Three years ago, consulting firm Deloitte raised considerable concern with a study that found nearly 1 in 5 small-business owners surveyed were very likely to buy insurance directly online under the right circumstances.
Close to half of the participants indicated they were at least open-minded about the possibility of bypassing their agent.
But then the company came out earlier this year with an updated survey.
"Due to the complex nature of some commercial policies and intangible benefits provided by agents, online sales have been slow to develop in the small-business segment, accounting for less than 1 percent of U.S. market share," noted Deloitte. Except that 1 percent is more than just "slow" — it's almost nonexistent.
In a May, PropertyCasualty360.com blog, "Small-business insurers must bolster agents to fight off online disruptors," Deloitte lead researcher Sam Friedman, an author of the new study, included a cautionary note: "Small-business insurance buyers taking part in focus groups and surveys for Deloitte said dropping their agent would mean having no one but themselves to blame if they have a gap in coverage.
"Independent agencies are often small businesses just like their clients, operating in the same communities and belonging to the same neighborhood associations. Doing business in such close quarters can create a personal relationship that's difficult for a rival agent to disrupt, let alone a distant insurer looking to impersonally sell direct to consumers online," Friedman added.
Online quotes in action
Nevertheless, various tech firms and Silicon Valley start-ups have been circling the small commercial insurance market like buzzards, thinking they will be able to swoop down and make a quick killing. So far, all they've generated is venture capital and some press.
Allstate recently debuted a business insurance-quoting platform that the carrier touted as a means for small-business owners to buy a business owner's policy in five minutes. It is my belief that small-business owners will find it insulting that a business that they have toiled years to build is thought to be worth only five minutes to insure. The risks faced by small businesses are complex, not simple. Insuring them with a five-minute, do-it-yourself online session would be like performing an appendectomy on yourself with a butter knife while following a YouTube video.
Let's not forget that this was also the year when another highly touted online insurance and financial services platform, Google Compare, failed and was shut down.
However, the use of online insurance-quoting systems in small commercial lines could still pose a threat if a company is willing to spend about $1 billion per year in advertising as Warren Buffett has done in promoting Geico auto insurance, with mixed returns. That's why it's so critical that we get our industry together to arm independent agents with a "Buy Button" to bind policies in real time from their agency platforms.
Survey after survey continues to show that the owners of small and midsize businesses want to work with their insurance agents, much to the ongoing frustration of various direct writers. Clearly, the best strategy for carriers is to continue to support their agency force in providing their customers with what buyers want.
Gary Blackwell, CPCU, of Corinth, Maine, is president of the National Association of Professional Insurance Agents. The opinions expressed in this article are his own.
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