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Eager Beavers, Fence Sitters, or Naysayers

Are small-business consumers ready to buy insurance without an agent?

Posted by Sam Friedman, insurance research leader, Deloitte Services LP, on July 9, 2013 

One doesn’t see disruptive innovation very often in the insurance industry. But a sea of change in distribution could be coming sooner rather than later in one major line. About half of small-business insurance consumers indicate they might be quite willing to buy coverage directly from a carrier over the Internet, without having an agent or broker shop for them or advise them, according to a recent survey by the Deloitte Center for Financial Services.

Our hypothesis going into this research project was that given the growing proclivity of individuals to live their personal and business lives online, many buyers of small-business insurance might indeed be ready, willing, and able to conclude a transaction on their own, whether through their desktop, laptop, tablet or perhaps even their smartphone.

Deloitte tested that hypothesis this past March by querying 751 small-business insurance buyers representing a wide range of industries and company sizes, from single-proprietorships up to 25 employees.

The survey identified three categories of respondents, including:

  • “Eager Beavers:” Representing anywhere from 10-20 percent of those surveyed, depending on the line of business — who say they would be “very likely” to conclude an online insurance transaction without the help of an agent. Many of these respondents are already shopping for small-commercial coverage on their own, either via insurer or aggregator websites.
  • “Fence-sitters:” Those who say they would be “somewhat likely” to buy direct over the Web, depending on the circumstances — representing about one-third of respondents.
  • “Naysayers:” Representing about half of the respondents — who say they are “not very likely” to buy without an agent, but may be open to a direct approach if certain reservations, particularly trust issues, are overcome.

The survey also helped pinpoint what factors might convince a small-business prospect to take the leap and discard their intermediary to buy one or more of their insurance policies over the Internet. Being able to save money on premiums was by far the most important factor, but the discount anticipated by respondents was surprisingly modest, with a large segment expecting a price cut of no more than 15 percent.

Meanwhile, subject matter specialists here at Deloitte supplemented the survey findings by identifying some of the marketing and operational conundrums insurers might have to overcome if they are interested in selling small-business coverage directly to consumers. Among these challenges is the potential for channel conflict, creation of straight-through underwriting and pricing systems, and the establishment of a full-service call center to replace some of the functions an intermediary might provide.

In addition, they suggest that even if an insurer decides against pursuing a direct sales option, there are steps agency carriers should consider taking to enhance their capabilities so they may protect their book of business against direct writers, while improving their competitive position against more traditional distributors.

To learn more about the survey results and how carriers might position themselves to sell small-commercial coverage direct, or perhaps fortify their agency-driven operation to compete with those who do, you may download Deloitte’s “Voice of the Small-Business Consumer” study.

What are you hearing in the market? Have any of your insurance clients spoken with you about the potential for direct sales of small-commercial lines? If so, what kinds of questions and concerns are they raising with you, and what has been your response? If not, have you considered raising the issue with them, at least in terms of how they might deal with this new competitive challenge?

In addition, you may listen to an archived webcast reviewing the main takeaways from the survey as well as the implications for carriers and their intermediaries. 


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