Small-business insurers that are not interested or ready to try selling coverage directly to consumers over the web need to raise the value and enhance the services offered by their traditional agency channel to avoid losing market share to a growing number of online competitors.

Indeed, while some carriers may decide to delay a move online or decline the opportunity to bypass their agents, that doesn’t mean they can afford to stick their heads in the sand and ignore direct carriers making a play for increasingly web-savvy buyers. That was a key takeaway from a recent study by the Deloitte Center for Financial Services, "Small-business insurance in transition: Agents difficult to displace, but direct sellers challenge status quo."

Let’s start with the pricing conundrum. The 150 small-business owners from a wide variety of industries who were interviewed for the latest Deloitte report were extremely cost conscious, indicating they were likely to consider a direct purchase if it meant saving money. Agency insurers will be hard put to match the 10-20% discounts those business owners expect from online competitors operating without commissioned intermediaries. (This will be among the key points discussed during Deloitte’s May 17 webcast.)

Insurers need to bolster value-added components

However, while most respondents said they would welcome the prospect of lower premiums by eliminating the intermediary, that doesn’t mean all is lost for agency carriers. On the contrary, those we interviewed cited several aspects of working with an agent they would be reluctant to give up to buy direct. Insurers need to bolster these value-added components to make them deal-breaking barriers, discouraging a switch to an online purchase.