December 9, 2016 by Canadian Underwriter
Small-medium businesses (SMBs) with less than 10 employees – or nearly 80% of all firms in the United States – have “significantly negative views of insurers and employee benefits providers, creating an opportunity for new, innovative business models, products and processes from existing and new start-ups,” new research from Majesco has found.
Majesco, a global provider of core insurance software and consulting services, published a whitepaper on Thursday titled The Rise of the Small-Medium Business Insurance Customer: Shifting Views and Expectations…Is Your Business Ready for Them?
Based on original primary research with 400 SMBs in the U.S., the report found significant gaps in performance between insurers and the other major suppliers SMBs rely on to run their businesses. Notably, the report found that the “traditional insurance business model has not been built with the capability to scale sufficiently nor to meet the unique needs and expectations of this market well. The consequences of this become apparent in the research, as this segment is disengaged and disinterested in insurance, has a hard time seeing its value, and considers it a necessary commodity required to run their businesses.”
“The research reveals that SMBs find insurance complex and confusing relative to the other products and services they need to run their businesses,” said whitepaper co-author Denise Garth, senior vice president of strategic marketing, industry relations and innovation at Majesco, in a media release. “Current insurers are not meeting needs or expectations, such as the ability to create customized products available from a range of options rather than lowest price and through multiple channels, reflecting the increasing demand for personalization across the customer journey,” she said. “The result is a view of insurance as a low-loyalty, low net-promoter score commodity that opens a window of opportunity for new business models and insurtech start-ups that could rapidly shift market leadership.”
The research assessed SMB owners’ and decision makers’ perceptions across ten common industries they do business with regularly, including P&C and life insurance and employee benefits. It found that all three are “among the worst in terms of ‘easy to do business with’ from researching to buying and servicing insurance. Loyalty is significantly lower for small- and medium-sized businesses compared to other industries, highlighting the commodity view of insurance and a new bar for loyalty. This sets a trajectory of change for SMB insurance similar to personal insurance, but at a faster pace that will likely accelerate market share shifts.”
The whitepaper also found that the two larger SMB segments currently are more progressive than the smallest segment in participation in leveraging new technologies like smart devices in offices/buildings or alternative payment methods like ApplePay. However, the release said that participation is expected to expand among all segments as these technologies mature.
“Roboadvisors offer a unique bridge between personal and technology capabilities to a market that is diverse in needs and expectations,” the whitepaper said. “The two largest SMB segments outpace the smallest in likelihood to use this technology by three- to five-fold and when the swing group is included, their likelihood of using roboadvisors reaches nearly 50%.”
Interestingly, the report found that fair price was more important than lowest price across all of the business segments. “However, the ability to create a custom product from a range of options is more important than both lowest price and the ability to pick from a set of ‘pre-packaged’ options, reflecting the increasing demand for personalization rather than price-driven mass production of insurance products,” the whitepaper said.