Insurance Industry

Online, Direct Sales Continue to Grow

Insurers that offer direct, online coverage to small and mid-size businesses are seeing substantial growth.
By: | November 9, 2015 • 5 min read
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Online direct sales of insurance to small and medium-size businesses in the U.S. has become a hot market.


While no one is predicting that commercial insurance will be primarily sold online any time soon – and may always primarily require the use of a broker or agent — insurers that do offer coverage to small and mid-size businesses are seeing substantial growth.

Ted Devine, CEO at Chicago-based Insureon, predicted that five percent of small to medium-size insurance in the U.S. will be sold online within 10 years.

“Our online platform is about 10 years old, but the Insureon brand and our real focus on it started four years ago, and we’ve been growing at about 30 percent a year,” said Devine.

Pioneer in the Market

Hiscox USA was the pioneer in direct-to-small business online sales in November 2010.

Kevin Kerridge, head of small business, direct and partnerships, Hiscox USA

Kevin Kerridge, head of small business, direct and partnerships, Hiscox USA

“We’ve grown from zero in business in 2010 to over 100,000 customers currently, and with sales of thousands of new policies each week,” said Kevin Kerridge, head of small business, direct and partnerships, at the company. He started a similar program in the United Kingdom before moving to the U.S.

Hiscox and Insureon will soon be joined by Berkshire Hathaway Direct, which planned to launch its online product next year. ACE Group also has online small business products, although they are targeted to brokers and agents.

Warren Buffett’s Berkshire Hathaway is pivoting away from its once lucrative, but now lagging reinsurance business in favor of Berkshire Hathaway Direct, an online, direct distribution system for small and medium-size businesses.

“I wouldn’t play it any other way,” Chairman and CEO Buffett told the “Wall Street Journal” in July. Buffett is banking on a success similar to the company’s popular Geico Internet-only, direct-to-consumers auto policy service.

“We plan to launch this service sometime next year,” said Kara Raiguel, president of Berkshire Hathaway Direct, beginning with Business Owners Policy (BOP) and workers’ compensation.

“As we move along, we plan to add other products such as umbrella, commercial auto and professional lines,” she said.


Raiguel added that Berkshire Hathaway Direct is currently licensed in 48 states. “We expect to be licensed in all 50 states when we launch next year,” she said.

The Hiscox online direct sales program for small businesses began with professional liability. Since then, the online commercial lines program, the first in the U.S., has expanded to offer BOP and general liability coverage.

The solutions are currently available in 38 states and D.C., and will be available nationwide within a year, said Kerridge.

“Technology empowerment is what this effort is all about.” — David Charlton, president, micro & specialty products, ACE Commercial Risk Services

“Consumers expect their online business insurance purchase to work the same as it does for all of their transactions online. You can purchase cars online directly without any human interaction and you should be able to do the same for business insurance,” he said.

“To take full advantage of the online channel you need to commit to creating a fully automated process. Every workaround and human review adds time and cost to the process and makes it less appealing to consumers.”

Starting its online, direct distribution for small businesses four years ago, Insureon currently represents about 35 carriers and 175,000 clients, with $210 million in annual premiums.

Devine noted that Insureon, which is licensed in 48 states, gets about 400,000 hits a month on its website, all driven by online digital marketing strategies.

At its start, Insureon offered BOP, workers’ compensation and liability. Since then, it has added commercial auto and cyber, Devine said.

The company also has a B2B business, Insurance Noodle, which Insureon acquired last year, which provides “access to our markets through technology for about 6,000 independent agents,” said Devine.

Empowered by Technology

ACE Commercial Risk Services (ACE CRS), which targets small U.S. businesses, also uses appointed agents and brokers as part of its move into the online market on March 30, when it launched new packaged BOP insurance products.

“Small businesses continually struggle to find proper insurance coverage due to a lack of optimal choices, issues with cost, or uncertainty about the scope of coverage that is most suitable for them,” said David Charlton, president, micro & specialty products, ACE CRS.

“Technology empowerment is what this effort is all about.”

