Insurers intrigued by the idea of selling small-businesscoverage direct to consumers, but hesitant to take the plunge dueto concerns over potential channel conflict with their existingagency force, might yet be able to leverage the best of bothworlds.

That's one of the takeaways from a recent report — “Voice of the Small-Business Insurance Consumer: Are Buyers Readyto Take the Direct Sales Route?” — published by the DeloitteCenter for Financial Services, and based on a survey of 751consumers from a variety of industries and different-sizecompanies. The study found strong interest in buying commercialinsurance direct among 15-to-20 percent of respondents, and atleast some interest among about 30 percent more.

That isn't to say there aren't good reasons for a carrier totake agent reaction into account when determining whether todirectly reach out to small-business prospects via the Web. But channel conflicts are not necessarily inevitable. And even ifthey do arise, they are not necessarily unresolvable.

It would only be logical for an insurer's existing agency forceto resent one of their carriers that is seemingly competing withthem for clients by selling direct online. Such tension could beespecially intense if some customers end up dropping their agentsand buying direct from the same insurance company over the Web toget a cheaper price for similar coverage.

Insurers currently distributing through agents might hesitate toadd a direct channel because they fear they'll end up alienatingtheir independent producers, perhaps prompting some to move theirbooks of business to other carriers that they feel are morecommitted to the agency channel.

But before dismissing the notion of adding a direct purchaseoption for small-businesses so as to avoid channel conflict,carriers should first consider how they might possibly mitigate anyfallout among their producers.

One way to add a direct sales option while maintaining existingagency relationships might be to treat current policyholders whochoose to buy direct as sourced through their former agency — atleast for a period of time. Friction during the transition toa direct relationship could be eased by paying a reduced commissionto the agency, in return for certain ongoing services and theopportunity to cross-sell to the account.

In addition, carriers adding a direct sales capability couldperhaps avoid channel conflict by launching their Web-basedinitiative under an entirely new brand. However, the value of sucha strategy in terms of pacifying existing producers should beweighed against the potential advantage of marketing a direct salesoption under a carrier's already established brand.

Keeping the main brand intact might provide name recognition tothe emerging channel that could conceivably make a difference amongthose shopping over the Web on their own for the first time. Someprospects may be more comfortable buying direct from a carrierwhose name they recognize, particularly if that brand has a stellarreputation in general.

Thus, while shying away from co-branding the direct channelmight alleviate any confrontations with agents, it could also makethe direct option a harder sell among those prospects willing tobuy online but leery of doing business with an insurer of whichthey have not heard.

Carriers looking to avoid channel conflicts could also considertargeting another market segment altogether with a directinitiative, or perhaps offer different products direct than thosesold through their agency force.

Regardless of how an agency carrier chooses to go direct, thepotential for channel conflict and its implications should not betaken lightly. Indeed, it is likely to be an ongoing balancingact.

Even if such mitigating alternatives are not employed, however,the potential for direct sales of small-business coverage over theWeb may be worth the risk of channel conflict for many carriers.Deloitte's survey found interest in buying direct among half ofrespondents. That number is likely to grow given the increasingproclivity of people to conduct their personal and business livesonline.

The risk of alienating producers and cannibalizing their agencybook of business might discourage some carriers from offering adirect purchase option. But as commercial insurance becomesmore available via the direct channel, and as small-businessconsumers grow more accustomed to shopping for their insuranceonline, those who avoid going direct altogether could end upforfeiting a significant amount of business to bolder, moreWeb-savvy competitors.

For more information about the survey results and insights intothe challenges facing insurers interested in selling direct, aswell as those looking to fortify their book of business againstdirect sellers, you may download Deloitte's “Voiceof the Small-Business Insurance Consumer” report by clickinghere.

In addition, you may listen to an archived webcast reviewing themain takeaways from the survey as well as the implications forcarriers and their intermediaries. To register, click here.