Just because a small-business insurer decides that sellingdirect to consumers over the Web is not for them doesn't mean theycan afford to ignore the potential threat to their market shareposed by competitors who do take the plunge. 

Some agency carriers may shy away from direct sales if they fearthat alienating their current intermediaries could cost them morebusiness than they might gain. Others may believe thatsmall-business coverages are too complicated and the risk to buyersof going it alone too high to make a direct sales channelpreferable or even viable. 

However, it is important to keep in mind that simply maintainingthe status quo when it comes to small-business insurancedistribution via agents could pose risks as well. In addition,there are lessons to be learned from would-be direct writers thatcould benefit carriers regardless of whether they sell with orwithout agents.

Consumer Demand

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

Therefore, carriers that decide against selling via a directchannel may risk leaving a large group of Web-savvy prospects onthe table who might want to buy insurance online without botheringwith an intermediary. 

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

Much of the interest in direct purchasing right now istheoretical, since there are relatively few opportunities forbuyers to actually conclude a small-commercial insurancetransaction over the Web. But that's likely to change sooner ratherthan later as more carriers add a direct purchaseoption. 

The question, then, is what agency carriers are going to do inresponse to this disruptive distribution trend? Some may concludethat "if you can't beat them, join them," and launch their owndirect channel. But others will stay the course and sell strictlythrough intermediaries. 

Lessons Learned

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

For example, asking buyers to shop for insurance, solicitquotes, and complete a transaction on their own calls forintuitive, straight-through underwriting and pricing platforms,fueled by advanced analytics and predictive modeling. Such techinfrastructure enhancements could improve the competitive positionof a small-business insurer regardless of how they distribute theirproducts.

In addition, some carriers may choose to apply lessons learnedfrom direct writers to support, rather than supplement or replacetheir agency channel. One way to do so would be to make it easierfor prospects to apply for coverage on the carrier's website, butthen refer such leads to a nearby agent. Another might be tosolicit business through aggregators offering comparison shoppingon their websites, as well as through online insuranceagencies.

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

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

Direct writers, and those following their example in terms ofonline capabilities, should therefore seriously consider beingprepared to transact business in real-time. That means providing aquote, collecting credit card information, issuing the policy, andclosing the sale — all while the prospect is engaged on theinsurer's website. 

The bottom line is that no matter how an insurer currently sellstheir products and services — via agents, direct to consumers, orwith some hybrid combination of the two — those targeting thesmall-business market would be wise to consider improvements intheir core operational and technological capabilities so theyremain competitive when facing off against both traditional- andemerging distribution systems. 

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.