A significant portion of the small commercial insurance market is ready to embrace direct and online sales within the next five years, according to “Direct Online Small Commercial Insurance: Preparing for the Inevitable,” new report from Novarica.
Similar to established trends in personal lines, buyer sentiment among small commercial customers seems to be moving toward a price/convenience value proposition, according to the report. “The only thing missing is billions of dollars in advertising to make direct purchasing seem more ‘normal,’ but that’s just a matter of money and time,” writes Matthew Josefowicz, report author and a managing director at Novarica.
A recent Deloitte survey of more than 700 buyers sought to gauge commercial insurer’s interest in buying insurance online, and found that nearly half of smaller businesses were more eager to purchase directly.
Novarica’s recent attempt to gauge interest found that 14 out of 50 small business insurance buyers expressed willingness to buy online. However, the report points to a survey from four years ago, when respondents indicated that “lack of direct sales and service capability” and “belief that the market is not ready” were already being dismissed as reasons online sales were not then offered. Respondents of that 2009 survey also correctly predicted that a new entrant, Hiscox, would start to sell direct within two years.
Since direct sales options have begun to appear, customers have started to show up. Among the 50 respondents included in the report who purchased small business insurance within the last two years, 17 percent made that purchase online, 30 percent by phone and 53 in person. Among those who made purchases more than two years ago, 37 percent purchased by phone and 63 percent in person, indicating that direct channels stand to bring customers who previously preferred alternatives.
While the segment waits for the idea to become normalized and more widely offered, the question then becomes: What happens to agents?
According to the report, 70 percent of agents said they agree price is the primary motivator for small business customers, and more than 40 percent believe a significant portion of buyers already start their shopping process online. Thus, there is a fear of disintermediation among agents; however, Novarica found that as long as full commissions are preserved, agents have positive feelings toward the shift to online transactions.
Indeed, in looking at the road paved by personal lines insurers toward more direct, online business, Novarica advises insurers maintain a personal touch in the process. The report suggests that insurers, in order to prepare for the shift, look into redesigning products to make them simpler for consumers to evaluate directly, and running contact centers and other support offerings unique to the space, which Novarica calls “critical for closing sales.”
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