Who Will Buy Direct and Why?

The question for insurers is how they want to address a growing desire by small businesses to purchase online.


Just as personal lines have become commoditized and moved to a world of digital distribution, the online sales of small business and workers’ compensation insurance is fast increasing. There has been an explosion in online offerings — from online agents, to managing general agents (MGAs) to insurers. Because we were curious about whether direct-to-consumer would increase, we conducted a survey of small business insurance buyers.

We surveyed 190 small business owners about their practices, attitudes and preferences when it comes to purchasing insurance.

The rich data set from this research can guide insurers as they think through how to approach the acceleration of digital direct for small commercial. The key lessons drawn from the data are:

  • No respondents currently purchase online. This was not by design; it was simply that, in the random solicitation, no respondents happen to buy direct. The direct-to-consumer market is still relatively nascent, and that was reflected in the response rate.
  • Eighty-one percent use an independent agency that represents multiple insurers.
  • More than half of small businesses are delighted with the process of insurance buying but wish that there were more comparison options available, that the coverage was less confusing and that the process was simpler and faster.
  • Half of small businesses are not likely to buy commercial insurance online, with the biggest barriers being the lack of familiarity with insurance and the desire for an agent. But 33% say they would be likely to make their next purchase of commercial insurance online.
  • Those who want an agent are looking for a personal relationship. They want advice on what coverages to purchase, someone who can answer their questions and someone who will intervene with the insurer, if needed.
  • No surprise: Low price is the most important factor in the insurance buying process. By contrast, the least important factors — which include fast claims payment and fair claims payment — likely aren't priorities because small customers generally do not have many claims and do not expect to. Without other sources of value, price becomes the dominant feature.
  • When presented with two value propositions, Concept One with a lower price and no agent and Concept Two with a stated higher price that includes an agent, we found that 61% chose the more expensive, agent-assisted option. However, one-third of small businesses preferred an online buying experience at a lower price even though none of them use that option today.
  • The question for insurers is how they want to address this growing desire for purchasing commercial online. It is a potentially $20 billion market, by our calculation. Insurers can look at going after the online buyer — through a digital agency, by involving the agent or by selling direct themselves. Or they can focus their investments by supporting independent agents who want to keep buyers satisfied with the traditional process and avoid digital disintermediation.
  • Regardless of the option chosen, we have identified a variety of strategic questions insurers should answer about the role of the agent and priorities to address in the online market. Depending on the approach, insurers may need to invest not only in new technologies but also in new internal processes to provide services for online buyers or to support agents in retaining those customers.

You can find the full report here.

Karlyn Carnahan

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Karlyn Carnahan

Karlyn Carnahan is the head of the Americas Property Casualty practice for Celent. She focuses on issues related to digital transformation. Carnahan is the lead analyst for questions related to distribution management, underwriting and claims, core systems and operational excellence.


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