Conflagration: fire; especially: a large disastrous fire.

-Merriam-Webster

Ask most agents whether the online sales of insurance is going to negatively impact them, and their response is, “No. My clients value {insert Unique Selling Proposition here}.”   Many agencies focus on commercial lines, and everybody assumes that you can’t do commercial lines on the web.

My position is that the hot embers of experimentation are quickly being fanned into flames. In the heart of the crowded commercial insurance marketplace.

Think Mrs. O’Leary’s cow kicked up a fuss?  Ain’t gonna be nuthin’ compared to this.

Although mid-market and larger risks don’t lend themselves to online underwriting and pricing, many main street, BOP  and simple GL-only type risks do.  Innovative insurance companies and others are trying hard to access this market. What they learn will quickly be leveraged up-market.

But more importantly, the buyers themselves increasingly want to explore and bind online.

Today, many organizations are starting to explore by providing resources to the online commercial insurance buyer.  These efforts are primarily targeted in two areas.

  • Insurance carriers (primarily those who use captive agencies) are starting to put their quoting systems online, and
  • Lead aggregation services that help direct buyers to agencies and/or carriers that can write the policies

Disclaimer: TrustedChoice.com is an example of the latter.

Selling Business Insurance Online

Most of the organizations that are underwriting and binding online are captive agency companies and direct sales carriers. They have the advantage of having centralized IT operations, and are building upon the efforts undertaken to provide online purchase of personal lines coverage.

As a group, these companies have nice interfaces that walk the customer through class selection and exposure identification. Typically, the information required is simple, and the process is straight forward and fast.

At present, the scope of risks is centralized on main street and professional/consulting businesses, precisely those businesses that would be exploring options via the web.

It is notable that a number of independent agency companies are beginning to experiment as well, primarily with Insureon. I’ve grouped a number of these into a category called ‘Non-Traditional’, as they are new businesses formed to capture these new buyers.

Directs/Captives

The Directs and Captives Agency Companies are working aggressively to approach this market.  They see a huge opportunity in the majority market share in commercial lines held by the IA channel. And they know that if they can gain the first mover advantage the same way that they did in personal lines, they will capture quite a bit of market share before the IA channel can catch up.

Companies like State Farm, Farmers, Allstate, Nationwide and even Geico are working hard on web-based underwriting and binding systems.

Non-Traditional

New start-ups are pouring efforts into selling insurance online. They see the same market opportunity, and want to exploit it. They know that the IA channel is typically slow to react, and our efforts are complicated by the fragmented nature of our industry.

Because these Non-Traditional players are approaching this market with new eyes, they don’t have many of the preconceived notions that more established industry types would bring. In some ways, these new views may be spectacularly successful, in others, perhaps not so much.

Hiscox, a Bermuda based  insurer, prides themselves on their ability to insure specific niches and complex risks. They don’t try to be everything to everyone.  This level of specialization has provided them with the clarity of vision to identify those specific classes that would be amenable to purchasing online.

AssureStart was founded by insurance and technology executives to start with a blank sheet of paper. They have worked out a deal to write their policies on American Family paper.

Insureon has built an online platform and is integrating some of the big independent channel carriers like ACE, CNA, Hartford, Philadelphia and Travelers.

Lead Services

Lead services are using the web to funnel insurance buyers to writers of insurance. The typical lead service uses traditional and digital marketing efforts to ‘find’ insurance buyers and direct them to their lead capture system.   Those leads are then provided for a fee to agencies (and in some instances online underwriting, binding and sales organizations) who are interested in writing the business.

Lead services operate on a few different models.

  • Leads can be provided to a single, exclusive recipient. (An example of this type of service is TrustedChoice.com)
  • Leads can be sold to multiple buyers, leading to a ‘contact competition’ where the first organization to contact the prospect has a good chance of closing the business. (NetQuote)
  • Another model is where the buying organization bids for leads based upon different criteria, perhaps location, time of day, and class of business. Depending upon the criteria, the agency will bid more or less to obtain the business.  Higher amounts for local main street businesses during the day, lower amounts for taxi services that come in after 8 PM at night. (Insurance321)
  • A relatively new technique is also being tried wherein the prospect posts their insurance particulars to a clearinghouse, and then multiple organizations present proposals. The buyer then evaluates the proposals and selects the proposal which they will accept. (QuotePie)

What About the Buyer?

But we all know the buyer isn’t ready for this, right? Don’t bet on it.

A recent report by the Deloitte Center for Financial Services in September of 2014 provides some insight. About 16% of small business owners are ‘eager’ to try online shopping for small commercial policies, and another 30% are open to the notion.

“Hah!” you say. “Less than 50% are interested in buying online.”

While your math is right, time isn’t with you.  The sad truth is that the trends in personal lines are directly affecting commercial buying behavior.  Roughly 90% of consumers who purchased personal auto insurance online are ‘Satisfied’ or ‘Very Satisfied’ with their purchases, and the same responses total 86% for homeowners purchasers.

Commercial insurance purchasers who have bought personal insurance online are 400% MORE LIKELY to want to purchase their business insurance online.  The accelerating trends in online purchase of personal insurance is only making the problem worse.

Long Story Short

Small business owners are learning that purchasing personal insurance online isn’t scary, and that the results can be good, thus spurring them to try purchasing their commercial policies the same way.

Established insurance companies and nimble new competitors are looking to take away low-hanging fruit from the independent channel. As they did in the personal lines space, these organizations are leveraging changing consumer demands with technology and new ways of doing business to tap an open market.

It’s gonna get hot!

Good Selling,

Marty Agather

Mrs OLeary’s cow” by Anonymous – Harper’s Magazine, 1871. Licensed under Public Domain via Wikimedia Commons.

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