Why Start-Ups Win on Small Business

But even the most innovative start-ups will need the help and support of traditional carriers and brokers.

As more companies invest in insurtech, we know that the small business insurance market is in the crosshairs of a number of start-ups, because small businesses are underserved and often underinsured. What many have failed to discuss is the impact that serving a small business has on carriers and brokers and how innovation could help these folks, as well. It is both challenging and costly to manage a small businesses book because serving these smaller, often first-time business owners comes with more questions, more time spent on renewal and more upkeep. Small businesses often do not have someone solely responsible for operations, and, thus, business owners are figuring out insurance on their own, with little time or patience to learn every intricacy of the insurance process. See also: Start-Ups Set Sights on Small Businesses However, the small business market makes up $100 billion of the $1 trillion insurance market. While not serving these businesses comes with a cost, serving these businesses poorly perhaps comes with a greater cost — not the least of which could be the loss of trust, if not the loss of a customer for life. Without the right systems in place, brokers and carriers will continue to feel the burden of serving small businesses, and small business owners will continue to feel confused about their insurance needs. So the truth that no one is talking about is: Innovation goes beyond helping small businesses; innovation helps everyone, carriers and brokers included. So, what is the solution? When many insurance veterans hear the words “start-up,” “innovation” or “change,” they roll their eyes, and they have the right to. After all, many of these folks have dedicated their lives to selling insurance and managing books worth hundreds of millions of dollars. Traditional carriers and brokers have built strong brands and have served billions of businesses, both large and small. At CoverWallet, we don’t take the expertise of those who have come before us lightly, but we know that finding a better way to acquire, retain and improve lifetime value of small businesses policies in a more cost-effective way is an essential path forward for traditional carriers and brokers. What’s important to understand is that many carriers and larger brokers aren’t well-positioned to take on completely innovating their tech stack, which is where start-ups can fill an unmet need. Start-ups can innovate and build faster and can focus on a single group, while traditional carriers and brokers have largely been forced to focus on many groups, businesses and sizes of business. Overall, start-ups are better poised to:
  • Acquire customers: Quotes and binds can take a long time, and carriers are more apt to focus on larger accounts. However, start-ups with an online application can serve businesses faster, moving from quote to bind in record time.
  • Service customers: Finding information about insurance online is tough, but with peer comparison tools, informative landing pages and support any way you want it (email, chat, phone) a customer can get questions answered in 1-2-3.
  • Retain customers: Retention of small businesses for traditional carriers and brokers gets tougher and tougher year-over-year as customer expectations grow. Many small business owners will at least shop around for a new quote when renewal time comes up, typically because they are disappointed with the level of customer service they have received. Start-ups focused on small businesses, providing a digital solution, built-in notifications and renewal reminders will likely make customers more comfortable with renewing — again and again.
This is not to say that introduction of start-ups into the insurance world means the end of traditional carriers and brokers. Quite the opposite. While start-ups are better-positioned in some ways, even the most innovative start-ups will need the help and support of traditional carriers and brokers. See also: InsurTech Boom Is Reshaping Market   Partnering with a start-up, especially one that focuses on making insurance a digital experience, from the bind to policy management, will no doubt prove valuable for today’s insurers. Doing so will allow carriers and brokers to focus on their largest binds and will reduce the cost of maintaining smaller businesses for the carrier. Having a strong digital presence and giving customers a way to buy online will be essential to the future of the industry. What is important for all players to understand, from start-ups to brokers to carriers, is that the most successful way forward is together.

Rashmi Melgiri

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Rashmi Melgiri

Rashmi Melgiri is COO and co-founder of CoverWallet. Melgiri has more than 10 years of experience in technology and media. She was a strategy consultant at the largest North American TMT (technology, media and telecom) consulting group, Altman & Vilandrie.


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