The underwriting platform, ACE Solutions Fast Track, quotes and issues small business and specialty insurance for brokers in less than five minutes, according to the company, by utilizing real-time third-party data analytics.

Ted Devine, CEO, Insureon

Ted Devine, CEO, Insureon

In early August, ACE CRS launched an expanded list of online products and coverages to include Lessor’s Risk BOP; Liquor Liability; Commercial Umbrella; Employment Practices Liability Insurance BOP Enhancement; Privacy Liability & Data Breach Insurance BOP Enhancement (Cyber) and Professional Liability BOP Enhancement.

Then in late October, the company launched a Producer Portal, which focuses on increasing functionality and simplifying the user experience. The new online portal gives the company’s small business clients an easy-to-use application, providing brokers real-time access to ACE’s systems and expertise, according to ACE.

Regardless of the technology advances made, Devine said, agents and brokers will continue to be the majority distribution channel for reaching small and medium-size businesses for at least the next 10 years.

He noted that selling auto insurance online did not really reach a tipping point until about 10 years after it was introduced in the market.

“Given the complexity of the product, it’s always going to have to be delivered with a lot of advice,” Devine said. “Whoever delivers the best advice is going to win.”


He added that each industry is different. “A mobile food truck is different from a contractor, etc.,” he said.  “So you’ve got to have a lot of different industry expertise.”

“This is not going to be a commodity business, even though the technology will continue to make delivering the business easier and easier,” Devine said. “But we will always need people as well.”

Steve Yahn is a freelance writer based in New York. He has more than 40 years of financial reporting and editing experience. He can be reached at [email protected]
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PLUS Conference

Three Pain Points

Practitioners urge the professional liability markets to throw off an 'antiquated mindset.'
By: | November 2, 2015 • 9 min read

From dealing with multi-million dollar claims by private equity funds to assessing the risk profiles of telehealth providers, professional liability (PL) underwriters and practitioners across a broad spectrum of sectors have plenty to ponder.

Ahead of this year’s Professional Liability Underwriting Society’s (PLUS) annual conference in Dallas, we asked a selection of PL experts to outline the key issues in their respective fields.

Cyber Cover: To Buy or Not
to Buy?

Sarah Stephens, partner and head of cyber, technology, and media E&O at broker JLT, is on a panel discussion entitled “When David Fells Goliath — Small Companies’ Role in Large Breaches,” which explores the threat that inferior IT networks of vendors, service providers and other counterparties can pose to larger, seemingly more secure organizations.


According to Stephens, PL practitioners need to be aware of the resource pressure on small vendors, while navigating a “web of interconnectedness” in both the liability and insurance arrangements of the various companies in the technology supply chain.

While large companies’ cyber insurance policies tend to cover them for expenses and third-party liability resulting from another vendor’s error or omission, small tech vendors are often required to buy tech PL liability insurance under their contract with larger vendors.

Stephens said it is important that practitioners help these vendors establish exactly what is and isn’t covered under their own policies, and whether procuring additional cover is necessary — particularly as in some cases, a small vendor may require tech PL cover with limits that far exceed the size of their own business.

Sarah Stephens partner and head of cyber, technology, and media E&O at JLT

Sarah Stephens
Partner and head of cyber, technology, and media E&O at JLT

“A vendor whose revenues are $5 million may, for example, provide niche services to a larger vendor and be handling the personal data of millions of retail customers,” Stephens said.

“It can be a real challenge for a broker to go to the market on behalf of a company whose revenues are $5 million and requests $20 million professional liability cover, but the exposure is real. This is the cost and reality of doing business if you are a small tech vendor.

“If I were a large company drafting the insurance requirements for my vendors, do I want PL coverage or do I want cyber coverage, or do I need both? And is it acceptable to request PL that includes cyber coverage?” Stephens asked.

“I think more education is needed as you don’t want to be requiring companies to buy cyber policies when they already have that coverage under a tech PL policy. A better understanding of the coverage and how people buy it will drive efficiencies for both large and small vendors.”

