ITA Pro Magazine - December 2015

make accommodations for everyone.

One problem Deloitte identified, according to Friedman, is some buyers reported they can’t buy everything online.

“Some carriers are only selling one or two lines of coverage so the idea is if you have the agent as a backup you have them there to sell other policies and round out the account with some cross-selling,” he says.

Lucker believes it’s a difficult problem
to resolve because only a few companies
sell small commercial products direct
and those are virtually all monoline. “No
one is selling all the products you need
online,” he says. “There is no carrier that
sells more than two (small business)
products online.”
It’s an expensive proposition to start
up a direct company that writes all the
products a small business might need,
adds Lucker. If an insurer is going to be a
direct writer, they have to write in all 50
states and territories, which means there
is an enormous development expense
and a huge regulatory filing/compliance
issue to write BOP, commercial auto,
workers’ comp, or cybersecurity policies
in 50 states.

“A direct writer has to be highly automated, which means you need very good rating and underwriting models to create the no-touch or low-touch process,” he says. “This creates significant expense and regulatory issues because it’s easy to file a BOP or a workers’ comp policy in more traditional means, but if you are going to fully automate you have to file in an automated pathway. In small commercial, that process is done by people. The human touch process has to be analytically automated and filed. It’s not an insignificant process. If you look at the options we outlined, the hybrid model potentially emerges as the most expeditious and cost effective.”

A New Generation

Lucker points out the Deloitte research
indicates a new generation of insurance
customers seem to be willing to bypass
agents, but he cau-
tions that as those
younger people
become business
owners they might
not retain the kind
of technology confi-
dence that will allow
them to disregard
agents.

“What some studies are showing, unrelated to insurance, is life stages tend to take over and as people get older with families and kids, time becomes more precious. That’s where the intermediary helps reduce the load,” says Lucker. “The agent can do what he knows you need. Time will tell, but there does seem to be a little movement away from this intense focus on technology dependency for certain things. Some people we interviewed were young business owners as well and it was uniformly distributed. The 17 percent that are unhappy with their agents are not all young people;

People are growing up with the idea they can not only do everything online but on their phones as well, points out Friedman. Whether this will translate into something as important or as intricate as a small business insurance transaction will take some time. Personal auto is a more mature market as far as direct writing. With small commercial there are different challenges.

“Small commercial is more complex,”
he says. “Nobody wants something to go
wrong when there’s a claim. Your business
is at stake if something goes wrong.”
Superstorm Sandy was a good exam-
ple of this, according to Lucker. Small
business owners assumed when the pow-
er went out that someone was going to
pay for spoilage or business interruption,

but there were many business owners who were taken by surprise when they discovered they didn’t have such coverage because either they didn’t know who to ask for such coverage or they didn’t want to pay the additional premium expense and declined the coverage.

Which Way to Go

Friedman believes there are ways for carriers to leverage the technology advances throughout the organization, whether it is marketing, the sales process, underwriting, pricing or claims. These advancements will be leveraged internally.

“In some ways this might help the agents to cut out some of the minor service work and free them to deal with more complex accounts and give customers a sense of confidence,” he says. “There may be more online sources that can be advisory. You see more automation in the claims process where the agents are not always directly involved, although people fear losing an advocate when there’s a claim filed. I don’t know if an agent can make a huge difference there, but it helps to have someone in your corner.” ITA