Robo advisors could give small-business insurers a competitive edge

Many of the questions policyholders take to their insurer or agent lend themselves to automated self-service.

Robo advisors could be programmed to explain basic coverage terms and conditions, review adequacy of deductibles and limits, and check on a claim’s status. (Graphic provided by Deloitte.)

Small-business insurers may be able to differentiate in an increasingly commoditized market by offering more proactive risk management services, a Deloitte Global survey has revealed.

But capitalizing on that opportunity in an economically feasible way will likely require some innovation.

Deloitte Global’s survey of 500 U.S. buyers indicated several opportunities to improve retention, expand market share, and grow the overall small-business insurance pie by providing more customized, adjustable policies as well as devising new coverages for emerging exposures, which was detailed in my May 25, 2022, article published on PropertyCasualty360.com.

However, while many respondents also expressed a desire for a more holistic loss-control package, that could be challenging to deliver without charging additional fees, given the relatively modest premiums and sales commissions small businesses usually pay for pure risk-transfer policies.

How, then, might insurers and their agents make a “cover-plus” program commercially viable for small-businesses?

Technology solution

Developing more automated, do-it-yourself options might help fill the gap. Robo advisors — long established for small investors as well as more recently by some personal lines carriers —could be programmed to explain basic coverage terms and conditions, review adequacy of deductibles and limits, and check on a claim’s status. They also could help small businesses identify potential exposures that may call for endorsements to bolster existing policies or suggest additional coverage purchases.

Indeed, many of the areas for which respondents said they are likely to seek advice from their insurer or agent are fairly basic and should lend themselves to automated self-service. (See figure 1 above).

However, Deloitte Global’s survey also found many respondents eager for guidance in tackling more complex challenges such as cybersecurity, systemic risks and legal issues. Automated services might suffice in some of these cases as well. For example, policyholders could be offered online, interactive, industry-specific cybersecurity training programs, which could benefit both insurers and buyers by limiting exposure and claims. Such programs could be produced by insurers or vendors, then offered directly to policyholders or provided through agents.

Exhanced online experiences

One possible hurdle to widespread use of online self-service is the desire by most small-business insureds surveyed to deal with a live person rather than a chatbot or some other automated encounter, with three-quarters of respondents indicating a preference for in-person or at least virtual consultations.

To overcome resistance to automated interactions, insurers could provide an online onboarding tool at the point of sale to make policyholders aware of all the services available via the insurer’s website or smart phone app, while emphasizing the simplicity and ease of navigation when using automated tools. They might even provide gamification incentives where regulations permit — scoring points that could earn them premium reductions for completing online risk management courses, documenting suggested loss control steps, and/or exceeding peer safety benchmarks.

Insurers could also add value by remaining digitally engaged with policyholders throughout the year via risk management e-newsletters, texts offering safety tips or storm alerts, or sharing case studies of successful loss control initiatives, rather than customer interactions being limited (as most are now) to the point of sale, renewals, or claims.

To remain engaged with customers who simply don’t want to deal with robo advisors or need to speak with an actual support person, insurers should have a human default option available via chat, video, or phone, particularly in moments that likely matter most to an insurer’s reputation— if claim conflicts arise.

Unlike their large commercial counterparts, few if any small businesses have the equivalent of a fulltime risk manager on staff to anticipate and manage exposures or oversee multiple insurance policies. Insurers and intermediaries that can help fill that gap by providing innovative, flexible, and affordable loss control service options are more likely to break free of pure price competition for off-the-shelf commoditized policies.

Those carriers that don’t respond to buyer preferences for a greater variety of flexible products and services could find themselves losing out not only to more proactive and innovative insurance company rivals, but emerging competitors as well, since 85% of those surveyed indicated a willingness to purchase coverage from non-traditional providers. We’ll explore that challenge further in my next article.

(For more details about the survey’s findings and analysis of U.S. results, please download Deloitte’s full research report on “How to Reinvent the Small-Business Insurance Market for a Digital Economy.”)

Former NU Property & Casualty Editor in Chief Sam J. Friedman (samfriedman@deloitte.com) is insurance research leader at the Deloitte Center for Financial Services. Follow Sam on Twitter at @SamOnInsurance, as well as on LinkedIn. These views are his own.

This piece is published with permission from Deloitte.

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