Why Pivoting to Digital-First Insurance is a Necessity for Small Commercial Insurers?

The small commercial insurance market finds itself at a juncture where going digital is not a ‘nice-to-have’ feature but an absolute necessity. Consumers, agents/brokers, and carriers find themselves empowered by accessible data that permeates the insurance value chain. Such an inflection point paired with the ever-increasing scope for digital transformation, changing customer behaviour and regulatory pressure makes this industry a point of interest for several stakeholders – big or small.

They have identified the high-risk, high-reward potential of this market segment and are eyeing to tame the highly dynamic business environment to yield considerable profits. Here is a detailed profile of what to expect while venturing into the small commercial insurance space, especially from the lens of digitization, to harvest favorable results.

Small Commercial Insurance, Big Opportunities

The small commercial insurance space offers ample opportunities primarily due to the following reasons:

1. Digital transformation is in its nascency: The sector finds itself at the brink of embracing digital transformation and hasn’t taken the plunge entirely like other industries. Insurers are still working out the profitability of such a strategic move stagnated by legacy processes and systems.
2. The market is not consolidated: Even the big players manage to capture only a small percentage of the total premium income due to the highly fragmented nature of the industry. Consolidation can compound the profits.
3. The coverage is limited and underserved: Since this market segment serves Micro and Small Businesses (MSBs), Micro, Small & Medium Enterprises (MSMEs), and gig economies, the extent of coverage is highly restricted. As such, there is scope for service enhancement.
4. Small commercial consumers lack awareness: Small commercial insurance consumers have no clear understanding of their requirements and expectations. On the other hand, the unmitigated influx of information from the carriers’ end adds to their confusion. This information exchange can be streamlined.
5. Manual processes are cumbersome: Several small commercial insurance players resort to manual processes to keep things flowing. However, the constant back and forth adds to the lengthening of policy sales cycles and can be a pain point that needs immediate redressal. There is potential to digitize this vertical of small commercial insurance.
6. Climate change: Climate change has been linked with an increased risk of natural disasters such as floods or earthquakes which could lead to higher premiums and/or demand for certain types of coverage to cover the losses depending on local conditions.

The above opportunities make the small commercial insurance sector ripe for adopting digital solutions to address present deficiencies. Digitalization will also pave the way for additional customer experience innovations like automation, self-servicing, etc. – to name a few – as an add-on to fill all market-linked gaps. Such a proactive approach will definitely put the small commercial insurance market on an accelerated upward trajectory to growth!

Challenges in Small Commercial Insurance

Despite the several opportunities available in the small commercial insurance space, stakeholders will have to remain wary of the following roadblocks:

• The customers see the primary business owners’ policy as a commodity that offers very little differentiation
• Underwriting and policy pricing will have to factor in several variables, thereby making the process extremely complex
• Stiff competition from established and new players in the industry for new insurance products to be sold due to the newness of the product offering, lack of awareness of the product benefits, or lack of trust
• Small commercial insurance consumers are highly price sensitive, which makes it tough to squeeze in profitability
• The high servicing needs of the customer increase expense pressure, which further eats into profit margins
• The continuous back and forth between customers and carriers can serve as a drop-off point where you lose customers
• Slow implementation of digitalization well as changes in regulatory environments have a significant impact on insurers’ ability to operate efficiently

Actionable Tips for Realizing Success With Small Commercial Insurance

Keeping in mind the potential and barriers discussed above, here are some actionable ways to penetrate small commercial insurance through digitization:

1. Curate Winning Digital Experiences

Seeing that small commercial insurance offers great scope for digitalization, transforming the customer experience can be a great way to ride this wave. There are several ways to integrate digitalization into the customer experience, be it through digital advertising for direct-to-consumer policies to chatbot-based policy recommenders to digital onboarding to online claims settlement, and beyond. Essentially, you get the freedom and flexibility to start with the low-hanging fruit and graduate to other more mission-critical elements. The resulting technological and digital innovations will act as a competitive differentiator and help increase your market share.

2. Improve Operational Efficiencies

Leveraging digital-first solutions to enhance operational efficiency across the insurance value chain including claims, underwriting, policy administration and customer service functions attracts multifold positive results. First, it allows customers to enjoy better-personalized services as the carriers can respond to them faster and in more meaningful ways. Second, it does so without overburdening the existing workforce and maintaining the performance average. Finally, it lends scalability to businesses without making them dependent on staff or finite resources, which also keeps a lid on operational expenses. As such, find gaps in business operations where digitization can inject value and efficiency to enjoy higher returns and better results.

3. Enhance Data Quality

It is virtually impossible to envision a digital ecosystem without acknowledging the heart of all matters – data. Since a lot of your business processes, workflows, and activities will hinge on data, insurers have to ensure that the data available to them is of the purest form. In a bid to achieve this goal, they will have to resort to strategies like data centralization, vetting data, data authentication, data governance and routine cleansing to ensure that they are working with only high-quality data. After all, garbage data will give garbage outputs, and vice versa – so aim for the latter!

4. Make Information Accessible

The small commercial insurance buyer’s cycle is highly complex where information plays a key decision-making role. A recent survey says that about 54% of consumers consult with industry peers while 40% base their purchase-related decision on such peer recommendations. While rewarding digital experiences increase the probability of earning these valuable recommendations and word-of-mouth marketing, making information accessible overcomes the successive roadblocks. You can start by establishing a robust online presence through a professional website and social media handles. Then, use it to publish and share industry-specific content to attract leads. Embed such assets with CTAs that connect customers with agents so that the funnel keeps moving.

The Way Ahead

The small commercial insurance industry is heading towards a radical shift that is spearheaded by the digital transformation of businesses to become future-ready. From shaping distinct customer experiences to speeding up processes to cutting down operational costs, every disruption will bring about a positive change that will make the sector even more hospitable to digitalization. Once this movement gains momentum, it is only a matter of time until upcoming new-age technologies like Artificial Intelligence (AI), Machine Learning (ML), etc. accelerate the rate of digital transformation to help the industry thrive.