BY MICHELLE KERR
Most consumers take for granted that they can research any product or service and buy it within the space of a few keystrokes. But by and large, the world of ecommerce hasn't bled through to the commercial insurance realm, where buyers still rely on agents and brokers as intermediaries.
But the times, as they say, are a-changin'. Among small business owners, there is a rising wave of interest in direct online commercial insurance sales.
Recent studies highlight the extent to which small business insurance buyers would be ready to take the plunge. About 20 percent of small-business insurance buyers said they would jump into direct sales in a heartbeat, with that number shifting closer to 30 percent for insureds with revenues under $100,000.
That's according to a report, Voice of the Small-Business Insurance Consumer: Are Buyers Ready to Take the Direct Sales Route?, by the Deloitte Center for Financial Services. It was based on a sample of 751 small-business insurance buyers.
Even for those with company revenues between $5 million and $20 million, nearly 15 percent said they would be very likely to buy their business insurance online directly from an insurer. Across the board, an additional third of respondents were at least open to exploring the option.
For now, such studies are more or less speculative. Only Bermuda-based Hiscox currently offers direct sales of commercial lines for small businesses. But the increasing level of consumer interest is probably not lost on other carriers. Nor is the likelihood of favorable pricing.
"People do expect to get cheaper insurance if they buy direct, but their expectations are not sky-high," said Sam Friedman, research leader, Insurance, Deloitte Center for Financial Services. "The majority is looking for 10 to 15 percent savings."
Even so, direct sales won't interest all carriers. Large national insurers would probably be first to test the waters while regional carriers might shy away.
Turning to a direct-sales option seems largely inevitable. Small business owners are used to using the web to meet their personal and business needs. For many, that includes buying personal lines coverage direct from insurers.
Deloitte researchers found that those who had already purchased auto, homeowners or life insurance were at least three times more likely to buy their commercial coverage over the Internet if given the opportunity.
"Their satisfaction levels are through the roof -- around 90 percent of them are very satisfied," said Friedman. "So naturally they have a higher confidence level [with direct buying]."
And that's exactly where agents and brokers are vulnerable, said Donna Schlegel, director, Deloitte Consulting LLP. Small commercial insureds are becoming increasingly disenfranchised.
"Where the coverage needs are less, they're less complex and no services are being provided by the agent," she said. "There's really a perception of 'What do I get from my agent?' "
In the event of an actual exodus of small-premium buyers to direct sales, it could be a mixed blessing for some, but a challenge for others, said Stacy Bury, commercial lines manager, Programs & Select at RJF Agencies, a Marsh & McLennan Agency.
"The larger agencies will be able to work their way through it," she said, "maybe not having to spend their time on some of the minimum premium accounts -- we could raise our threshold to write bigger small accounts. The smaller agencies -- I think that's where they'll struggle because that's what they do all day long. That's the main heart of their business. "
But Schlegel doesn't see a shift to direct sales as an overnight evolution. Changes will be more gradual, shifting partway into the digital arena to start with.
"The biggest play," said Schlegel, "is happening with online aggregators who have engaged multiple carriers, have hooked to them through interfaces, and are able to give real time quotes directly to customers from multiple companies, and close the deal. That's been the most prevalent and that's what we think will grow really quick.
"Carriers who go direct to market themselves, where the comparison quotes aren't available, I think will have a tougher time in the beginning," she said.
Clearly, the onus is on agents and brokers to step up and embrace the digital realm. To keep up, agents must become adept at using all of the channels open to them.
"The purchase of [small commercial insurance] remains infrequent and complex enough that small business owners still very much value the advice and expertise of an agent," said Richard Clarke, associate principal at McKinsey & Co., and one of the authors of the report, Agents of the Future: The Evolution of Property and Casualty Insurance Distribution, published in July.
"But," he said, "the way that expertise is delivered must evolve." That could mean anything from email to videoconferencing, he said.
Added Friedman, "The historical trend is moving in this direction. There's no turning back. It's definitely not going to replace agents, but more and more people are conducting their personal and professional lives online. And small business insurance probably will not be an exception."
MICHELLE KERR is associate editor at Risk & Insurance. She can be reached at firstname.lastname@example.org.
September 3, 2013
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