The technical glitches that have plagued the launch of the newfederal health insurance exchange provide a cautionary tale forcarriers thinking of selling small-business coverage direct toconsumers over the web.

That is, you'd better make sure your tech processing systemfunctions properly before you launch, because you may not get asecond chance with consumers.

Public health insurance exchanges have an advantage that privatecarriers selling online may not necessarily share. Under thePatient Protection and Affordable Care Act, individual consumersare mandated to get health insurance either through their employer,purchased on their own, or granted via Medicaid or Medicareprograms. Otherwise, they will have to pay a penalty on theirfederal income tax forms.

This means that at some point, once all the kinks and bugs areeventually worked out, many currently uninsured people willprobably get their health coverage via a state or federal exchange,regardless of how good or poor their first encounter with this newdistribution outlet went, or whatever horror stories they might'veheard in the media or from people they know. That's because theymay have no other alternative, or may not be aware of any otheroptions.

Private carriers probably don't have that luxury. If a consumercomes to your site to buy coverage, and they get frozen out,confused or frustrated because the technology either isn't workingor is too complicated to follow, not only won't they be able tocomplete their purchase, but it's unlikely they'll return to tryagain. There are too many other alternatives in the traditionalinsurance market for people to bother banging their heads against avirtual wall trying to buy on their own over the web if the processgets in the way.

What's worse, take note of the negative publicity generated astales of those who had problems dealing with malfunctioning healthinsurance exchanges went viral. Technical difficulties won't justalienate the individuals who have trouble buying direct over theWeb. Those who are disappointed and angry about their initialonline purchase experience will most likely share their war storieswith family, friends, neighbors, work colleagues, businessassociates, as well as with millions of others via social media.Such downbeat buzz could discourage others from trying the directchannel themselves.

I've spent a lot of time in these blogs lately talking about thepotential for small-business insurers to sell commercial coveragedirect to a segment of "do-it-myself" consumers. It makes a lot ofsense to leverage this platform for small-commercial coverages,since the average consumer is already doing so much of theirbusiness online these days, why should small-business insurance bean exception?

Small-business insurers looking to sell direct should follow theexample set by their personal lines counterparts, which havegenerally delivered a very positive experience to buyers. Nine in10 small-business owners and managers Deloitte surveyed who hadbought auto, homeowners or life insurance online were eithersatisfied or very satisfied with the process.

For those skeptical about the importance of this finding,consider that when slicing and dicing our data further, we foundthat 52% of those who had bought personal lines online (versus only12% who had not) said they were likely to go that route forcommercial property coverage. The difference was even more dramaticfor workers' comp (46% versus 7%) and commercial auto (42% versus8%). Get the online experience right, and you're likely to have amuch easier time generating sales momentum.

The application process should be simple and straightforward.The straight-through-processing system handling underwriting andpricing should be quick and reliable. Claims reporting should betransparent and intuitive. Ultimately, the overall customerexperience should be fluid and positive.

To drive home this point, note that lack of trust in theindustry to handle consumers fairly was by far the biggestobjection cited by those "naysayer" respondents who indicated inour survey they were not at all likely to buy coverage direct frominsurers online, without an agent or broker serving as anintermediary.

Part of that trust issue, I believe, might have to do with thefact that the vast majority of small-businesses have never boughtcommercial coverage online, and neither has anyone else they dobusiness with. They simply don't know what to expect. Outside ofcommercial auto and professional liability, the opportunity to buydirect online has not been available.

That situation is likely to change dramatically over the nextfew years as new direct players enter the market and agencycarriers extend their brands into online sales. The big question iswhether carriers will be ready to handle it.