Small commercial insurance is a highly desirable market, and one that is going through a digital transformation. In order to win big in small commercial, carriers need to create winning digital experiences, relentlessly improve operations and create category killers.

Last month, I wrote about the future of small commercial insurance and detailed the statistics that give a glimpse of the growth opportunities that lie ahead for carriers.

In a nutshell, small commercial insurance is a highly desirable business for three main reasons:

  • The market is fragmented, with even the largest carriers having only a small portion of total premium income;
  • The market is underserved, both in the amount of coverage many small commercial businesses have and the number of micro & small businesses (MSBs) and gig economy workers who have no coverage at all;
  • The digital transformation is at an early stage in this industry, and insurers are not yet having to wage the costly brand and advertising wars that accompanied the advent of direct online selling in the personal lines sector.

But just because it is a desirable market it doesn’t mean that it is an easy business in which to be successful. There are also several challenges that carriers face in small commercial insurance:

  • The core business owners’ policy (BOP) is viewed by customers as a commodity with little differentiation;
  • The underwriting and pricing can be very complex;
  • Pricing pressure is strong, making profitability difficult;
  • Expense pressure is constant despite the high-servicing needs of customers.

It is especially difficult to succeed when the industry is undergoing a transition. Small commercial is in the early stages of the same type of digital revolution we have seen in personal lines; and as in the personal lines revolution there will be winners and losers.

The question small commercial carriers need to ask is whether or not they are setting themselves up to win in the digital revolution. In this blog series, I will take a deep dive into the three things carriers need to do to prepare for the small commercial revolution:

  1. Create Winning Experiences with Digital: These are the compelling experiences that will help to differentiate carriers, enabling them to win and keep customers as the core product becomes a commodity.
  2. Relentlessly Improve Operations: This is the focus to provide increasingly better and faster services while reducing operational expenses and maintaining or improving underwriting results.
  3. Create Category Killers: Using partnerships to establish compelling channels, services, and offerings that let you win and own sections of the marketplace.

In my next post, I will discuss how creating winning digital experiences can help carriers make the sale. In the meantime, feel free to contact me with your comments, questions and feedback.

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