Voice of the small-business insurance consumer Are buyers ...

Voice of the small-business

insurance consumer

Are buyers ready to take the

direct sales route?

Deloitte Center

for Financial Services

Contents

Introduction: What should small-business carriers

be thinking about in terms of direct sales?

1

Survey findings: Who is open to buying direct over the Internet?

3

Reality check: What operational factors should carriers consider

if they are interested in selling direct?

10

Conclusion: Where do small-business insurers go from here?

14

Survey methodology

15

Acknowledgments and contacts

17

2

Introduction: What should small-business

carriers be thinking about in terms of

direct sales?

Direct sales of auto insurance to consumers has been a

prime distribution platform for a number of years, keeping

the heat on agents and brokers to demonstrate their

added value if they want to retain or expand their market

share. However, a day of reckoning for intermediaries

on small-commercial business might similarly be looming

sooner rather than later, as carriers begin to seriously

explore the potential for reaching buyers directly via a

one-stop, Web- or mobile-based transaction.

It would be understandable if many are skeptical about

the potential for disintermediation in small-business lines,

if only because it simply hasn¡¯t yet been attempted to any

great degree here in the United States. The conventional

wisdom is that such consumers probably don¡¯t have time

to shop for coverage on their own ¨C and even if they do,

their lack of an insurance background, the complexity of

coverage, as well as their service requirements would likely

keep them solidly entrenched in the agency camp for the

foreseeable future.

However, our hypothesis is that given the growing

proclivity of individuals to live their personal and business

lives online, many buyers of small-business insurance might

indeed be ready, willing and able to conclude a transaction

on their own, whether through their desktop, laptop,

tablet or perhaps even their smartphone.

We tested that hypothesis in two primary research projects

conducted by Deloitte¡¯s Center for Financial Services ¨C first

in a pair of focus groups over the summer of 2012, and

then following-up with a much broader online survey

during the winter of 2013.1 Deloitte found that as much

as half of the small-business insurance market might be

quite willing to buy direct from a carrier over the Internet,

without having an agent or broker to shop for them or

advise them, given the proper circumstances.

But what are the ¡°proper¡± circumstances that might

convince a small-business prospect to take the leap and

discard their intermediary to buy one or more of their

insurance policies over the Internet? What incentives,

reassurances and educational material might have to be

provided to create a comfort zone for online shoppers?

And what marketing and operational conundrums

might carriers encounter if they choose to go direct to

consumers? Could carriers still face many of the same

challenges even if they decide not to go the direct

sales route?

Deloitte launched its research initiatives and tapped the

experience of in-house subject matter specialists in part

to scope the potential market for direct small-business

insurance sales. In addition, we looked at what it might

take for carriers to do business directly with increasingly

tech-savvy and Web-centric consumers, concluding that

such efforts are likely to require a group of enhanced

capabilities across the insurance company value chain. And

we suggest that many such upgrades might be required

regardless of whether a carrier opts to explore direct

distribution or to stick with its existing agency channel.

As used in this document, ¡°Deloitte¡± means Deloitte Consulting LLP, a subsidiary of Deloitte LLP. Please see us/about for a

detailed description of the legal structure of Deloitte LLP and its subsidiaries. Certain services may not be available to attest clients under the rules

and regulations of public accounting.

1

Please see page 15 for details on our research methodology

Voice of the small-business insurance consumer Are buyers ready to take the direct sales route?

1

Deloitte¡¯s ¡°Voice of the Small-Business Consumer¡± online

survey of 751 respondents in March 2013 ¨C representing a

wide array of industry groups as well as different company

sizes (both in terms of the number of employees and

annual revenue) ¨C asked a variety of questions about the

small-business customer¡¯s insurance purchase experiences

and expectations, including:

? Whether the respondents had ever shopped for

commercial insurance online.

? If they would be willing to buy such coverage direct

from a carrier over the Web without a personal agent to

guide them.

? What factors might cause them to hesitate or shy away

from buying direct online.

? Which, if any, conditions might convince them to

conclude a transaction over the Web, with or without

the assistance of someone in a licensed service center.

The survey found that while the direct purchase of smallcommercial coverage might not be attractive for all smallbusiness insurance buyers ¨C anymore than it is for those

buying personal lines today ¨C about one in five are actually

eager to take the plunge, with another third quite open to

the notion (see Exhibit 1). The question is how an insurer

might reach such prospects, as well as how to effectively

sell to and service them once a carrier makes a direct

connection.

