Web-Enabling Small Business Insurance Policy Origination

Celent Communications offers the first in-depth look at the potential for selling small business insurance online and six of the new companies that are enabling this market

Web-enabling small business insurance has the potential to make it easier for carriers and agents to reach the what Celent terms the "Upper SOHO" market - the 5.7 million US small businesses with annual revenues between $50,000 and $500,000.

With average annual insurance spending of $2,000 each, Upper SOHO businesses in the US represent a $11.4 billion market for carriers and agents. But a fundamental disconnect in the current distribution model keeps carriers from being able to reach them effectively.

While it is profitable for carriers to offer coverage to these businesses, many of which are low-risk, it is currently unprofitable for agents to serve them, since commissions are not big enough to cover the expenses of prospecting and time spent on meetings and quote requests.

The added efficiencies of the online channel have the potential to resolve this conflict. Celent predicts that 30% of the Upper SOHO market will buy business insurance through online channels by 2005, generating $3.8 billion in premiums.

"Unlike some of the early consumer web insurance plays, small business web initiatives are about making the agency model more efficient, not displacing it," says Celent analyst and author of the report Matthew Josefowicz. "The Online Agencies and Online Agency Enablers are working within the existing structure of the insurance industry, but offering significant efficiencies."

A Table of Contents is available online.

of Celent Communication's Life/Health Insurance and Property/Casualty Insurance research services can download the report electronically by clicking on the icon to the left.