Pledging to provide better service and lower-cost coverage to small and midsize business owners, two Internet startups are targeting what some industry observers believe is an underserved insurance market.Assess CoverageCorp Inc., an Internet marketplace for property and casualty insurance based in Charlotte, N.C., enables small to midsize businesses to shop for and purchase property and casualty insurance. Referring to itself as an independent "e-agent," CoverageCorp has lined up affiliations with 15 major carriers who provide an array of products and services to small businesses.

The insurance coverage is sold at the company's Web site, and at various third-party Internet portals with which CoverageCorp has forged alliances.

Generating its revenues exclusively through commissions that range from 6% to 18% of the policy, the company-during the first six weeks of going live-had accumulated 500 quote requests from small-business owners, says Frederick Waite, chief e-commerce officer for CoverageCorp.

The company, which in May secured a $9 million round of financing from efinanceworks LLC, an independent investment firm, declined to comment on how many of those requests were parlayed into signed contracts.

As CoverageCorp establishes its footing, a second e-agency-New York City-based CoverageConnect-is getting ready to remove the wraps from its Web site in August. The company will provide commercial property, general liability, workers' compensation and commercial automobile to small and midsize businesses through its own roster of carriers. CoverageConnect has raised $3.7 million in private equity capital and is hoping to generate additional funding, says CEO Richard Kane.

The company, which declined to reveal the names of carriers that it has contracted with, expects to generate its revenues from agent commissions based on policies sold. Unlike CoverageCorp, whose commissions are more in line with those of traditional agents, CoverageConnect believes it can build business by slashing its commission rate by 75% under what traditional agents assess, says Kane.

Lack of knowledge

The Web models are prudent strategies, analysts say, because they fill a need.

"This type of coverage isn't economical for agents or carriers, and most agents don't have the required expertise to understand the needs of individual companies," notes Kimberly Harris, senior research analyst for GartnerGroup Financial Services, Durham, N.C. "Most small businesses obtain either too much or not enough coverage."

Executives from CoverageCorp and CoverageConnect insist they've developed Web-based technologies that accommodate this market.

For example, both use automated underwriting and policy-comparison tools to determine the best coverage options based on an business owner's risk profile. CoverageCorp typically provides policy comparisons from up to five carriers from its roster of insurers, which includes St. Paul Companies, Travelers and The Hartford, Waite says.

CoverageCorp's Virtual Underwriter technology, Waite explains, enables small businesses to secure the appropriate level of coverage using a tool known as a value comparison chart.

"We perform a side-by-side comparison of all the itemized coverage terms encompassing the three or four best policies for a particular business," says Waite. "Of those quotes, maybe one carrier doesn't offer air bag coverage for commercial auto. Maybe another carrier has some exclusions that another carrier doesn't. We sift through all the variations and then identify the best match."

CoverageCorp and CoverageConnect have a great opportunity to ensure growth if they develop the right model to meet business owners' needs, analysts say. By some estimates, less than 1% of small to midsize businesses visit the Web to shop for insurance.

"There are 20 million small businesses in the U.S.," says Todd Eyler, a senior research analyst for Cambridge, Mass.-based Forrester Research Inc. "Main Street is a perfect target for buying policies online because most business owners have PCs, and many can make the time to research coverage."

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