Just because a small-business insurer decides that selling direct to consumers over the Web is not for them doesn't mean they can afford to ignore the potential threat to their market share posed by competitors who do take the plunge.

Some agency carriers may shy away from direct sales if they fear that alienating their current intermediaries could cost them more business than they might gain. Others may believe that small-business coverages are too complicated and the risk to buyers of going it alone too high to make a direct sales channel preferable or even viable.

However, it is important to keep in mind that simply maintaining the status quo when it comes to small-business insurance distribution via agents could pose risks as well. In addition, there are lessons to be learned from would-be direct writers that could benefit carriers regardless of whether they sell with or without agents.

Consumer Demand

Just as insurers often target certain distinct customer segments while passing on others, there are those who base buying decisions on their preferred purchasing method. We've certainly seen that scenario play out in the personal lines space.

Therefore, carriers that decide against selling via a direct channel may risk leaving a large group of Web-savvy prospects on the table who might want to buy insurance online without bothering with an intermediary.

Indeed, about one-in-five of the 751 small-business buyers surveyed in March on behalf of the Deloitte Center for Financial Services say they would be very likely to buy direct from insurers on the Web if given the chance. Another 30 percent said they would be somewhat likely to go the direct route.

Much of the interest in direct purchasing right now is theoretical, since there are relatively few opportunities for buyers to actually conclude a small-commercial insurance transaction over the Web. But that's likely to change sooner rather than later as more carriers add a direct purchase option.

The question, then, is what agency carriers are going to do in response to this disruptive distribution trend? Some may conclude that “if you can't beat them, join them,” and launch their own direct channel. But others will stay the course and sell strictly through intermediaries.

Lessons Learned

Yet even those carriers that are dead set against bypassing agents and brokers can still learn from the example provided by those selling direct to consumers. Indeed, traditional agency carriers should consider taking many of the same steps as those being implemented by the new breed of direct writers in terms of upgrading their marketing, sales, and service capabilities. This can help insurers compete not only with newly-emerging direct writers, but also with more traditional agency distribution carriers.

For example, asking buyers to shop for insurance, solicit quotes, and complete a transaction on their own calls for intuitive, straight-through underwriting and pricing platforms, fueled by advanced analytics and predictive modeling. Such tech infrastructure enhancements could improve the competitive position of a small-business insurer regardless of how they distribute their products.

In addition, some carriers may choose to apply lessons learned from direct writers to support, rather than supplement or replace their agency channel. One way to do so would be to make it easier for prospects to apply for coverage on the carrier's website, but then refer such leads to a nearby agent. Another might be to solicit business through aggregators offering comparison shopping on their websites, as well as through online insurance agencies.

Leveraging the lessons learned from direct writers, however, might require a shift in customer focus from agents to end-consumers. This might be a difficult transition, because from a service perspective independent agency carriers often think in terms of producer expectations — get the agent a quote and wait for hours, or even days, to learn whether a sale might go forward after the intermediary confers with their client and perhaps shops the risk around.

But when selling small-commercial coverage directly to consumers, while some may be willing to fill out an application on the Web and receive a quote within a reasonable period of time, many online prospects might expect turnaround time to be nearly instantaneous — as it often is with personal lines insurance purchased on the Internet.

Direct writers, and those following their example in terms of online capabilities, should therefore seriously consider being prepared to transact business in real-time. That means providing a quote, collecting credit card information, issuing the policy, and closing the sale — all while the prospect is engaged on the insurer's website.

The bottom line is that no matter how an insurer currently sells their products and services — via agents, direct to consumers, or with some hybrid combination of the two — those targeting the small-business market would be wise to consider improvements in their core operational and technological capabilities so they remain competitive when facing off against both traditional- and emerging distribution systems.

For more information about the survey results and insights into the challenges facing insurers interested in selling direct, as well as those looking to fortify their book of business against direct sellers, you may download Deloitte's “Voice of the Small-Business Insurance Consumer” report by clicking here.

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

Special Reports /

Direct Writer Path Provides Lessons to All Small-Business Carriers

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