A broader industry challenge, Stephens said, is the overlap where third-party cyber liability coverage meets PL. With some doubting underwriters’ pricing sustainability, modelling and claims-paying ability, Stephens noted there has been a flight to quality cyber carriers with enough capital to pay large limit claims without being scared away from the risk or making knee-jerk price hikes.


“From a practitioner’s point of view, my focus is to help insureds choose a market that will be there in five or 10 years and will be relatively consistent rather than reacting unreasonably to inevitable claims in the market,” she said.

According to Stephens, the nature of a company’s business should probably determine whether they choose stand-alone cyber insurance. It makes little sense, she said, for tech/IT companies to buy stand-alone cyber coverage as cyber risk runs through all of their professional risks, while other sectors with long-established PL histories may be advised to buy separate cyber policies — not least for the valuable crisis response services that usually come as standard with this coverage.

Stephens also raised the question of whether simply not having a cyber exclusion in a PL policy (as opposed to affirmative language outlining specific cyber risk triggers) offers assurance of coverage.

“Some companies choose to rely on the breadth of silence in the PL contract; others aren’t comfortable with that uncertainty as they don’t want to have to litigate a claim, so they opt for a separate cyber policy,” she said.

Financial E&O: A Volatile Subprime Legacy

According to lawyer James Skarzynski, principal of Skarzynski Black and president of PLUS, there is also an overlap at the intersection between cyber policies and D&O coverage. Skarzynski focuses primarily on D&O and E&O in the financial sector — a segment experiencing some of the most volatile and expensive PL claims.

“There are still some fairly significant subprime credit losses being litigated and it is taking time for practitioners to sort through all the issues,” he said.

James Skarzynski President of PLUS

James Skarzynski
President of PLUS

“One issue is the inter-relatedness of multiple claims within large towers of insurance. There could be multiple unrelated claims in several years of the tower, and when you have tower limits of quite easily $100 million, $200 million or more, this becomes a very substantial issue,” Skarzynski said.

These situations are being dealt with on a case-by-case basis, often with the help of mediators.

“The worst outcome is to fail to reach a resolution. It serves no one’s interest to have a dispute linger on, so that factor helps drive the parties to reach resolutions on how to allocate loss.”

But even if all parties agree and it is in their collective best interests to avoid litigation and reach a commercial resolution, negotiation challenges remain.

“Not surprisingly, the carriers at the top of the insurance towers think there should be full exhaustion of the claim from the ground up, while the insurers at the bottom of the tower may argue that if the claim would fully expose the limits of the entire tower, payment of the loss should be made pro rata so the tower shares equally in the loss.”

Even if the carriers at the top of the tower are willing to compromise and agree not to enforce full exhaustion from the ground up, they may insist that carriers in the lower portion pay a much higher proportion of their limits, Skarzynski said.

“These disputes can be very complex to resolve, and I and others in the D&O space have spent many hours in mediations, negotiating over how claims will be allocated as a prelude to mediating the underlying claims themselves, as you can’t resolve the underlying claim until you have agreed how funding will occur,” Skarzynski said.


Another post-crisis issue, he added, is the significant increase in regulatory investigations, with E&O insurers seeing the fees incurred reaching levels comparable to or above those in major 10B-5 securities litigations.

“Many years ago, no one would ever have guessed we would be routinely seeing seven- or eight-figure fees from regulator investigations and proceedings,” Skarzynski said, adding that variances in policy wordings mean that these governmental fees are not always covered under an E&O claim.

Meanwhile, increasing private equity in the corporate landscape has led to insurance around private equity “taking on a life of its own” — often involving large, volatile dollar sums.

“Private equity plaintiffs are often very serious about getting a large dollar recovery and the values can at times be proportionately higher than the recovery on losses to shareholders in a 10B-5 securities case,” Skarzynski said.

