Key messages

  • The stage has been set for a paradigm shift in the US small business insurance market, thanks to heightened buyer awareness driven by coverage gaps exposed during the pandemic as well as preferences for more policy flexibility, along with the emergence of InsurTechs and other alternative providers.
  • Legacy insurers still offering commoditized policies that are sold primarily on price through traditional agents and brokers should therefore consider reinventing their value proposition and business model, while those who have already launched transformation initiatives may want to accelerate such strategies.
  • Insurers have an opportunity to capitalize on enhanced attention and higher trust levels among small-business buyers to grow the overall pie and their own market share by developing more customized, adjustable coverages and enhanced advisory services, marketed through a wider variety of channels.
  • Since meeting expectations for “cover plus” packages offering concierge service via individual agents and customer service representatives is probably not economically viable for most providers, insurers should be looking to expand online, do-it-yourself capabilities—from automated risk management training to robo advisors.
  • With the rising threat of disintermediation in an increasingly diversified, online economy, legacy insurers should be bolstering the digital capabilities of their agency force while exploring supplemental platforms and partnerships.

Shifting customer needs, preferences setting the stage for major shifts in small-business insurance

While the pandemic may have made many small businesses keenly aware of potential shortcomings in their insurance portfolios, filling the gaps by simply selling them more coverage could provide a temporary bump in premium volume but isn’t likely to sustain short-term retention or fuel long-term growth, a Deloitte Global consumer survey has revealed.

Instead, many small-business respondents are also seeking more diverse and comprehensive solutions than what has traditionally been offered in commoditized risk-transfer policies. Significant segments want greater coverage and pricing flexibility, additional risk management services, as well as new sources of insurance, the survey found. While this article focuses on the 501 US small-business owners responding to the survey (see more US respondent results summarized here), these sentiments and trends were largely echoed by the 5,300 respondents from 14 countries1 (see sidebar, “About the survey,” to learn more about our methodology).

In light of these findings, most small business carriers might need to consider reinventing many existing products, launching new types of insurance for emerging risks, expanding distribution options, and bolstering service capabilities rather than continuing to compete and differentiate mainly on price and coverage levels.

If the stage has indeed been set for a significant paradigm shift in the small business market, legacy insurers could be well-positioned to pivot to new business models as trust levels among respondents rose during the COVID-19 outbreak—especially among those who had filed a claim (figure 1).