The small-business segment is a market in transition, with a number of insurers starting to follow the lead of their personal auto counterparts by seeking to sell direct to customers rather than interacting with them through an agent or broker. Carriers choosing the direct channel can accentuate the advantage of price and self-service convenience, while those opting to remain with the agency channel will need to stress benefits such as personalization and business expertise, according to a new report from the Deloitte Center for Financial Services.
Deloitte joined with an independent research firm to interview 150 small-business insurance buyers from a wide variety of industries and company sizes, ranging from one to 25 employees. Respondents were prescreened to include only those who were somewhat likely (57 percent) or very likely (43 percent) to consider buying direct.
While a vast majority (83 percent) of respondents said they are satisfied with their current agent, many indicated they would consider eliminating the intermediary for a relatively small discount. In fact, more than half (57 percent) of respondents cited the anticipation of reduced pricing as their primary motive to buy direct. Many respondents expect just a modest price decrease, with 4 in 10 looking to save 10 percent or less. Respondents are also interested in the greater convenience and efficiency afforded by an online channel.
On the other hand, some respondents are worried about losing an agent’s expertise in assessing coverage options, and 57 percent said they do not think they would be able to adequately comparison shop on their own. Two-thirds of those surveyed said they would be concerned about overlooking a potential exposure if they went direct.
Some respondents also worry that one direct sales insurer would not be able to offer the range of coverage needed to meet all of their business needs, and several respondents said they are hesitant about splitting up their insurance among multiple carriers without an agent to coordinate their portfolio. The majority of respondents (61 percent) said not having an agent as a proponent in case of a claims dispute would be a concern in buying direct.
Deloitte said that small-business insurers have several options when considering direct sales vs. the agency channel:
- Move to a direct sales approach.
- Stay with the agent channel but add more value.
- Leverage direct-to-consumer marketing to develop leads but have agents close a sale and service the account.
- Adopt a hybrid sales approach that allows buyers to choose between the direct channel or working with an agent.
According to Deloitte’s research, insurers looking to transition to direct sales can take a number of steps to make the prospect more appealing to consumers, including:
- Provide customers with the ability to compare prices and coverage offered by different insurers on one website (cited by 94 percent of respondents as a reason to buy direct).
- Tailor coverage by type of business (94 percent).
- Offer errors and omissions coverage to protect against policy gaps (89 percent).
- Simplify products and clarify policy language to make it understandable to a layperson (cited by 88 percent).
- Assign a licensed agent to each account (88 percent), with access via email, IM or video chat (82 percent).
Agency-driven carriers would be wise to accentuate the prominence of personalized, local service and leverage it to promote their value over the direct channel, Deloitte advised, as a number of respondents indicated they would keep their agent if they received more personalized service from them, even though doing so likely means paying more in premiums.
Some carriers may choose to try direct-to-consumer marketing and prospect screening online while using agents to close a sale and service an account. Deloitte said that such a strategy would let consumers shop for coverage online while allowing them to maintain the personal relationship and specific business proficiency afforded by an agent. This model may also help get small-business consumers more comfortable making online transactions for future purchases.
Other insurers may consider adopting a hybrid approach, Deloitte said, using one of these options:
- Buy or build a separate, direct sales entity—perhaps marketing under a different brand to avoid channel conflict with their existing agency force.
- Partner with a company that can offer an online purchase option.
- Sell coverage online direct to the consumer but offer clients an opportunity to be assigned an agent for additional consultation, coverage and/or services.