Many multiline regional carriers are looking to grow small commercial books of business due to concerns around personal lines profitability. Strategic disruptors are targeting small and micro-segment commercial niches and leveraging new digital processes and analytics to compete against existing agent channels or provide faster access to markets.
Entering the small commercial space doesn’t come without obstacles; significant competition in this area already exists, and lack of high-quality data presents a challenge when developing robust straight-through processing (STP). Midsize multiline P/C insurers eyeing the small commercial marketplace can no longer rely on good staff and strong agent relationships to guarantee success. To be successful, carriers considering state expansion or growth in the small commercial space need to establish competitive advantages in three areas: targeting a specific market segment, enabling high levels of STP throughput, and expanding digital capabilities to meet evolving consumer expectations.
Segmenting the Small Commercial Market
Attempting to price all risks for all small commercial segments is a Sisyphean undertaking. However, ISO-based products do not offer a significant competitive advantage. Insurers successful in the small commercial space have either identified a new need (e.g., micro-coverage for Airbnb hosts) or specialized in a subset of commercial opportunities (e.g., medical, liquor liability, professional services). Limiting the number of SIC codes to target allows carriers to build special programs, coverages, or services for that industry. Insurers can also capture industry-specific data to help build future products and define established market appetite to their distribution channel. Don’t try to underwrite everyone—be discerning when picking a target market. Insurers should look for new or underserved markets or even build on pockets of expertise they have already established in a current portfolio.
Developing High Rates of STP Throughput
Agents and potential clients expect immediate indications of underwriting acceptance or rejection—no one wants to wait. Agents are concerned about losing opportunities to others who respond more quickly; potential policyholders are busy and want to know if they are covered. Achieving true STP for quote-and-issue processes is paramount to success in the small commercial space, but there are often cultural barriers to achieving this desired state. Carriers need to tailor underwriting rules to shorten underwriting review cycle times and drive toward high levels of STP. Simplify the user experience by eliminating questions and leveraging third-party data sources. Make quick decisions via automated rules. Artificial intelligence (AI) is not necessary to create these rules, though many carriers are looking to AI for additional insights, expecting higher throughput and better underwriting results.
Growing Existing Digital Capabilities
The expectations of small commercial business owners are similar to those of personal lines customers. Credit cards payment options, online availability, and self-service capabilities are becoming the norm in the small commercial marketplace. Broad digital capabilities for self-service and claims processing are prerequisites for new market entrants. Many carriers have completed core modernizations; those that are in the process of modernizing cannot wait to develop digital strategies and identify the customer experience necessary to compete. Carriers with limited self-service capabilities can pilot programs that give preferred agents special privileges and self-service capabilities. Agents concerned about losing touch with their clients can have the option to allow or disallow client self-service.
As insurers look to the small commercial market for growth, how well they execute in these three areas will determine whether they succeed. Check out the following reports and briefs for more on this topic:
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