Filed Under:Carrier Innovations, Technology Solutions

Can insurers have it both ways with small-business direct sales?

When it comes to selling insurance online to small-business owners, insurance carriers have options. (Photo: Charles Rex Arbogast)
When it comes to selling insurance online to small-business owners, insurance carriers have options. (Photo: Charles Rex Arbogast)

Small-business insurance carriers grappling with the conundrum of whether to take the plunge and sell directly to consumers over the web but fearful of undermining their existing distribution force should consider the possibility of having their cake and eating it, too.

The decision whether to bypass agents and connect with small-business insurance buyers online doesn’t have to be an either/or scenario. Indeed, insurers could conceivably have it both ways, lowering the odds of potential disruption by emerging online competitors, while supporting rather than displacing their exclusive or independent agents.

This was one of the main conclusions coming out of a study by the Deloitte Center for Financial Services, "Small-business insurance in transition: Agents difficult to displace, but direct sellers challenge status quo." The report was co-authored by yours truly, along with my research team colleagues, Michelle Canaan and Nikhil Gokhale, with significant input from John Lucker, a principal with Deloitte Consulting LLP as well as our Global Advanced Analytics and Modeling Market Leader.

'Toe in the water' model

In my November 2015 blog, I outlined the major findings from our interviews with 150 small-business insurance consumers who were open to the idea of buying on their own over the Internet, while in my January 2016 blog I noted that it may take more than online discounts to convince prospects to give up their agent. This time, let’s consider two options that could allow a small-business insurer to leverage the technology and techniques of direct online sales, without necessarily creating conflicts with their existing agency distribution force.

One option is for agency carriers to use the technology and techniques of online customer acquisition to obtain warm leads for their agency channel. Such a strategy could accommodate the segment of purchasers who prefer to shop for coverage on their own over the web, just as they routinely do for other products and services, while at the same time reconciling the aspiration of many of our survey respondents to maintain the personal relationship and specific business proficiency afforded by a personal agent. This “toe in the water” model positions an insurer to be a close follower as they explore more comprehensive digital sales possibilities. Moreover, this hedging strategy could help agents lower client acquisition costs and grow their prospect base for cross-sales.

An option for agency insurance carriers is to sell coverage online to small-business owners, but offer to assign them an agent for additional consultation and coverage. (Photo: John Bazemore/AP Photo)

A second option might be to implement a hybrid, parallel approach — establishing a stand-alone online platform for small businesses ready to take the plunge and buy directly from an insurer, while preserving their agency channel for buyers who prefer to work through an intermediary. Within this approach, there are several strategies insurers could contemplate.

    • Buy or build a separate, direct sales entity to reach online consumers:Insurers may choose to launch a direct sales subsidiary from scratch or buy an existing direct writer to parallel their agency company, while perhaps marketing under a different brand to avoid channel conflict. This could allow a carrier to attract those who prefer to shop for insurance themselves online, while providing a more traditional agency relationship for those who still want one. If a carrier only sells select lines over the web, there could also be potential to refer direct buyers to the carrier’s agents for additional products, thereby creating cross-selling opportunities and easing channel conflict.
    • Align/partner with a company that can offer an online purchase option:In such a scenario, a small-business carrier could test the waters by selling online through another direct insurer’s website, offering complementary rather than competing products.
    • Affiliate with an online aggregator site: Aggregator sites scan multiple insurance providers for small businesses searching for coverage online. Working through such a site helps insurers target early online adopters while acquiring valuable direct sales experience.
    • Sell coverage online direct to the consumer, but offer clients an opportunity to be assigned an agent for additional consultation, coverage, and/or services:In this instance, a carrier would actually close a sale directly with the online customer, but provide buyers with an opportunity to contact an agent afterwards if there are any coverage questions, claims issues, or additional products required. That agent could either be working full time for the insurer (perhaps out of a customer service center) or come from an outside, independent agency. While an independent agent would likely receive a lower commission on a directly generated sale, reflecting their lack of involvement in the acquisition process, they could perhaps make up the difference and then some by having the opportunity to cross-sell additional lines of business. This option could also alleviate concerns of those customers who feel comfortable buying a relatively straightforward coverage themselves online if it will save them money, but can still depend on an agent for support as well as advice on the purchase of insurance for more complex or problematic risks.

What about carriers that decide direct selling is simply not for them? In a future blog, I’ll examine how agency insurers might fortify their model to compete against direct online challengers. But in the meantime, you can read our full research report for more information.

Sam J. Friedman ( is insurance research leader with Deloitte’s Center for Financial Services in New York. For many years, he was editor-in-chief of National Underwriter. Follow Sam on Twitter at @SamOnInsurance, as well as on LinkedIn.

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