Digitally Reinventing Small Commercial Insurance : Business and Technology Trends
Abstract
Small businesses comprise 99.9% of all firms in the US and were responsible for 62% of all net new jobs between 1995 and 2020. Some estimate the small commercial market at $113 billion. While we estimate it at a third to a half of that, the fact remains that this is a market that can’t be ignored if you’re an insurer writing commercial lines. But small businesses are changing their buying behavior, and insurers must find new ways to acquire business that also maintain or improve underwriting results.
Most insurers who sell small commercial work with independent agents as their dominant—or only—channel. But small business owners are shifting their buying preferences, and insurers are following the money, looking at how to efficiently attract and retain the new buyer. Forty-four percent of insurers expect an increase in direct sales to small commercial buyers. This is driving an explosion in channels and technologies to meet buyers’ needs.
Insurers focusing on this line look to three different strategic aspects of the line.
- How shall we distribute this business in a world with a growing number of policyholders that want to buy direct? Although the independent channel will likely maintain its place as the dominant channel, data shows a good portion of this market is moving online.
- How can we make it easier to acquire this business? The easier it is for an agent to place a piece of business, or for a policyholder to get a quote and bind their policy, the more business the agent will place.
- How can we ensure we are making good underwriting decisions in a world that increasingly demands straight-through processing? Automation of the line implies a growing use of predictive models focused on assessing risk and underwriting acceptability.
Several ways of using technology have arisen that can be used to take the friction out of the process. Technology can be used not only to drive cost efficiencies but to create a differentiated agent experience.
As competitive pressures continue to increase, many carriers are investing in improving the agent experience as one of their top priorities. That typically means a streamlined user interface with significant data prefill to reduce data entry requirements.
Whether simplifying the process of finding a market, reducing the work of data entry, providing transparency in the process, or improving collaboration, technology adds value across the agent journey.
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