There is a long-held belief that commercial lines insurance, regardless of the size, require a personal agent or broker to be effectively marketed, sold, and serviced. A new report (based on US data) is questioning this assumption, raising some technology, operational, and marketing issues for everyone involved in small commercial insurance. We’d like to know what you think about this trend coming to Canada.
Deloitte: Factors correlating with interest to purchase on-line
The report comes from The Deloitte Center for Financial Services, which conducted a several focus groups in 2012 and followed up with survey of more than 750 small-businesses in March 2013 from a variety of industries. The results? “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.”
So what are these circumstances? Demographics played a smaller role than one might imagine. The report indicates that 22% of small business insurance consumers aged 26-34 are very likely to buy over the Internet. This drops to 14% for the 35-44 year old segment, but goes backup slightly for the 45-54 (17%) and 55-64 (18%) segments. For the 65+ segment, the very likely group is 15%.
The size of the business is a more distinguishing factor. According to the report, “Smaller businesses appear more interested in going online for commercial insurance, with 28 percent of those generating under $100,000 in annual revenue describing themselves as very likely to buy direct, along with 18 percent of those with revenue between $100,001 and $250,000.”
Previous experience buying insurance on-line also seems to be an influencer. The reports says: “roughly half of the 21 percent of respondents who had purchased individual auto, homeowners and/or life insurance directly from a carrier online also at least had shopped for commercial insurance on the Web as well.”
All of this suggests that Commercial Lines Insurance consumers’ behaviours are looking a lot like personal lines insurance consumers’ behaviour
So what does this mean for carriers and brokers?
The first important point to be made is that, while there is very little in the way of direct, on-line commercial lines sales, this is no longer a ‘theoretical concept’, according to the report. Commenting on the report, Regis Hyle, editor of PropertyCasualty360, wrote, “If technology has taught us anything over the last decade it’s that we can’t expect things to stay the same indefinitely.”
This has immediate technology and operational implications, regardless of whether a carrier or broker sets out to put up an on-line facility or not. Ease of doing business is critical. Direct providers will have real-time facilities, supported by technologies with predictive capabilities and capacity to culminate the sale in one session.
Beyond technology, there are serious marketing implications. This involves segmentation, advertising, social media strategies, partnership with associations and other service providers, etc. Deloitte points out the ‘Build it and they will come’ approach is hardly a recipe for success. The message here is that there will likely be more intense competition for the attention of commercial insurance buyers.
What do you think?
All of this is based on US data. And the penetration of direct sales of personal lines insurance in Canada is significantly lower than in the US. So does this mean agents and brokers have a better grip on the market? Or, will the pressure for change impact our commercial insurance consumers in similar proportion?