Deloitte: Business owners now open to non-traditional insurance
The rise of alternative channels should prompt insurers to bolster agency force and diversify distribution options.
Editor’s Note: This is part 3 in a series of columns about the results of Deloitte Global’s recent survey of small businesses.
While most small-business owners still buy insurance through an agent or broker, an overwhelming majority of those surveyed by Deloitte Global indicated heightened interest in alternative channels, raising potential red flags about the staying power of the industry’s longtime distribution system.
Indeed, the fact that 85% of the 500 U.S. buyers responding to Deloitte Global’s survey indicated willingness to purchase insurance from an array of non-traditional providers could leave many agent-dependent insurers vulnerable to deteriorating renewal rates and shrinking market share as they face off against emerging competitors.
Respondents cited a variety of reasons to consider switching to an alternative provider. Many thought they might lower their costs, or receive more proactive notifications for risk mitigation. Others said they would like to buy from a provider with more knowledge of their specific business than had been demonstrated by their current insurer or agent.
Some alternative providers, such as the wave of insurtechs launched over the past few years, may offer more technologically advanced platforms as well as more convenient digital sales and service capabilities. Others from outside the industry entirely — such as online retailers, manufacturers and tech 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 might be in order, helping legacy carriers to:
- Fortify the capabilities of current agents and brokers; and
- Establish new digital platforms and partnerships.
Both options should ultimately enhance customer experience and differentiate the provider from traditional channels.
Bolstering capabilities
To avoid disintermediation, insurers should begin reinventing the value proposition offered through their agent/broker network. Rather than relying on longtime distributors to drive price-focused purchases of commoditized insurance products, they could consider re-positioning their legacy representatives not simply as salespeople, but as more sophisticated risk managers for small businesses.
To achieve this, carriers should help prepare agents to educate and advise small businesses about how to control and cover emerging exposures. At the same time insurers should be developing more innovative and flexible products and risk management service capabilities, calling for expertise clients might not be able to get from newer entrants — particularly those involving direct-to-consumer channels.
Carriers could also bolster digital capabilities to relieve some of the manual workload assumed by their intermediaries and speed up turnaround time, while offering buyers more convenient on-demand access to information and services. Such efforts might make it more economically viable for intermediaries to offer value-added advice and support on coverage, risk management, and claims issues.
Meanwhile, insurers looking to hedge their distribution bets might consider an omni-channel strategy. One option is developing intuitive, user-friendly, direct-to-consumer platforms of their own. They might also seek alliances with alternative distributors such as web aggregators, online agencies, and non-insurance players looking to expand their service offerings — thus turning potential competitors into partners. This approach is already underway in the personal insurance space.
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 magazine editor 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. See www.deloitte.com/about to learn more about Deloitte’s global network of member firms.
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