As seen in Insurance Journal
Small business used to be associated with small exposures — simple business risks addressed with simple insurance products. However, changing customer needs and expectations, technology advancements, new regulations and evolving legal environment issues have dramatically changed the way small business owners run their companies. Small business is no longer simple.
Small-business owners say employment-related issues, crime risks and professional liability risks are their top three exposures, according to the 2018 Small Business Risk Report by Forbes Insights and The Hanover. In the face of increasingly complex exposures, many small-business owners often require insurance coverage that goes beyond a standard policy. This creates an opportunity for insurance carriers and specialized independent agents to expand their businesses by moving downstream and offering specialty solutions that better align with the needs of small businesses.
Servicing small business accounts with complex needs has been difficult for agents in the past. The industry focused on providing specialty insurance lines for businesses that are large or difficult to place. Most insurance carriers selling to small businesses have concentrated their efforts on more predictable business owner policies (BOP), leaving business owners with complex risks without an effective solution.
In turn, agents have had limited options when it comes to serving smaller clients. Those limited options were:
- Avoiding the small business market to focus on mid to larger-sized complex accounts
- Sending all small accounts to wholesale partners for placement and servicing
- Bringing these smaller, complex clients into the agency service structure but then struggling to serve them easily and efficiently
Agents have repeatedly said they need more alternatives.The good news is carriers are evolving to provide better coverage and servicing options for these small businesses' complex needs, making it easier for specialty agents to capitalize on the opportunity.
Waves of change
Carriers invested in the specialty space are already implementing distinctive changes. First, they're staying on top of the various specialty risks customers face. Because risks evolve over time, the best carriers are closely monitoring the many trends that drive exposures for small businesses.
In addition, these carriers are providing standard and specialty coverage from different underwriting disciplines in a way that is seamless for the customer. For example, a carrier's small commercial practice can provide a BOP, while its management liability operation can provide directors and officers liability coverage, enhanced employment practices liability limits and a broader crime policy in a seamless fashion, all behind the scenes. To the customer, it appears as though they have one comprehensive insurance program from a single carrier.
Finally, these carriers are working to solve coverage needs as efficiently as possible for both customers and agents. Implementing specialty lines capabilities within their customer service centers is a highly effective way to give small businesses all the insurance coverages they need, while providing them with high-quality service. This also saves insurance agencies valuable staff time.
The insurance industry has made good progress in recognizing that small businesses can have complex exposures. By building a broad portfolio of efficient, small specialty solutions, carriers will ultimately help agents grow their small commercial business and continue to make great strides in developing specialty lines solutions that serve the needs of small businesses with complex risks.
In turn, agents are able to better serve their small business clients with more comprehensive solutions and streamlined service.
About the author
Bryan Salvatore is an executive vice president and president of specialty for The Hanover. In this capacity, he leads the company's U.S. domestic specialty business