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The Tipping Point? The Race to Online Buying For Small Commercial Insurance

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1 August 2022
Karlyn Carnahan

Abstract

Small business owners are increasingly turning to online options for purchasing their commercial insurance policies. They want more options, a simpler process and lower prices.

Just as we’ve seen personal lines become commoditized and move to a world of digital distribution, the online sales of small business and WC insurance is fast increasing. We have seen an explosion in online offerings--from online agents, to mgas to insurers. Any many more that we’re aware of are in the planning phase. But is this just a finger in the wind testing the opportunity? Or is it real? Just because you build it doesn’t mean they will come.

So we launched a study to get the voice of the consumer. Our initial question was — how interested are small business owners in buying direct? And if they’re interested – what matters to them? And if they’re not – why not? What do agents need to do to keep them as clients. What do insurers going direct need to offer in order to convert them?

Here’s what we found.

  • Most respondents purchase a BOP to provide their insurance coverages and while price is important, buyers also value coverage and claims.
  • Agents are the most common purchasing channel with 66% using either a captive or an independent agent. But those purchasing online report higher satisfaction with the purchasing process than those using most other methods. Those buying through independent agents are the least satisfied.
  • Almost ¾ of small businesses say they are likely to purchase their insurance online in the future. While 55% would prefer to purchase through an agent, if they can get a lower price online, they will switch. Those who prefer an agent want a personal relationship, advice and recommendations.
  • Comparing today’s number of small business buyers who would like to purchase online versus our study two years ago shows a significant increase in interest. Two years ago, 38% preferred to purchase online. Today’s number is almost double that. Insurers who are watching these trends have to decide if this is approaching a tipping point that would cause them to shift their own stance – especially those that are committed to the independent agency channel.
  • The online market for small commercial business is large and difficult for insurers to ignore.We calculate it at $55B and $33 B of that is property casualty insurance.
  • There are several options for addressing this market. Insurers can work with online agencies and MGAs, they can go direct themselves, or they can support their agents in addressing the online market. Each requires different capabilities.
  • Insurers contemplating this market will want to think through a number of strategic questions that allow them to consider not only the technologies needed, but the cultural changes within their organizations, the process changes, and the role of the agent going forward
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