Few carriers in the U.S. small commercial insurance market are relying on direct online sales right now. But the number is growing, and it could become quite large within the next five years, Novarica concluded in a new briefing.

The use of direct and online sales started small and went large in the personal lines sector, and Novarica said the same thing is set to happen for the small commercial investment.

“The market continues to follow a similar trajectory to that of personal lines, with online sales of small commercial policies showing double-digit growth but a persistently small market share,” Novarica said in the briefing. “Reanalysis of our findings from 2013 show that existing trends have continued to accelerate, with increased investments by both startups and major carriers.”

Novarica added that “while the general trend is a move from the sidelines, the market is still waiting for a major player or players to make the advertising investment necessary for a real transformation.”

That said, Novarica noted in its report that while “agents will continue to play a central” role in most small commercial insurance transactions over the next five years, “recent trends indicate both a shift to a larger proportion of direct sales as well as a fundamental change in the nature of the agent customer relationship.”

The Novarica briefing updates research on direct online small commercial sales first released in 2013. Among its updated findings:

• Small commercial insurance continues to trail personal lines insurers’ use of direct and online sales. But the gap is starting to close with more technology in place, and buyers becoming more receptive to online sales channels due to the price and convenience.
• Major advertising could be the trigger to propel greater online sales of commercial lines insurance. Novarica said that “billions of dollars of advertising” in online insurance sales for personal lines hasn’t crossed over yet to commercial. Without that transition, carriers face setbacks in name recognition, making them more reliant on agents for distribution.
• If carriers go to online sales channels, they still must give customers the ability to talk to a live person.
• Agents can still play a role in online insurance purchasing, but face time and person-to-person relationships become less important in the transition.
• Even now, online agencies and platforms are experimenting with alternative insurance distribution models. Among the new ideas: partnerships with retailers and other non-insurance organizations.
• A number of insurance carriers who have made early investment in direct small commercial sales with some early success, including Hiscox USA, AssureStart, Progressive, The Hartford and Gore Mutual. Online agencies and brokerages that have similarly tested the technology for commercial sales include Insureon, BOLT and BizInsure, Novarica said.

Details are in the Novarica report: “Direct Online Small Commercial Insurance: Updates and New Observations.”

Source: Novarica