Berkshire's small ‘experiment’ thrives

Berkshire's small ‘experiment’ thrives

Berkshire's small ‘experiment’ thrives A “very, very small” insurance operation that allows owners of small businesses to shop online for commercial vehicle, general liability, property, workers' compensation, and eventually professional liability insurance, continues to grow one year after it was founded.

The Berkshire Hathaway Inc. unit, called biBERK or Business Insurance Berkshire Hathaway, was conceptualised by Ajit Jain, Berkshire's top insurance executive, said biBERK CEO Rakesh Gupta.

The unit, previously called ‘Cover Your Business’ until March, was set up to provide small business owners with a hassle-free way to bypass insurance agents, often generating quotes within five minutes of filling out short questionnaires, Reuters reported.

"Amazon.com can deliver something to you in four hours," said Gupta, who specialised in big data before joining BiBERK. "If people can buy paper towels on the internet, why not insurance?"

The BiBERK boss said the unit has been attracting twice as many customers as a year ago – although sales data was kept confidential.

Gupta said business insurance could follow the trajectory of auto insurance, where Berkshire's Geico unit, as well as rivals Progressive and USAA, won their share of the market by driving underwriting costs and premiums down, the report said.

"If that happens, we want to be at the forefront," he said.

In workers' compensation, biBERK usually generates 60% of applicants with instant quotes, denies 20%, and refers the remainder to representatives.

Improvements to the sign-up process now allow 50% of customers to buy insurance without the help of humans, a 10% rise from a year ago.

Gupta said BiBERK sometimes holds what it calls ‘hatchet’ meetings to assess risks and red flag issues that the questionnaires might not address.

To cover biBERK in the event of the occasional mistake, its parent Berkshire Hathaway Direct Insurance Co has US$118m of surplus capital, plus reinsurance from Berkshire's National Indemnity Co. unit, Reuters said.

Gupta identified state regulatory burdens as one reason why insurers have been slow to adopt online technology, and expressed his hope that biBERK will attract younger, technology-savvy entrepreneurs.

"It's still very, very small," he told Reuters. "In the scheme of Berkshire, it's an interesting experiment."


Related stories:
Cover-More announces underwriting deal with BHSI
Insurer BHSI launches A&H solutions in NZ
 
3 Comments
  • Andrew 11/05/2017 11:09:41 AM
    Says it all really.... 'if people can buy paper towel on the internet, why not insurance?'

    Thanks Buffett and co for sending us all back to the dark ages of a pricing house.
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  • Bronson 12/05/2017 8:42:00 AM
    This should not come as a surprise to anyone in the industry. Disruption is created by removing the 'middle-man' and replacing with the internet. Change is inevitable and focus must be on the 'value' you bring to your client. If your only 'value' is price you will lose....period
    Post a reply
  • Onliner 12/05/2017 10:07:28 AM
    Anyone who has studied marketing knows that price is always a factor. Most insurers have overly concentrated on price - just look at the ads on TV, buses, internet and you will see how much they "save". If brokers criticise those who push price, is it because they have nothing else to offer? If brokers use placement facilities and act as agents for these facilities and their underwriter(s), they are not brokers - they are agents who have dumbed down the market. You reap what you sow.
    Post a reply