The COVID-19 pandemic upended small businesses across the nation. The most recent iteration of U.S. Census Bureau weekly pulse survey found 66% of business up to 500 employees said they had suffered a moderate or large negative effect as a result of the pandemic.
Small business owners are more aware of their risk levels than ever before, and are turning to their insurers in record numbers to find out what they’re protected against – pandemic-related or otherwise.
“There are more small business customers engaging with their insurers,” says Robert M. Lajdziak, director, insurance intelligence for J.D. Power. “Things may have been a little more ‘set it and forget it’ before the pandemic.”
A J.D. Power survey found business owners felt that “the effort that they had to put into managing their small commercial policies was three times greater than what they've consistently said in the past,” Lajdziak added. “With more customers interacting, that stresses the live support system on behalf of the carriers – greater wait times, all those things came up.”
Insurers are using a range of digital tactics to respond to this customer pressure, and insurtechs are sprouting up to meet certain pain points felt by these customers. But tact is required to make sure that the issues that are driving small business customers’ concerns aren’t lost in the drive to digitalize more processes.
“We need to simplify the products – they’re too complicated and small businesses are trying to buy them one at a time versus getting a comprehensive package of coverage,” says Ed Chandra, head of insurance in the U.S. for KPMG. “Then we need to come up with a way of communicating that, using technology, using some sort of platform that makes it easier to purchase it.”
Chandra is quick to note that this doesn’t mean going to a direct sales model for small commercial. Rather, the right play is to find the administrative components to the insurance acquisition process and digitize those, while continuing to leverage the agent force for advisory to ensure that businesses and coverages are correctly matched.
“Someone comes to you and says, ‘I need a workers’ compensation policy’ – but do they only need that tender slice of it? Are they trying to build their own program?” he asks. “So how can we use the technology to alert them of gaps so that they can be pursued and closed. There's a moment right now where everybody is saying, ‘What the heck just happened to me, and how do i make sure that never happens to me again?’”
Lajdziak agrees, noting that the agent channel consistently rates highly in J.D. Power’s ratings. But especially when the system is stressed, larger businesses tend to get more attention overall from insurers and agents, leaving the smaller businesses to rely on digital tools.
“Those smaller businesses aren't using the digital tools as much and don't have that same level of live support,” he says. “The larger businesses are finding those tools useful, but that underscores the point that they don't have to rely on them for everything, because they have that support for, you know, more, more high-touch needs.
“I continually see with a lot of the new entrants that they've got a piece of the puzzle that solves a pain point typically in, in some sort of slick digital fashion, but what they never have is the capacity for live support,” he continues.
The best path forward is an ecosystem that combines the scale and agent reach of large carriers with guided investments in companies providing digital solutions to components of the process, Chandra concludes.
“The carriers are very interested in funding the development of insurtech in the space,” he says. “Its, ‘come up with a good idea where we're happy to be part of it.’ I don't think they see themselves as competition. I think they're all trying to solve this problem together.”
