Surge of new SMBs spike demand for insurance, month-to-month policies
Searches of the phrase 'business insurance' were roughly 50% higher in 2020 than in 2019, according to Google Trends.
The formation of new small businesses surged in 2020, as so many Americans were forced out of work by the pandemic. Under record-high unemployment rates (14.8% in April 2020), and as some industries still struggle to reopen a year into the pandemic, many workers have taken matters into their own hands.
The growth of small-business ventures coincided with a boom in business insurance uptake and first-time policy buyers.
At Thimble, an on-demand business insurance startup, 40% of its customer base are now first-time insurance buyers from businesses that were founded in 2020 alone.
“I think it’s definitely a tectonic shift in the creation of new businesses,” said Jay Bregman, Thimble CEO & Founder. “The census estimates 40% year-on-year growth; nobody has seen growth like that in new business registration EINs in over 30 years.”
In 2020, 30% of Thimble customers switched from a legacy insurer to Thimble’s monthly subscription insurance, which allows businesses to purchase insurance on a month-to-month basis instead of paying upfront for an entire year.
“This entirely new type of consumerized small business needs the same things as other small businesses do — insurance, banking, etc.,” Bregman said, “But they’re used to getting all of their services as consumers in the modern age.”
Business categories that saw the most growth in insurance purchases in 2020 include:
- Cleaners & janitors: +96.9%
- Handymen & contractors: +82.3%
- Consultants & freelancers: +27.6%
- Landscapers: +16.9%
On the other hand, some industries hit hardest by the pandemic have opted out of policyholding in 2020. They include:
- Beauty & fitness: -23.1%. While home gym purchases and online fitness classes have taken off during the pandemic, many personal trainers and beauty professionals have unfortunately experienced a decrease in work.
- Events & entertainment: -25.4%. With most events going virtual in 2020, Thimble’s pros in the events/entertainment field expectedly purchased less insurance coverage.
- Pet services: -57.6%. Stay-at-home guidance also means less time away from Fido and Fluffy. Accordingly, pet services (like dog walkers) have declined steeply, which is reflected here in Thimble’s insurance purchasing data for the category.
In the pandemic age where the only thing that is certain is uncertainty, the option to operate on a month-to-month basis could offer businesses some critical flexibility.
Month-to-month insurance to fit the new demands of today’s businesses
Regardless of the pandemic, running a small business is hard enough. According to data from the U.S. Bureau of Labor Statistics, about 20% of U.S. small businesses fail within the first year. By the end of their fifth year, roughly 50% have faltered. After 10 years, only around a third of businesses have survived.
“Some of these businesses will work; some of them won’t, but they will all get to a stage in their lifecycle where they need insurance,” Bregman said, and in such uncertain times, the traditional means of insurance buying may not be suitable for some.
“People do not want commitment when there has been a major catastrophic disaster. Features like this are indispensable,” Bregman added. “People have memories of how bad things could be being locked into an insurance contract when you can’t even operate your business.
“All of the ideas about the flexibility that companies like Thimble have been providing are now not seen as a luxury, but they’re seen as absolutely essential. And by the way, people will pay more for them.”
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