Editor’s note: This is the third part of a series of columns on the results of Deloitte Global’s recent small business survey.
While most small business owners still buy insurance through an agent or broker, the vast majority of those surveyed by Deloitte Global indicated greater interest in alternative channels, raising potential red flags about the ability of permanence of the industry’s long-lasting distribution system.
Indeed, the fact that 85% of the 500 US buyers who responded to Deloitte Global’s survey indicated a willingness to buy insurance from a range of non-traditional providers could leave many insurers dependent on agents vulnerable to deterioration of renewal rates and shrinking market share as they face each other. against emerging competitors.
Respondents cited several reasons for considering switching to an alternative provider. Many thought they could reduce 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 their current insurer or agent had demonstrated.
Some alternative providers, such as the wave of insurtechs launched in recent years, may offer more technologically advanced platforms as well as more convenient digital sales and service capabilities. Others outside the industry, such as online retailers, manufacturers and technology companies, may include coverage in 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 operators to:
- Strengthen the capacities of current agents and brokers; i
- Establish new digital platforms and collaborations.
Both options should improve the customer experience and differentiate the provider from traditional channels.
To avoid disintermediation, insurers should start reinventing the value proposition offered by their agent/broker network. Instead of relying on long-standing distributors to drive purchases of price-focused commoditized insurance products, they could consider repositioning their legacy representatives not just as salespeople, but as more sophisticated risk managers for small businesses .
To achieve this, operators should help prepare agents to educate and advise small businesses on how to monitor 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 that clients may not be able to get from new entrants, especially those involving direct-to-consumer channels.
Carriers could also strengthen digital capabilities to relieve some of the manual workload assumed by their intermediaries and speed up response time, while providing buyers with more convenient access to information and services. These efforts could make it more economically viable for intermediaries to offer value-added advice and support in coverage, risk management and claims.
In the meantime, insurers looking to hedge their distribution bets might consider an omnichannel strategy. One option is to develop intuitive, user-friendly and direct-to-consumer platforms. They may also seek alliances with alternative distributors, such as web aggregators, online agencies and non-insurer players looking to expand their service offerings, thereby turning potential competitors into partners. This approach is already underway in the field of personal insurance.
For more details on the survey findings and analysis of the US results, download Deloitte’s full research report at “How to Reinvent the Small Business Insurance Market for a Digital Economy.”
Former NU Property & Casualty magazine editor Sam J. Friedman ([email protected]) is an insurance research leader at the Deloitte Center for Financial Services. Follow Sam on Twitter at @SamOnInsuranceas well as in LinkedIn. These opinions are my own.
This piece is published with the permission of Deloitte. see www.deloitte.com/about to learn more about Deloitte’s global network of member firms.
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