Insurers currently distributing through agents might hesitate to add a direct channel because they fear they'll end up alienating their independent producers, perhaps prompting some to move their books of business to other carriers that they feel are more committed to the agency channel.

But before dismissing the notion of adding a direct purchase option for small-businesses so as to avoid channel conflict, carriers should first consider how they might possibly mitigate any fallout among their producers.

One way to add a direct sales option while maintaining existing agency relationships might be to treat current policyholders who choose to buy direct as sourced through their former agency — at least for a period of time. Friction during the transition to a direct relationship could be eased by paying a reduced commission to the agency, in return for certain ongoing services and the opportunity to cross-sell to the account.

In addition, carriers adding a direct sales capability could perhaps avoid channel conflict by launching their Web-based initiative under an entirely new brand. However, the value of such a strategy in terms of pacifying existing producers should be weighed against the potential advantage of marketing a direct sales option under a carrier's already established brand.

Keeping the main brand intact might provide name recognition to the emerging channel that could conceivably make a difference among those shopping over the Web on their own for the first time. Some prospects may be more comfortable buying direct from a carrier whose name they recognize, particularly if that brand has a stellar reputation in general.

Thus, while shying away from co-branding the direct channel might alleviate any confrontations with agents, it could also make the direct option a harder sell among those prospects willing to buy online but leery of doing business with an insurer of which they have not heard.

Carriers looking to avoid channel conflicts could also consider targeting another market segment altogether with a direct initiative, or perhaps offer different products direct than those sold through their agency force.

Regardless of how an agency carrier chooses to go direct, the potential for channel conflict and its implications should not be taken lightly. Indeed, it is likely to be an ongoing balancing act.

Even if such mitigating alternatives are not employed, however, the potential for direct sales of small-business coverage over the Web may be worth the risk of channel conflict for many carriers. Deloitte's survey found interest in buying direct among half of respondents. That number is likely to grow given the increasing proclivity of people to conduct their personal and business lives online.

The risk of alienating producers and cannibalizing their agency book of business might discourage some carriers from offering a direct purchase option. But as commercial insurance becomes more available via the direct channel, and as small-business consumers grow more accustomed to shopping for their insurance online, those who avoid going direct altogether could end up forfeiting a significant amount of business to bolder, more Web-savvy competitors.

For more information about the survey results and insights into the challenges facing insurers interested in selling direct, as well as those looking to fortify their book of business against direct sellers, you may download Deloitte's “Voice of the Small-Business Insurance Consumer” report by clicking here.

In addition, you may listen to an archived webcast reviewing the main takeaways from the survey as well as the implications for carriers and their intermediaries. To register, click here.