the organization doesn't yet have data on how many of its members chose to take part in the program. Still, Alldredge said he anticipates a decent number will choose to participate based on the questions about the program his group had fielded.

Rich Sega, global chief investment strategist at asset management firm Conning, said the stimulus package was done quickly in terms of a government time frame. While the marquee names and large-cap insurance companies should be able to weather the events, much of the aid was targeted at smaller firms, he said.

“The real driver of the economy is the smaller businesses and it's unclear as to how they get affected,” he said. “They're on their heels right now.”

Sega did have some pause. He said that as an asset management professional, he worries some aspects of the stimulus package could prove detrimental longer term. He cited increased unemployment benefits as potentially depressing labor participation rates and higher costs layered on struggling businesses as an example.

Outside of government, the industry has taken steps of its own to deal with COVID-19.

In one example, Rusbuldt's IIABA created the Trusted Choice COVID-19 Relief Fund to assist independent agencies and announced in April that Progressive had donated $2 million to it. To gauge the need for such efforts, he points out that his group had 160 applications for that program within 10 minutes of announcing it.

“I almost fell out of my chair,” he said of the level of response.

And at the state level, regulators have attempted to deal with the crisis in ways the industry has at times opposed.

In New York, Department of Financial Services Superintendent Linda Lacewell recently issued a directive ordering insurers' immediate payment of outstanding hospital claims, suspension of preauthorization requirements for all hospital services and a prohibition of retrospective review of claims during the COVID-19 pandemic. Health insurers quickly warned the move could result in higher premiums for policyholders.

No cost-sharing for COVID-19 testing and treatment has been a common move across the United States, along with expanded grace periods for payment of premiums for life, health and property/casualty policies, loosened rules covering prescription refills and coverage for telemedicine.

Also proving to be a vexing issue for the wider insurance industry is how to deal with business interruption claims and whether to enforce epidemic exemptions along with whether states can override them.

Regardless of the big picture, NAMIC's Alldredge said that for his clients, continuing to meet payroll and stay in business remains the primary goal.

“There's still a lot of small companies around and they've been around for hundreds of years. They're financially strong, they're just small and they keep it that way,” he said. “They've been through lots of turmoil in the past and came out just fine.”

Terrence Dopp is a senior associate editor. He can be reached at

Back to Home

Want More News From Best's Review?

Sign up for our Best's Review Newsletter and we'll send you featured news stories straight to your inbox.