The technical glitches that have plagued the launch of the new federal health insurance exchange provide a cautionary tale for carriers thinking of selling small-business coverage direct to consumers over the web.

That is, you'd better make sure your tech processing system functions properly before you launch, because you may not get a second chance with consumers.

Public health insurance exchanges have an advantage that private carriers selling online may not necessarily share. Under the Patient Protection and Affordable Care Act, individual consumers are mandated to get health insurance either through their employer, purchased on their own, or granted via Medicaid or Medicare programs. Otherwise, they will have to pay a penalty on their federal income tax forms.

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

Private carriers probably don't have that luxury. If a consumer comes to your site to buy coverage, and they get frozen out, confused or frustrated because the technology either isn't working or is too complicated to follow, not only won't they be able to complete their purchase, but it's unlikely they'll return to try again. There are too many other alternatives in the traditional insurance market for people to bother banging their heads against a virtual wall trying to buy on their own over the web if the process gets in the way.

What's worse, take note of the negative publicity generated as tales of those who had problems dealing with malfunctioning health insurance exchanges went viral. Technical difficulties won't just alienate the individuals who have trouble buying direct over the Web. Those who are disappointed and angry about their initial online purchase experience will most likely share their war stories with family, friends, neighbors, work colleagues, business associates, as well as with millions of others via social media. Such downbeat buzz could discourage others from trying the direct channel themselves.

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

Small-business insurers looking to sell direct should follow the example set by their personal lines counterparts, which have generally delivered a very positive experience to buyers. Nine in 10 small-business owners and managers Deloitte surveyed who had bought auto, homeowners or life insurance online were either satisfied 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 found that 52% of those who had bought personal lines online (versus only 12% who had not) said they were likely to go that route for commercial property coverage. The difference was even more dramatic for workers' comp (46% versus 7%) and commercial auto (42% versus 8%). Get the online experience right, and you're likely to have a much easier time generating sales momentum.

The application process should be simple and straightforward. The straight-through-processing system handling underwriting and pricing should be quick and reliable. Claims reporting should be transparent and intuitive. Ultimately, the overall customer experience should be fluid and positive.

To drive home this point, note that lack of trust in the industry to handle consumers fairly was by far the biggest objection cited by those "naysayer" respondents who indicated in our survey they were not at all likely to buy coverage direct from insurers online, without an agent or broker serving as an intermediary.

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

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

Special Reports /

Commercial Insurers Selling Direct Can Take Lessons from Obamacare Rollout

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