Assessing business risk in the digital age

In today’s connected world, a strong online presence is critical to business success. A business’s digital footprint informs customers of the services offered, provides an unfiltered view into how the business operates, and allows businesses to connect with a demographic whose preferred communication channel is digital. In order to accommodate (and realize the value of) this business data revolution, insurance carriers now need to place greater emphasis on a business’s online presence when verifying operations, assessing management performance and developing insurance rates.

As the online world continues to evolve, insurance carriers who have an in-depth understanding of how to translate a business’s online presence and use it to underwrite more efficiently and accurately will have the upper hand.

Creating an online presence

Here are three key aspects worth considering when evaluating a company’s online presence.

1) Understanding the impact of online presence (or lack thereof) on business health and risk assessment

In most instances, a strong online presence of a business can be helpful in assessing its overall health and risk profile. Businesses that have a greater and more robust online presence tend to attract more customers as they are providing more information via multiple touchpoints, making it easier for customers to find and engage with them.

Underwriters can leverage this type of information to piece together the overall state of a business and make a more informed decision when issuing a policy. Limited online information about a business is not only a sign of potential risk, but it also usually means that insurance carriers will have to conduct a more detailed review. This review may require expensive resources like field underwriters, and additional information such as loss history reports or profit and loss statements may be requested before a quote is released.

2) The power of customer reviews

By actively participating in review sites, businesses boost their visibility and establish a strong reputation among their customers and community. Insurance carriers can benefit from monitoring these reviews to understand how customers perceive the quality of the business’s operations, facilities, managers and employees. Favorable reviews that mention responsive employees, for instance, can signal to an underwriter that the business is managed and performing well and should therefore be offered a competitive rate.

On the other hand, negative reviews about unkempt facilities could lead an underwriter to question how this business is being managed and indicate future risk. They can also reveal whether additional products or services are being provided beyond what’s currently covered (i.e., does the nail salon you insure provide waxing services too?). The content is online for the world to see, but difficult for insurance carriers to summarize and use in existing processes.

3) Leveraging social media to assess risk

Social media has become a valuable tool for businesses to engage with their customers and maintain a strong online presence. However, it’s important to recognize that these interactions can also have an impact on insurance policies. For example, a local food truck that regularly posts about hosting trivia nights, movie screenings and discount beer promotions on social media provides additional insight into the range of services they offer — some of which may not have been included in the original quote. Additionally, insurance carriers may use this information to assess risk and determine premiums, as it provides a glimpse into the length of time customers stay.

For example, if a tap house frequently posts about broadcasting big sporting events and offering $4 draft pints during game time, this is fantastic marketing to draw in new and repeat customers, but if there are no food options available, it may be seen as a negative risk factor in the eyes of an underwriter. This type of information can factor into the carrier’s quote and influence decisions on price, or whether to offer coverage at all.

On the other hand, businesses that use social media to showcase the quality of their work can build credibility and trust with insurance carriers. For instance, if a local plumber shares reminders on how to insulate outdoor spigots before a freeze warning and posts before and after photos of their work, this could provide valuable insights into the plumber’s eligibility and acceptability criteria, potentially leading to a more competitive rate for their insurance coverage.

Similar to how people search for a restaurant or contractor, successful businesses typically rise to the top. With a strong online presence, such as high visibility, positive customer reviews, and active sharing of products and services, these businesses establish credibility and trust with potential customers and insurers. This allows customers to confidently choose how to spend their Friday night and insurers to confidently review the business before providing a quote.

Scot Barton is senior vice president and head of product at Carpe Data. Contact him at scot.barton@carpe.io.

Related:

Why insurance organizations must brand from the inside out

Using social media to promote your insurance brokerage

6 best practices to build or boost agency social media marketing