Each summer, insurance carriers begin to plan their major initiatives and investments for the coming year. But 2020 is, to put it mildly, a little bit different than the average year. The uncertainty isn’t just due to the pandemic. Economic shifts and a volatile regulatory environment are also pressing concerns.

They all make this year’s planning process more difficult—and more important. To help insurance leaders navigate this storm, this blog series will present some no-regret actions

different insurance businesses can include in their 2021 plans. Let’s start with small commercial.

Growth will return to small commercial market eventually

In 2021, the small commercial market will remain highly volatile. We can expect carriers to be working through the impact of premium retraction from lost small businesses that have been sunk by the crises of 2020. It is unclear how quickly small business growth will begin to rebound. We know it will come back; it’s just a matter of when.

However, we do know a few things about the market in 2021:

  • Customers will be more focused on premium price given the state of the economy.
  • Customers will be even more likely to begin their search for insurance online.
  • If their insurance didn’t cover the business interruption of the pandemic, customers will be more wary of carriers and will want a deeper understanding of what is and isn’t covered.

With those market conditions in mind, here are five things small commercial insurance carriers should consider for investments to improve capabilities to grow in 2021:

  1. Become a digital attacker

More sales searches for new insurance and renewals are going to begin online. To be successful, carriers are going to need a strategy to attack opportunities in the digital marketplace.

This doesn’t mean that every small commercial carrier needs to have a direct-to-consumer offering. It does mean that being able to reach your customers through digital channels will move from nice-to-have to need-to-have.

Potential strategies can include:

  • Attracting customers to your site and then routing them to agents with better experience, tools, and educational materials so you are a source of expertise.
  • Digital partnerships that engage customers at the point of need or working through eBrokers such as Insureon.
  • Direct-to-consumer offerings such at Hiscox, THREE, or Next.
  1. Put intelligent data to work

We learned during the recent crisis how quickly small-commercial companies need to evolve and flex to meet changing demands. Restaurants were suddenly acting more like grocery stores selling food for delivery or pick-up.

In this environment, the 15- to 20-percent inaccuracy of rating elements that most carriers live with isn’t sustainable. As competition becomes fiercer, carriers that have better data will be the ones achieving better underwriting results and winning long term. It is time to move past piecemeal approaches to data and invest in modern data platforms that can ingest, cleanse, and prepare data from multiple sources to improve the accuracy of rating, quoting, and underwriting results.

  1. Improve and consolidate core platforms

The need in 2021 will be no different than it has been in the last five years: if your core policy platform doesn’t allow you to easily make changes to policy forms and doesn’t allow you distribution flexibility to quote through portals, application programming interfaces (APIs), and direct, it may be time to start to upgrade.

  1. Boost book management with intelligent renewals

Small businesses have had to adapt dramatically to make it through this crisis. Is your business certain of what is actually on your books?

Most carriers go years without taking a close look at renewing business unless there is a major claim. That’s a huge risk with today’s pace of change.

Investing in the intelligent data mentioned above doesn’t just have to be about new business. If carriers don’t want to see underwriting erosion, they need to redefine their renewal process to make sure that what they are renewing and pricing for matches reality.

  1. Seek hyper growth opportunities through convergent plays

Today, more information and services for small commercial are coming from digital service providers such as hosting sites, payroll and accounting solutions, and employee benefit providers. This creates emerging opportunities to integrate with these providers and offer unique distribution or service opportunities to your customers.

In 2021, it will be worth having at least a small amount of investment focusing on exploring one or two asymmetrical opportunities for growth by pursuing an innovative play with another player in the small commercial marketplace.

The year ahead is no time for a business-as-usual mindset. Pause, think through what the future is likely to bring, and consider what really will move the needle for your business. Hopefully, these five ideas will give you a place to start.

And if you want to know more about any of them, I’d love to hear from you. In our next post, we’ll look at investment ideas for commercial and specialty carriers.

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