Carriers in the small commercial insurance sector will continue to face challenges from a competitive market and changing customer profiles. To survive and thrive in the future of small commercial, they will need to improve their underwriting core and pivot to the new by driving growth opportunities.

The small commercial insurance sector is a fragmented market with increased competition from new entrants that continues to drive price and margin pressures on traditional carriers. Add to that rapidly evolving customer expectations caused by digital disruption, and the world of small commercial is rife with challenges. However, the future also promises significant growth opportunities through new channels, markets and affinity.

According to recent Accenture research, no one player in the small commercial sector has more than 4 percent of the $100-billion market. In this new small world, speed, price and the customer experience are becoming the only differentiators among competitors.

But there is also a large underserved market made up of customers who don’t even realize they need coverage, such as gig workers for the likes of Airbnb and Uber. Fifty-five million people, or 35 percent of the U.S. workforce, are freelancers. The gig economy is estimated to grow from $14 billion in 2014 to $335 billion by 2025.

By 2020, more than 60 percent of small businesses in the U.S. will be owned by millennials and generation Xers. Millennials are not only used to getting by without an agent but actually prefer it. When it comes to affinity, there are now 65 million Facebook business pages and 1.75 million active Etsy sellers.

Carriers, it’s time to meet your new small-business insurance customers. According to Accenture research, the new micro & small business (MSBs) customers are self-employed, they’re operators and contractors, and they’re businesses with fewer than 20 employees. The average age of the individual customers is between 35 and 44. More than half of the businesses have millennials in senior management. What’s more, 57 percent of them begin their coverage-purchasing journey online.

To survive and thrive in the small commercial marketplace, carriers need to create more compelling experiences for both agents and customers while pursuing two key strategies:

Brilliant Basics: Improve the core of underwriting, with a tight focus on efficiency and protecting data quality. Insurers need to relentlessly seek simplification, efficiency and effectiveness of their core business through automation and digitization using advanced analytics, third-party data and artificial intelligence.

Pivoting to the New: After improving the core of underwriting, carriers will need to drive higher-margin business by pursuing new growth opportunities in underserved markets through direct channels and with strategic alliances in the greater digital ecosystem.

In my next post, I will delve deeper into the Brilliant Basics strategy that carriers can use to win big in small commercial. In the meantime, you can contact me with your comments, questions and feedback.

Submit a Comment

Your email address will not be published. Required fields are marked *