If technology has taught us anything over the last decade it's that we can't expect things to stay the same indefinitely. A recent study by the Deloitte Center for Financial Services gives us another item to check off on the list of changes in the insurance market: online direct sales of small commercial lines insurance products to consumers.

Many of the leading personal lines insurers have been selling direct to consumers for years and companies like GEICO and Progressive have risen to the top of the personal auto market. But commercial lines coverages have always been considered a different animal.

Deloitte emphasizes in its report ("Voice of the Small-business Consumer: Are Buyers Ready to Take the Direct Sales Route?") that there are few opportunities to purchase commercial lines products online, particularly when you compare the market to personal lines auto, explains Sam Friedman, research team leader at the Deloitte Center for Financial Services.

"For most of the mainstream commercial lines, it's not a reality yet, but given the proclivity of people who want to spend more of their personal and professional time online and the number of financial transactions completed online, we think it is inevitable that this will take a significant share down the road," says Friedman.

Deloitte doesn't have a crystal ball to predict how long before such dramatic changes might come, but Friedman believes insurers need to get out in front of such possible changes—even if they are three to five years from reality.

"About one in five people are perhaps very likely to [buy commercial lines product online]," says Friedman. "We consider these the eager beavers. About one-third are what we call the fence sitters—they are somewhat likely to do this online under the right circumstances. It's a significant portion of the population that is open to doing this."

With consumers purchasing more products online every year, Deloitte principal Arun Prasad believes consumers will be expecting more changes from their insurance companies.

"I've done some work in other industries and what I've seen is a willingness to purchase and have trust in that domain—not require some intermediary," says Prasad. "Similarly, I feel like consumers as a whole—and this is not just a generational statement—are more comfortable when they are information rich and understand the product or service they are looking to acquire. Once they are in that position they will acquire it through the least costly method—in time as well as money."

Prasad understands this might not be welcome news to insurance brokers and agents, but he believes brokers need to look at how they are adding value to the transaction, especially for the small business community.

"What they will see is they should focus their effort on larger commercial lines," he says. "The more complex relationships are where a broker can align the multiple interests of an organization very effectively. If small commercial become more of a transactional business, the broker community has to make a decision. Is it worth the time for the commission I am going to get to continue to stay involved?"

Prasad also believes carriers must provide a greater level of self service for policyholders while still engaging the agent/broker community more effectively.

"They need to make these tools add to what the broker is already providing [policyholders]," he says. "That will make for a successful sale. If the existing relationship is already in place, that won't disappear."

Friedman doesn't anticipate agents being elbowed out of this market and believes they will continue to play a substantial role.

"The point is [agents] can't take this business for granted," he says. "If you are a carrier that distributes only through independent agents, you can't take it for granted that agents will always have to be a part of the transaction."

Friedman points out that in working with focus groups for this research report, a number of individuals reported they had the same carrier for five or more years and they said the only time they hear from their agent or broker is at renewal time or if there is a claim.

"[Consumers] are wondering out loud where the value is," says Friedman. "Why can't they renew the policy online and why are they paying the extra commission? It is those types of situations where even though a carrier might want to remain with the pure agency sales force, they might want to upgrade their technology infrastructure so they can provide more self-service for clients, which will also help agents service their clients more efficiently."

Small commercial lines coverages are often low premium with small margins and it is difficult for agents to provide value-added service under these conditions, explains Friedman.

"The more the carriers can do to streamline their operation, contain costs, and improve service delivery, the better off they will be," he says.

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When Selling Direct, Commercial Lines Insurers Can Learn from the Past

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