Buying Business Cover Online: Crossing into the New Frontier in Commercial Lines

Business insurance is simply too complex for direct sales to buyers, right? Actually, a few carriers, such as Hiscox, are seeing early success—and rapid growth—in going straight to insureds

In personal-lines insurance, particularly in the highly commoditized world of Personal Auto, carriers offering direct-to-consumer sales via the Web have achieved what the Independent Insurance Agents & Brokers of America (IIABA) characterizes as “unmistakable” success.

In its latest Property-Casualty Insurance Market report, the IIABA found that 1 in every 6 dollars in Personal Auto premiums comes through the direct-response channel.

But while producers are clearly feeling the competitive pinch in personal lines, for the most part they aren’t concerned with encroachment into their territory by companies offering direct online sales of commercial insurance—at least not yet.

“I still think agents have a very strong position in this market because of the range and number of policies a business needs,” says Jeff Yates, executive director of the IIABA’s Agents Council for Technology (ACT).

Indeed, conventional wisdom suggests that even small-business insurance needs are too complicated and intimidating for the average buyer to navigate online.

“Small-business folks need Workers’ Comp, Property, Liability, Health and maybe Surety,” says Clay Ricord, senior consultant at Robert E. Nolan Co., an operations and technology consulting firm specializing in insurance. “That’s too complex for the typical small-business owner; they don’t want to be their own risk manager. They benefit from the knowledge, advice and support of an agent.”

And although many commercial-lines carriers offer online quoting or application capabilities for their agent and broker partners, insurers by and large aren’t extending those tools to the ultimate purchaser.

Liberty Mutual, Zurich, The Hartford, Philadelphia, CNA, Chartis, Chubb, Ace—none report offering direct online sales to businesses or having any near-term plans to do so.


But a small handful of providers have managed to begin carving out a successful niche selling directly to buyers online—and they see a lot of future opportunity in this approach.

Specialty-insurer Hiscox began direct online business sales in the U.S. in November 2010, and it advertises this ability extensively across the Web.

Capson Physicians Insurance Co., formed in late 2010, writes Medical Malpractice insurance in 25 states exclusively through an online channel.

Hiscox targets very small businesses and currently limits its offerings to such professional-services firms as consultants, marketing firms, health and beauty providers, and realtors, with most firms recording less than $150,000 in annual revenues and employing three or fewer employees.

Hiscox attests that it already is enjoying robust business, with its direct channel growing at 10 times the rate of its broker channel, although it wouldn’t divulge premium figures of the two and how they compare.

“We’ve seen growth in the first half of 2012 at triple the levels of weekly sales during the same time period last year,” says Kevin Kerridge, director of Small Business Insurance for Hiscox. “Overall, we’ve seen more growth in General Liability than Professional Liability so far.”

Kerridge adds that in almost all circumstances, Hiscox is acquiring new customers in the small-commercial sector that it wouldn’t have landed through its brokers. “[We] are accessing a rich seam of new business that is too small to be handled by the traditional broker channel,” he says.

“This [online] offering is providing smaller businesses with an easy, efficient and understandable channel to protect their businesses from risk,” he adds. “Businesses of this size are now able to get the coverage they need quickly.”


One of the factors surely keeping other carriers from aggressively moving into this space is the concern of how their producers would respond.

 “If you go direct with a portion of your business, you run the risk of alienating agents to the point where they move the rest of the business,” says Karlyn Carnahan, principal at Novarica, an insurance-industry consulting and information firm. “It’s a big risk for insurers—particularly those that use independent agents.”

Hiscox has taken steps to manage that risk. “We were proactive in reaching out to our broker partners to make them aware of this [direct] offering and to address any of their concerns,” says Kerridge.

Hiscox brokers accept the online program’s existence, Kerridge adds, because the overwhelming majority of the business the carrier sells direct is well below the levels of company revenues and associated premiums that brokers can profitably underwrite.

For Capson, which began life as a direct-to-buyer player, agent alienation was not an issue—but form complexity was.

To address this challenge, Capson began by redesigning the traditional, multipage Medical Malpractice application and creating a streamlined online form.

Once a physician submits the form, a premium indication is returned within seconds. If the physician chooses to accept the provisional premium, the carrier uses rules-based processing to automate underwriting and new-business workflow, shortening the underwriting process from weeks to hours and, in most cases, issuing the policy the same day.

“Almost every decision around evaluating [a prospective client’s] risk, training, claims history, hours of practice, specific procedures, area of practice, and so on, has been automated,” says Capson Founder & CEO Maury Magids. “The underwriting algorithms and decision trees are automated.”


Companies are reluctant to divulge too many details on the technology that supports their online offerings.

Magids says that Capson has developed “propriety in-house technology that supports the entire consumer-facing experience from indication to application, to payment, to policy issuance and policy management.”

Hiscox created a new website for its direct business and established a call center in Virginia Beach to support it. Hiscox was able to leverage a corporate technology investment the company has used to write commercial insurance online in the U.K. since 2005.

“This re-use meant the cost was low for us, but if we were a new entrant, doing this from scratch, we would expect the cost to have been $10 million-plus,” Kerridge says.

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