With the rise of eCommerce, startups and side hustles, the landscape of what defines small businesses has changed dramatically, including more variety than ever. There are freelancers, sole proprietors with home-based businesses, artisan contractors, to name a few examples. Although the world of small business owners is continuously evolving, there have been few updates to how traditional business insurance models support small businesses, even though their needs are changing and are different from other sizes and life cycles of business.
Breaking Down the Traditional Model
Traditionally, legacy insurance companies provide package insurance policies or BOPs (Business Owner’s Policies.) These are generic, one-size-fits-all packages that include coverages small businesses don’t necessarily want or need. This model is efficient for legacy insurance companies but it doesn’t help the small business owner. Large carriers with this traditional model have also controlled the market, leaving little purchasing power, flexibility and affordability for small businesses. The impetus for small business owners to get insurance is often a landlord or partnership that is requiring proof of a policy; this is likely the first time they’ve considered that they need insurance or their first time going through the buying process. With this in mind, small business owners should have transparency and authority to feel empowered and supported in a situation where they may already feel a lack of control.
Customizable Business Insurance Supports Small Businesses
A more modern solution is customizable business insurance that enables small business owners to compare and contrast coverage offerings, and choose what they feel is needed for their business at that time. By creating better transparency in the coverages these small businesses truly need, customizable insurance helps demystify the buying process, preventing them from overpaying for unnecessary coverages that a package policy may have included. Being able to compare and customize coverage offerings also allows for insurance policies to evolve as the business grows.
The Pandemic & The Need for Innovation
The past year and a half has only further stressed the need for innovation in business insurance. The pandemic caused a loss of business for many small business owners, leading them to look for savings where possible in their operations. However, many small business owners would discover that there are little “savings” to be found in these one-size-fits all package insurance policies due to the lack of adaptability. When a small business owner is looking to save money on their insurance premium, there are few options aside from cancelling their policy. The pandemic has emphasized the need for a flexible modular approach to small business insurance, allowing a policyholder to reduce to a barebones offering and scale back up when operations resume.
A Tech-First Approach
In addition, the pandemic forced all of us, as business owners, as employees, as friends and family, to resort to digital and virtual tools to communicate and do business. All over the world in many aspects of our lives, we saw technology leveraged and innovation advanced. However, legacy providers, lacking the flexibility to adapt to a modular solution, have not pursued investing in technology. Customers experienced this first-hand with gaps in service and difficulty reaching their brokers when they needed them most. Ultimately, it was the peace of mind of small business owners that suffered; the support system they expected to have been provided by their insurance provider was disrupted. More than ever before, insurance providers need to put control in the hands of small business owners and provide a tech-first, online approach which promotes speed, objectivity and transparency.
The insurance industry needs to recognize that the profile of small businesses is changing and that due to this, they need to move away from the one-size-fits-all approach because there is no longer a homogenous definition of a small business owner. Instead, leveraging customizable plan helps bring fair access to price and purchasing power. Using plain language to help educate business owners and letting them voice their concerns and needs, allows them to be in control of their business insurance. This may be more complex for insurers but ultimately, it is what is best for the customer, the small business owner – and that’s what should matter most.
Mark Morissette is the CEO & Co-Founder of Foxquilt – an Insurance technology company empowering small businesses and B2B networks to save on Small Business insurance.