Health Care: An Evolving Risk Landscape

“Increasing settlement verdicts, hardening of the market, and a changing model of how health care is delivered through telehealth or retail clinic settings make a busy, swirling bucket for PL underwriters to get their heads around and put the right premium/price on the table,” said Bill McDonough, managing principal and broker for Integro’s national health care practice, who will be on a panel discussing whether the PL industry can keep up with “The Brave New World of Medicine.”

“The delivery of medicine is moving much quicker than how we analyze, underwrite and understand these risks.” — Bill McDonough, managing principal and broker for Integro’s national health care practice

“Whether it’s individual insureds or the lead layer for a large system, there’s a lot of moving parts. Underwriters have to be smarter and rethink how they have been underwriting for past seven or 10 years.”

The primary shift in the U.S. medical landscape is in the delivery of care, which is evolving from “brick and mortar” bedside care to “retail care” available in shopping centers other walk-up venues, and more recently “telehealth” platforms — through which the diagnosis and prescription of treatment is administered by practitioners via phone, computer or other smart technology.

“Now people are receiving care without ever being in front of a provider,” said McDonough.

“It’s a huge issue for PL underwriters. The concerns revolve around whether there are appropriate controls around the delivery of telemedicine care, whether underwriters can accurately measure the risk and understand how the risk differs to the risk they’ve been writing for the last 30 years.”

McDonough said the PL insurance market including brokers, underwriters and consultants needs to let go of its “antiquated mind-set” in order to redefine health care risk profiles, taking into account the new setting in which health practitioners — who in the case of retail and telehealth are primarily nurses rather than physicians — are operating and delivering services.

“The delivery of medicine is moving much quicker than how we analyze, underwrite and understand these risks,” he said.

“In the next three, five or 10 years, there will be a different way not only of delivering care but also in how we define that risk and insure it. As patients increasingly seek quicker, cheaper and more readily accessible health care, I believe a locus of control is being lost.


“Practitioners can operate very independently, and my sense is that offering cheaper and quicker care is going to lead to more risk.”

Yet, McDonough said, telemedicine nurses continue to be covered under the same PL policies that brick-and-mortar practitioners have been insured under for years — either from the PL market or through captives owned by health systems and providers.

“We have to think about the adequacy of coverage with the new risk profile we’re dealing with,” McDonough said.

He added, however, that practitioners are also concerned about the adequacy of coverage — primarily regarding the size of limits they can obtain.

Antony Ireland is a London-based financial journalist. He can be reached at [email protected]
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Sponsored Content by CorVel

Telehealth: The Wait is Over

Telehealth delivers access to the work comp industry.
By: | November 2, 2015 • 5 min read


From Early Intervention To Immediate Intervention

Reducing medical lag times and initiating early intervention are some of the cornerstones to a successful claims management program. A key element in refining those metrics is improving access to appropriate care.

Telehealth is the use of electronic communications to facilitate interaction between a patient and a physician. With today’s technology and mass presence of mobile devices, injured workers can be connected to providers instantaneously via virtual visits. Early intervention offers time and cost saving benefits, and emerging technology presents the capability for immediate intervention.

Telehealth creates an opportunity to reduce overall claim duration by putting an injured worker in touch with a doctor including a prescription or referral to physical therapy when needed. On demand, secure and cost efficient, telehealth offers significant benefits to both payors and patients.

The Doctor Will See You Now

Major healthcare players like Aetna and Blue Cross Blue Shield are adding telehealth as part of their program standards. This comes as no surprise as multiple studies have found a correlation between improved outcomes and patients taking responsibility for their treatment with communications outside of the doctor’s office. CorVel has launched the new technology within the workers’ compensation industry as part of their service offering.

“Telehealth is an exciting enhancement for the Workers’ Compensation industry and our program. By piloting this new technology with CorVel, we hope to impact our program by streamlining communication and facilitating injured worker care more efficiently,” said one of CorVel’s clients.

SponsoredContent_Corvel“We expect to add convenience for the injured worker while significantly reducing lag times from the injury to initiating treatment. The goal is to continue to merge the ecosystems of providers, injured workers and payors.”

