Whither the Weather?

 I heard on television this morning that Oklahoma had the fewest tornadoes in 2014 in recorded weather history! There were only 16 tornadoes recorded in all of last year. It seems to me that we have had that many in one week in a lot of recent springs!

That is great news for Oklahoma insurance agents because, along with few tornadoes, there weren’t very many wind and hail events either. That means that 2015 should be a banner year for profit sharing! Similar results have been seen in many states that are traditionally hard hit by windstorm and hail events. That combined with generally better than recent average weather across the U.S. means that our insurance company partners will have a banner profit year overall.

That’s great news for everybody!

Unless, of course, you are a small agent struggling to create enough volume for your carriers to be in the profit sharing game at all. Small agents frequently suffer the market contractions and loss of business due to rate action when the weather is bad but never reap the rewards when it’s good.   If this is you remember you can solve that problem by affiliating with my company OAA. We make a lot of money in not so great weather and we reap a bonanza when the weather is good. 2015 is going to be fantastic for profit sharing!

What will the weather do to us this year?

Are you kidding? How the heck should I know! Even the weather forecasters can’t get it right more than 2 hours out – I certainly don’t know how this year will turn out. But I do know this: In the central part of the United States we will have 2 to 3 times more bad weather years than good weather years. So, 2014 will, more than likely, prove to be an aberration.

So, what can we do to profit moving forward with uncertain weather?

First, remember that the checks you get this spring are for several years work. Be careful with that money and invest it don’t blow it. Second, keep encouraging your insurance carriers to price for the long term. Unfortunately most insurance companies are pressured by stockholders to create market share and will lower rates in the face of a good year’s weather and forget the last 3-5 years of bad. Push back on this when and where you can. Thirdly, remember this is an aberration and work hard to control your non-weather related claims. This seems obvious but is often over looked. The key to long-term profitability is still field underwriting.

I hope you make a ton of money this year in profit sharing! If you don’t call us and we’ll fix that!