May 05, 2014

With insurers turning over every stone in search of new market opportunity, the small business and startup market presents a wealth of potential. This remains a highly underserved market, rife with revenue for those insurers who are willing to think and act differently when it comes to marketing commercial lines products to the little guy. There are approximately 29 million small businesses in the U.S., 93% of which have four employees or less with 74% being single proprietorships. While these companies may be small, they have real insurance needs -- the market size is estimated at $50 billion. But the majority of the products available to this market segment are designed for large corporations, and so they are far more complex than needed for a one- or two-person shop. If there was ever a market where insurers and agents could become trusted advisors, perhaps the small business market is it. Yet, if the market potential is so great, why aren't more insurers jumping to claim market share?

It's no secret that traditional commercial insurance is highly complex and requires a knowledgeable risk manager or insurance professional to help a company navigate through their insurance needs and the buying process. The premium revenue involved with middle to large commercial transactions makes it worth everyone's time and effort. However, small business owners don't think and act much like large corporations, nor do they have the insurance industry insight or expert resources available to them.

Tim Attia, Bolt
Tim Attia, Bolt

With low per-policy premiums involved, getting your current distribution channel to pay attention, creating new product and processes that specifically fill the needs of small and micro-businesses, and making it all profitable, represents a set of challenges that can be overcome, but only if your organization is willing to consider the uniqueness of the market segment.

Today's 'going direct' trend closely aligns with small business owners' insurance buying needs, preferences, and level of expertise (or lack thereof). While the direct channel is often thought of more in terms of personal lines, today there is no reason insurers can't take a similar approach to small business coverage that industry leaders like Geico, Esurance, and Progressive have used for personal lines. It just takes an insurer willing to try a different approach to appeal to and capture this market.

[Previously from Attia: Making Online Commercial Insurance Sales a Reality]

In order to be profitable, you need products designed specifically for this market, and since the premium per policy is low, the profitability comes from volume. When you're trying to do a high volume of transactions, the process needs to be handled more like flow business – low touch, high automation.

Keep it simple

Since small business owners think and act more like a consumer, the buying process for small business insurance needs to reflect those characteristics. The small business owners don't want to fill out reams of paperwork to get the process started. They want websites that are easy to navigate and employ easy to understand terminology. They want to provide some basics about their business and their needs to see what options might be available to them before they take the next step.

Two good examples of commercial insurers who have effectively accomplished making it simple are AssureStart and Hiscox.

Make it quick

Small business owners don't want to spend their workday researching and plodding through a long insurance buying process. They want to be able to complete a short application, receive a quote, and have the policy bound and issued during the time it takes to drink their morning coffee.

If you are able to change your organization's mindset to deliver the right product and the right processes – all designed with the small business in mind – the technology is available to deliver these types of capabilities and issue a policy in less than 10 minutes.

Provide choice

The small business owner wants to be offered more than a choice of one when it comes to product. They also want a choice of channels --- everything from a fully automated online process (application to issue), to interacting with an agent for consultation, to a combination via an omni-channel experience. They want choice in how to interact in both on- and offline channels. They may have a need for multiple business products, but they also need personal auto, home, and liability coverage. You'll want to be in a position to fulfill all of their needs, even if that means partnering with a competitor to offer a product that your organization may not offer or coverage you may not have an appetite for. It's more important to be the brand of choice than to underwrite all of the business. You've already incurred the marketing expense to gain the attention of the small business owner, so you might as sell them something even if the only immediate revenue is the commission from a partner product sale. Delivering this full service customer experience will foster the customer's loyalty for a long term relationship and the future business that comes with it.

When selling to this market, insurers would be well served by a shift in approach when it comes to 'commercial' by thinking more like the small businesses they are looking to sell to. When going direct, the simplicity of buying and selling commercial lines needs to be, and can be, as simple and quick as it is for personal lines.

About the author: Tim Attia is SVP of sales and marketing for Bolt, a provider of insurance e-commerce platforms.