— David Lupinsky, Vice President, Medical Review Services, CorVel Corporation

As with all new solutions, there are some questions about telehealth. Regarding privacy concerns, telehealth is held to the same standards of HIPAA and all similar rules and regulations regarding health information technology and patients’ personal information. Telehealth offers secure, one on one interactions between the doctor and the injured worker, maintaining patient confidentiality.

The integrity of the patient-physician relationship often fuels debates against technology in healthcare. Conversely, telehealth may facilitate the undivided attention patients seek. In office physicians’ actual facetime with patients is continually decreasing, citing an average of eight minutes per patient, according to a 2013 New York Times article. Telehealth may offer an alternative.

Virtual visits last about 10 to 15 minutes, offering more one on one time with physicians than a standard visit. Patients also can physically participate in the physician examination. When consulting with a telehealth physician, the patient can enter their vital signs like heart rate, blood pressure, and temperature and follow physical cues from the doctor to help determine the diagnosis. This gives patients an active role in their treatment.

Additionally, a 2010 BioMed Central Health Services Research Report is helping to dispel any questions regarding telehealth quality of care, stating “91% of health outcomes were as good or better via telehealth.”

Care: On Demand

By leveraging technology, claims professionals can enhance an already proactive claims model. Mobile phones and tablets provide access anywhere an injured worker may be and break previous barriers set by after hours injuries, incidents occurring in rural areas, or being out of a familiar place (i.e. employees in the transportation industry).

With telehealth, CorVel eliminates travel and wait times. The injured worker meets virtually with an in-network physician via his or her computer, smart phone or tablet device.

As most injuries reported in workers’ compensation are musculoskeletal injuries – soft tissue injuries that may not need escalation – the industry can benefit from telehealth since many times the initial physician visit ends with either a pharmacy or physical therapy script.

In CorVel’s model, because all communication is conducted electronically, the physician receives the patient’s information transmitted from the triage nurse via email and/or electronic data feeds. This saves time and eliminates the patient having to sit in a crowded waiting room trying to fill out a form with information they may not know.

Through electronic correspondence, the physician will also be alerted that the injured worker is a workers’ compensation patient with the goal of returning to work, helping to dictate treatment just as it would for an in office doctor.

In the scope of workers’ compensation, active participation in telehealth examinations, accompanied by convenience, is beneficial for payors. As the physician understands return to work goals, they can ensure follow up care like physical therapy is channeled within the network and can also help determine modified duty and other means to assist the patient to return to work quickly.


Convenience Costs Less

Today, convenience can often be synonymous with costly. While it may be believed that an on demand, physician’s visit would cost more than seeing your regular physician; perceptions can be deceiving. One of the goals of telehealth is to provide quality care with convenience and a fair cost.

Telehealth virtual visits cost on average 30% less than brick and mortar doctor’s office visits, according to California state fee schedule. In addition, “health plans and employers see telehealth as a significant cost savings since as many as 10% of virtual visits replace emergency room visits which cost hundreds, if not thousands, of dollars for relatively minor complaints” according to a study by American Well.

“Telehealth is an exciting enhancement for the Workers’ Compensation industry and our program. By piloting this new technology with CorVel, we hope to impact our program by streamlining communication and facilitating injured worker care more efficiently,” said one of CorVel’s clients.

Benefits For All

Substantial evidence supports that better outcomes are produced the sooner an injured worker seeks care. Layered into CorVel’s proactive claims and medical management model, telehealth can upgrade early intervention to immediate intervention and is crucial for program success.

“We expect to add convenience for the injured worker while significantly reducing lag times from the injury to initiating treatment,” said David Lupinsky, Vice President, Medical Review Services.

“The goal is to continue to merge the ecosystems of providers, injured workers and payors.”

With a people first philosophy and an emphasis on immediacy, CorVel’s telehealth services reduce lag time and connect patients to convenient, quality care. It’s a win-win.

This article was produced by CorVel Corporation and not the Risk & Insurance® editorial team.

CorVel is a national provider of risk management solutions for employers, third party administrators, insurance companies and government agencies seeking to control costs and promote positive outcomes.
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