Editor’s note: This is part 3 of a series of columns about the results of Deloitte Global’s recent survey of small businesses.
While most small-business owners still purchase insurance through an agent or broker, most surveyed by Deloitte Global indicated a growing interest in alternative channels, raising potential red flags about the staying power of the industry’s long-standing distribution system.
In fact, the fact that 85% of 500 U.S. buyers who responded to a Deloitte Global survey indicated they were willing to purchase insurance from an array of non-traditional providers could put many agent-dependent insurers at risk of deteriorating renewal rates and losing market share. against emerging competitors.
Respondents cited a variety of reasons for considering switching to an alternative provider. Many thought they could reduce their costs, or get more proactive notifications for risk reduction. Others said they wanted to buy from a provider with more knowledge of their specific business than their current insurer or agent demonstrated.
Some alternative providers, such as the wave of insurtechs launched in the past few years, may offer more technologically advanced platforms as well as more convenient digital sales and service capabilities. Others outside the industry – such as online retailers, manufacturers and technology companies – may be able to embed coverage into their products, services and related transactions.
In the face of all this new competition, a two-pronged distribution transformation strategy may be in order, helping legacy carriers:
- strengthen the capacity of existing agents and brokers; and
- Establish new digital platforms and partnerships.
Both options should ultimately enhance the customer experience and differentiate the provider from traditional channels.
To avoid disruption, insurers must begin reinventing the value proposition offered through their agent/broker network. Instead of relying on longtime distributors to drive value-focused purchases of commoditized insurance products, they might consider repositioning their legacy reps not just as salespeople, but as more sophisticated risk managers for small businesses.
To achieve this, carriers should help agents educate and advise small businesses on how to control and cover emerging exposures. At the same time insurers must develop more innovative and flexible products and risk management service capabilities, expertise customers may not be able to obtain from new entrants – especially those involving direct-to-consumer channels – to call for.
Carriers can leverage digital capabilities to reduce some of the manual workload assumed by their intermediaries and speed up turnaround times, while providing buyers with on-demand access to information and services. Such efforts can make it economically viable for intermediaries to provide value-added advice and support on coverage, risk management, and claims issues.
Meanwhile, insurers looking to hedge their distribution bets may consider an omni-channel strategy. One option is to develop their own intuitive, user-friendly, direct-to-consumer platforms. They may seek alliances with alternative distributors such as web aggregators, online agencies, and non-insurance players to expand their service offerings—thus turning potential competitors into partners. This approach is already underway in the personal insurance sector.
For more details on the survey findings and analysis of the US results, please download Deloitte’s full research report. “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 Insurance Research Leader at the Deloitte Center for Financial Services. Follow Sam on Twitter @SamOnInsuranceAlso in LinkedIn. These views are his own.
This piece is published with permission from Deloitte. see www.deloitte.com/about To learn more about Deloitte’s global network of member firms.
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