Start-Ups Set Sights on Small Businesses

When start-ups jumped into insurance, many focused on the personal auto industry. Not surprising, considering it is arguably the least complex line of insurance and is often the first to be disrupted (going back to Progressive in the ‘90s). Now that InsurTech investment is at an all-time high, more start-ups are entering the market and have become increasingly confident in their ability to tackle complex lines of business. If recent start-ups like CoverWallet and Next Insurance are any indication, small commercial business is the next line to face aggressive disruption. If carriers want to stay competitive and grab profitable market share, they will have to adapt to today's standards for the customer experience. Small Commercial an Obvious Move for Startups Targeting the small commercial business market makes sense, given a recent McKinsey study that calls the line “one of the few bright spots in P/C insurance.” The study points out that, since the 2008 recession, the number of small businesses has grown, and 40% of sole proprietorships don’t have insurance. Unfortunately for the traditional carrier, the majority of small businesses are also open to purchasing policies online. But remember that saying you’re open to purchasing online and actually purchasing online are two very different things - especially if we use the recent past as an indicator. See Also: So Your Start-Up Will Sell Insurance Google Compare terminated operations after sluggish growth across the U.S., with many of their leads failing to purchase. This is not atypical for this insurance shopping method. Several years ago, Overstock also tried selling insurance online outside of personal auto - including commercial business - and that closed down quickly. That two business giants failed doesn’t mean online purchasing won’t eventually catch on. Start-up culture is largely a test-and-learn environment. But these initial growing pains do indicate that traditional insurance still has a chance to stay alive amid disruption if they provide an efficient, engaging consumer experience. Consumers Want Both Confidence and Efficiency It’s not that consumers don’t want to work with carriers and agents, it’s that the customer efficiency of 30 years ago is no longer an appropriate benchmark. Of course small business owners are open to purchasing online, because traditional insurance has not yet given them the experience they desire. According to a PIA study from last year, small commercial businesses would much prefer the personal attention from agents (and by extension the carriers they work with) as long as they do a better job of adapting to technologies and the Internet. From the customer’s perspective, an experience with an insurance carrier isn’t compared only with other carriers – but to other companies they do business with regardless of industry. Whether it’s Amazon, Apple, Google, etc., your customer experience will be rated against the companies leading in the modern, digital world. This explains many of the start-ups entering the space now and why they have the potential to gain the upper hand. To achieve better communication, carriers need to think more broadly about their usage of data and predictive analytics. You have to gain an incredibly detailed view of your customers, their behaviors and their responses to your communication and product offerings. We always recommend an incremental rollout of analytics to get your feet wet before diving in. At the same time, it’s critically important to be ready to build off that early momentum and develop an overall predictive analytics strategy that seamlessly merges with business goals. Recognize that this evolution to becoming more data-driven is as much about organizational change as it is about technology. When carriers understand how predictive analytics benefits them, they can confidently make data-driven decisions that improve every aspect of their business - including the customer experience. For example, using underwriting analytics to achieve real-time insights into pricing policies doesn’t just help a carrier's bottom line - it also greatly streamlines and expedites the communication chain between consumers, agents and carriers. At the recent Dig In insurance conference, a panel of InsurTech CEOs discussed how start-ups dissect insurance data – in ways that differ from traditional insurers and agents. A member of the audience asked, “Why are start-ups so combative in their approach?” It was an intriguing question that highlights the digital divide in terms of how the industry thinks about evolving versus how technology and Internet entrepreneurs think about playing in industries ripe for disruption. What feels “combative” to the incumbent is often seen as “customer-centric” to the new entrant. It’s important that carriers understand that there is a way to co-exist, but counting on new entrants to accept the status quo is a bad bet. Think of start-ups as an advocate for a better customer experience, and see those that fit your business as innovation partners. Adopt the mantra that the customer always wins, and you’ll remain relevant in the customer value chain.