At this year’s TECHtalk program at ILF, two panels delved into the evolving space of small commercial insurance, a $140 billion industry in annual revenue.
The first panel, moderated by The Council’s Rob Boyce, explored non-traditional distribution models for small commercial. While the four forward-looking companies agreed on the value brokers provide to their clients, their companies all take varying approaches on small commercial distribution. The second panel, moderated by The Council’s Cheryl Matochik, discussed a similar topic – brokerages’ strategies on streamlining small business solutions, to build, buy or partner.
Alternative Distribution Models
Direct Distribution: Sofya Pogreb, Chief Operating Officer, Next Insurance
MGA Channel (selling through an agent/broker): Phil Edmundson, Founder & CEO, Corvus Insurance
Partnership Route: Steve Hauck, Managing Director, AP Intego
Carrier White-label Platform: Jeff Ruetty, Nationwide
Streamlining Small Business Insurance: Build, Buy or Partner
Dan Kazan, CEO, Insureon
Matt Miller, Founder & CEO, Embroker
Ilya Bodner, Founder & CEO, Bold Penguin
Jared Carillo, Director of Foundation Accounts PL/SCL, Principal, Smith Brothers
Trends & Themes
“Direct distribution” can mean a lot of things, especially in the world of small commercial. Few companies have the capacity to rate-quote-bind without any human touch points, but companies are heading in that direction. “Direct” can also mean direct online through a portal, direct through an agent or direct through a carrier. It’s important to be clearer when defining what “direct” means.
Chicken or the Egg
What insurtechs need to be successful is buy-in from both carriers and brokers – without the right carriers and capacity, brokers won’t get on board. But without brokers’ participation, carriers have no incentive to offer their products on a platform, thus leading to the chicken-or-the-egg dilemma. Without carrier-buy in, “It’s like going on Expedia without Delta being there,” explained Ilya Bodner, Founder & CEO, Bold Penguin
Personal Lines: Moving Upstream
Yes, we’ve seen “disruption” in personal lines, but panelists agreed that commercial risk, even small commercial, is much more complex and requires more touch points at this time. However, small commercial will deviate from the path that was blazed by personal lines, according to the panelists, and “will always look different” because of the number of coverages required.
All panelists emphasized that while business strategies evolve, execution separates the winners from the losers. While all panelists displayed unique strategies around distribution, customer acquisition, technology solutions and customer service, it’s all about execution.
Building off existing ecosystems and consumer-facing brands (Amazon, payroll providers, etc.), installs a layer of trust with the consumer, streamlines data collection and improves underwriting efficiency. Steve Hauck of AP Intego and Jeff Ruetty of Nationwide are both approaching small commercial from the partnership approach in different capacities. Streamlined data collection and accuracy helps prevent risk from being adversely selected.
Why the MGA Route?
We’re seeing more and more companies take the MGA route, especially when it comes to tech-enabled distribution models. Panelists agreed that although not for everyone, the MGA route allows companies to be nimble and improve underwriting efficiency without having to take on risk. Additionally, customization of product and design (above that offered in standard lines) makes the MGA route an attractive option, and panelists seem to think this will grow. Going full stack not only requires a lot of capitol, but there is more complexity in its structure. This is an intermediate step, panelists noted.