Editor’s Notes: This is part 3 of a series of results from the latest Deloitte Global survey of small businesses.
While many small business owners still buy insurance through an agent or broker, many of those surveyed by Deloitte Global expressed a growing interest in other options, raising red flags that could affect the sustainability of the company’s long-term distribution strategy.
In fact, 85% of the 500 US consumers are responding Deloitte Global Research exhibiting willingness to purchase insurance from multiple non-traditional groups may leave many insurers that rely on insurers vulnerable to lower premiums and reduced market share in the face of new competitors.
Respondents cited a variety of reasons for considering switching to another provider. Many think they can lower their price, or receive more information to reduce risk. Others said they wanted to buy from an agent who knew more about their business than what was shown by the insurer or agent.
Other providers, such as the growing number of insurtechs that have been launched in the last few years, can provide you with more advanced platforms and digital purchasing capabilities and services. Others from outside the industry – such as online retailers, manufacturers and technology companies – can place their own advertisements on their products, services and other events.
In the face of this new competition, a two-tiered approach may be appropriate, helping legacy carriers to:
- Enhance the capabilities of existing agents and brokers; and
- Establish new digital platforms and relationships.
These two options should enhance the customer experience and differentiate the provider from the old ways.
In order to avoid confusion, insurers should start reimbursing the premium paid through the agent/broker network. Instead of relying on long-term distributors to sell fixed insurance rates, they might consider repositioning their legacy agents not as salespeople, but as risk managers for small businesses.
To this end, carriers should help train agents to train and advise small businesses on how to monitor and cover up incidents. At the same time, insurers must be developing new and flexible products and risk management capabilities, calling for professional expertise that cannot be obtained from new entrants – especially those that include consumer-oriented strategies.
Carriers can also leverage digital capabilities to reduce some of the tasks assumed by agents and speed up turnaround times, while giving consumers access to the information and services they need. Such efforts may create economic benefits for mediators to provide additional advice on information, risk management, and grievance issues.
Meanwhile, insurers looking to hedge their distribution bets may consider an omni-channel approach. One way is to create attractive, easy-to-use platforms that target their consumers. They may also seek partnerships with other distributors such as web aggregators, online agencies, and non-insurance players who want to expand their services – thus turning potential competitors into partners. This process is already happening in the insurance sector.
For more information on the survey’s findings and an analysis of the US results, please download the full Deloitte survey report at. “How to Reinvent the Small Business Insurance Market for the Digital Economy.”
Former NU Property & Casualty magazine editor Sam J. Friedman ([email protected]) is the director of insurance research at the Deloitte Center for Financial Services. Follow Sam on Twitter at @SamOnInsuranceand on LinkedIn. These views are his own.
This piece is published with permission from Deloitte. You see www.deloitte.com/about to learn more about Deloitte companies worldwide.
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