How loyal are your small business clients? Ahem…

A new Deloitte report suggests that while 83% of small business owners are happy with their agent, they would be quick to forego the relationship in exchange for cash

Insurance News

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About half of the 751 small business owners surveyed in March 2013 by the Deloitte Center for Financial Services said they would be at least somewhat likely to consider buying some of their insurance policies directly from a carrier.

However, while this business model has been successful for auto insurance, the greater complexity of commercial policies and the politics associated with dropping insurance agents and brokers has kept this wish from becoming a reality. In fact, the direct sale of small-business insurance in the United States comprises just 1% of the market.

And this has, largely, suited small business owners just fine. According to a new poll from Deloitte, 83% of small business owners surveyed say they are satisfied with their current agent. However, their willingness to part with that agent is still higher than many in the broker channel would like.

Close to half of those same survey respondents said they would eliminate an intermediary like an agent or broker in exchange for a relatively small discount. Even more indicated they would be willing to purchase from direct sellers if they were offered risk management advice and other value-added services currently provided by agents.

“If online sellers provide value-added self-services in addition to discounts, there may be a growing risk of disruption and disintermediation unless agents and their carriers respond in kind,” the Deloitte report says.

Even more concerning is the number of survey respondents who were less enthusiastic about their agents. While they emphasized the importance of service beyond insurance placement in choosing their distribution channel going forward, the majority said that other than peace of mind, they are not being provided with anything more than initial coverage and renewal quotes from their agent.

In fact, six out of 10 said they receive no other services from their agent over and above shopping for their policies.

Of course, the eventual rise of direct selling of small business policies is by no means assured. The Deloitte survey suggests there are several strong ties between small business owners and agents that will be difficult to sever if carriers wish to sell directly.

Nearly half said they appreciate the personal service and contact provided by agents, particularly as many independent agents are small business owners themselves, sharing the same community and economic conditions.

Another 34% said they value their agents’ knowledge, and 15% credited their agents with cost saving.

Regardless, the report should be a signal to agents to stay on their toes.

“It is unlikely that agents and brokers will be significantly disintermediated in the small-business market any time soon,” Deloitte said. “However, additional direct initiatives will likely be launched, requiring a response by their legacy agency competitors.”
 

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