Exhibit 1. How open are small-business respondents to purchasing direct online?

Likelihood of buying one or more business insurance policies over the Web, direct from an insurer

100%

80%

16%

5%

22%

47%

60%

14%

32%

40%

17%

18%

35%

39%

15%

31%

40%

35%

20%

0%

48%

18-25

54%

26-34

54%

48%

38%

35-44

43%

45-54

55-64

65 or over

11%

14%

34%

29%

Age

100%

49%

80%

60%

Likelihood of

buying business

insurance online

directly from the

insurer

19%

13%

16%

30%

49%

38%

34%

51%

38%

46%

55%

57%

Less than

$100,000

$101,000 to

less than

$250,000

$250,000

to less than

$500,000

$500,000

to less than

$1 million

$1 million

to less than

$5 million

$5 million to

less than

$20 million

28%

38%

40%

20%

0%

Annual company revenue

Very likely

Somewhat likely

Not very likely

Source: Voice of the Small Commercial Insurance Consumer Survey, Deloitte Center for Financial Services, March 2013

2

Survey findings: Who is open to buying direct

over the Internet?

While relatively few opportunities exist today ¨C outside of

commercial auto and professional liability ¨C for someone

looking to complete a purchase of small-business insurance

coverage on their own from a carrier online, Deloitte¡¯s

survey found that many consumers have already begun

moving in this direction.

Among buyers of property, general liability, businessowners policies and professional liability coverage,

nearly one-in-five surveyed had initiated their purchase

online, either via their insurance company¡¯s website or

through one of the aggregator sites that help shoppers

solicit and compare quotes from multiple sources. Smallbusinesses have also gone to the Web to shop for other

coverages, including workers¡¯ compensation, albeit in

smaller numbers.

It should be encouraging for those considering direct sales

to find such a significant segment of respondents testing

the online shopping experience ¨C even though, as noted

earlier, direct transaction capabilities offered by commercial

insurers are limited.

To confirm this limited capacity, we shopped for coverage

on the websites of 14 leading small-business insurance

carriers, as well as six aggregator sites, and found only one

from each category allowing consumers to enter their risk

information, receive a quote, and conclude a transaction in

a single sitting online. The other insurance company sites

refer prospects to an agent in their ZIP code, offer to have

an agent call them with a quote, or provide an opportunity

to speak with someone at a call center. The other aggregators either refer shoppers to relevant carrier websites or

arrange to have an agent contact them to complete

the process.

However, the fact that so many respondents are already

going to the Web to proactively shop for small-business

insurance on their own, rather than passively waiting for

an agent to shop for them, indicates that a segment of the

market is likely primed to take the next step and complete

actual transactions on carrier and aggregator websites, if

given the chance.

Indeed, the survey results suggest that there may be an

early-mover advantage to be had here, with carriers that

build this capability positioned to connect with those

already indicating an openness and desire to purchase at

least one of their small-business coverages directly from an

insurer over the Web.

What do you think about the

possibility of buying your smallbusiness coverage direct from an

insurer, without an agent or broker to

shop for you or advise you?

¡°If you can easily compare coverage and

prices online, why not?¡±

¡°I would want to be sure the insurer has

the resources to hire qualified [customer

service representatives] to provide

the help we would need without our

brokers.¡±

¡°Insurers could offer concierge service to

its best customers, especially those with

multiple policies, in return for handling

all of my business.¡±

¡°If the insurer gives you a one-on-one

internal agent within their company ¨C

someone knowledgeable about your

business and dedicated to your account

¨C it might make a difference.¡±

¡°There are not enough brokers to

handle all of these small businesses

economically.¡±

¡°With the Web, there is so much

information at your disposal.¡±

Source: Small-business insurance focus groups, Deloitte Center for

Financial Services, June 2012

Thus far, despite the limited transaction capabilities

available, about three out of four respondents who have

initiated a purchase online are satisfied with their Web

shopping experience, both on the price they eventually

received as well as coverage terms and conditions ¨C with a

slightly less enthusiastic response among online shoppers

for workers¡¯ comp and commercial auto.

Voice of the small-business insurance consumer Are buyers ready to take the direct sales route?

3

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