- Where Insurance & Technology Meet

Insurance Re-imagined: Small Businesses, Big Opportunities

Small Canadian businesses are being recognized as net-new business for insurance suppliers.  However, new operations can be more challenging than just punching in coverages. At the same time,  soon-to-be successful entrepreneurs have less time to work with insurers and brokers to get the coverage just right.

Is there a way to cover the requirements for insurance without taking all of the time of the day?

Deloitte’s small business focus

A few years back, Deloitte Canada undertook a review of the state-of-the-art for small business  insurance, and published a report entitled Insurance re-imagined; the focus (and subtitle) is “Unlocking the small business opportunity to help Canadian insurance carriers grow.” Featured are interesting approaches that are very relevant, if perhaps a little miss on the entrepreneurs’ requirements.

Patrick’s focus

I realized recently that I have been working for 52 years. During that time, I have worked for a few large organizations, but the majority of time fits in the ‘small business’ category.  In most of these situations, I had responsibility for admin, including insurance.  More on this later.

The small-business landscape

Deloitte notes that there are 1.14 million small businesses, employing 8.2 million people in Canada (slightly over 7 employees per business).  For its purposes, Deloitte conducted in-depth interviews with 550 small businesses.

At a high level, Deloitte noted:

  • The small business segment has been traditionally served through intermediaries. It demands a relatively high-touch and low-cost model to cater to small business customers’ needs while remaining attractive to carriers.
  • Deloitte found that the ‘right size’ small business generated C$8.8 billion in annual premiums – 38% of total commercial lines in Canada.  
  • However, digging further, Deloitte “estimated that the small business market is underinsured by at least C$2.2 billion – which means carriers are leaving considerable value on the table.”

Why? Three vectors:

  1. “With a limited understanding of business risks and a lack of educational material, there is often a mismatch between small business owners’ perceived risks and their coverage
  2. “Our research suggests that a substantial proportion of small businesses are not adequately protected against the risks they consider most relevant, potentially exposing them to significant legal action and monetary loss.
  3. “Carriers pursuing the small business market will also need to decide which sub-segment(s) to target.”

So what to do?

Deloitte suggest that innovation is required.  For one thing, Deloitte notes that small businesses are “generally price sensitive”.

In addition, new risks are coming from digital arenas, bring in new risks.  Deloitte notes: 

“To better serve the small business market, carriers will need to deliver a better level of service. Small business owners often feel marginalized by the current commercial insurance market. They’re busy, they value products that are easy to understand and convenient to service, and they strongly believe their businesses are unique.”

And here’s the punch line: “Going direct may present carriers with an opportunity to differentiate themselves, reach more customers and control the front-end experience for small businesses.”

It’s the channel …

Deloitte closes the article using the title of the article –  ‘Insurance re-imagined’ – and four options:

  1. Empower intermediaries to better serve customers
  2. Compete head-to-head with intermediaries
  3. Build a complementary hybrid delivery model
  4. Create an omnichannel experience

For each point, this assumes that the insurers have resources, and determination to support new approaches.   

This could be a challenge, especially with new programs and services that are not engaged with the list above.  Or it might be a simple transition.

Patrick again …

Working on insurance programs and projects seemed completely untethered from insurance policies.  

Now, I am able to see how the paths run neatly in parallel.  Something tells me that others are already in the paths and planning other exercises.  I’m just glad I’ve gotten to the first step.

Your thoughts?