December 04, 2013

With more than 80% of consumers now kicking off their insurance shopping trips via the Internet, few insurers are still questioning the logic of selling direct online. If insurers serving small commercial customers were on the fence, they aren't anymore (at least, they shouldn't be). Both Deloitte and Novarica found as many as half of small businesses indicate they'd be willing to buy insurance direct online. For insurers offering small commercial lines, the question is no longer 'why' they should sell direct via the Internet, but rather 'how.'

Preparing to go direct for small commercial requires a shift in mindset. A firm grasp of how Internet users shop has a big impact on the processes that can be automated, and how insurers measure what's working. Small commercial customers are often one to two person operations that function more like your average consumer than your average business; the home-based graphic designer doesn't have a finance department hiding in their laundry room to help assess risk. Intuitively understanding the customer's work environment and identifying their coverage needs is tricky in the online space, but it affects the product selection insurers need to offer and how to best get to know the customer.

Start with Products Built for Direct

Tim Attia, Bolt
Tim Attia, Bolt

The process of going direct seems simple – build a website, open a call center, and post existing products online. Insurers will want to pause on this last step however. Most commercial products aren't ready for primetime when it comes to online delivery -- they need to be built specifically for the channel.

Key to making selling commercial lines direct profitable is to automate – reviewing quotes and underwriting risk should require low-touch service via high-tech delivery. Commercial line products offered direct should be simple enough for the average consumer to understand and the process shouldn't require excessive amounts of information. A typical consumer isn't able to best determine their type of exposure or limits of deductible, and if they are required to answer 50 or more questions to get a quote, they'll bail.

Measure the Right Stuff

Studies demonstrate that while many consumers are using Internet insurance shopping environments to research product and get quotes, most are not buying online yet, but this is changing dramatically on a month over month basis. Understanding how this impacts lead conversion measurements when going direct is critical.

[Why predictive analytics are also hot in commercial insurance]

In direct online insurance sales, typically a lead is measured when a unique site visitor hits the site or starts the quoting process. How people get to an insurer's site may be significant in ultimately getting that customer to the policy sale. Insurers want to measure things that influence the propensity of the customer to buy and then tailor the experience to enhance the likelihood of purchase. Obviously there are a lot more types of measurements that are possible and it is critical that insurers measure the right stuff.

Sell the Customer What They Want

What happens when an insurer can sell the local pizzeria insurance for their shop, but not their delivery vehicles? An overlooked aspect of going direct is that customers will arrive with more requirements than an insurer can handle with their own portfolio of products. The insurer's goal should be to make effective use of a lead by finding some way to fulfill the customer's product needs – even if it means offering another insurer's product.

Customers want choice too – without a good selection of products that meets buyers' needs, they might turn to the insurer's competition. Partnering with companies that can fill the product void allows the insurer to keep the customer relationship, while generating revenue from underwriting the risk and/or brokerage fees. Offering the customer what they need is key to keeping the customer; and maintaining customer loyalty ultimately determines the success of an insurer's brand.

Handling channel conflict

Channel conflict is a valid concern when going direct. Independent agencies don't want to lose customers and commissions to insurers, or risk being undercut on pricing. Insurers don't want to lose more business than they gain if a dissatisfied agency leaves them.

A new narrative will help ease anxiety. There are customers for every channel and those customers will continue to buy using their preferred method. A direct online channel may not impact the way customers want to purchase, but rather it supports the way customers want to shop.

Internet channels are a key component in delivering the omnichannel shopping experience that customers want – they research, collect quotes and get opinions from fellow buyers online. They may 'shop' online, but only 'purchase' through a person. The net result is that while agents may lose some sales to direct channels, they will often be gaining sales as well.

Success in selling direct requires focus on the long-term benefits. Going direct may help insurers to lower expenses and increase net profits, but refining the processes and technologies that improve the bottom line won't happen overnight. The goal in going direct is to create an online channel that drives a seamless and rewarding omnichannel shopping experience. In the long run, the insurer's improved ability to retain satisfied customers will generate more profitability and growth.

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