Could Allstate’s ‘5 Minute’ Small Business Policy Transform Commercial Lines Sales?

By | October 19, 2016

At a time when technology startups are also targeting the small commercial insurance market, giant Allstate has debuted a hi-tech business insurance quoting platform that it says makes it possible for  small business owners to buy a policy in about five minutes.

Allstate’s redesigned online commercial insurance system has ease-of-use, speed and transparency features that are touted by various insurtech startups trying to attract small businesses.

The move by Allstate, a major writer with a big advertising budget, could be a game-changer for online direct sales to the small business market, according to one analyst.

Allstate’s new quoting functionality uses advanced data and analytics, plus third-party data, to pre-fill data elements, which reduces keystrokes needed for the quoting process. Small business owners enter their information in a few fields and then the Allstate system delivers a quote for a business owner’s policy. After they review the quote, customers can decide to purchase the policy or talk to an Allstate insurance agency owner to address other questions.

In addition to the new quoting platform, Allstate’s redesigned commercial insurance pages include features such as clear definitions of the types of businesses Allstate insures. There are also online tools and resources to help small business owners, including offers from partners including SurePayroll and InfoMart. A new section called Small Business Connection, produced in partnership with Capital One, LegalZoom, Web.com, Microsoft and Office Depo, features articles and advice for running a small business.

Michael Barton, president of Allstate Business Insurance, said the changes will help small business owners make “informed” purchasing decisions in a “one-stop shopping” environment that doesn’t require direct assistance.

“Buyer preferences are changing. They want the ability to do-it-yourself,” Barton said in prepared remarks. “This innovative ability to quote and bind an online [business owner’s policy] in about five minutes showcases the big strides Allstate is making to help small business owners.”

Allstate, which sells via its own exclusive agents, says it has more than 250,000 small-business policyholders.

Novarica View

A November, 2015 report by the Boston-based insurance research and technology firm Novarica said that online distribution of small commercial lines is expected to grow significantly over the next five years.  “The market continues to follow a similar trajectory to that of personal lines, with online sales of small commercial policies showing double-digit growth but a persistently small market share,” the report said.

However, the report said that the market is “still waiting for a major player or players to make the advertising investment necessary for a real transformation.”

Matthew Josefowicz, Novarica president/CEO, thinks Allstate may be the catalyst that the online small commercial lines marketplace has been waiting for.

“The online direct channel is poised to take a significant piece of the small business market. Between direct writers like Hiscox, online agencies like Bolt and Insureon, and various InsureTech start-ups, there are lots of players moving into this space. What we haven’t seen yet is anyone devote serious advertising dollars to changing the conversation in small business insurance the way that the direct personal lines writers have done over the last decade. With Allstate itself – one of the biggest advertisers in personal lines — moving into the market, this may be about to change,” Josefowicz told Insurance Journal.

Market Share

According to a 2015 market share study by the Independent Insurance Agents & Brokers of America, independent agents dominate commercial insurance sales, writing nearly 80 percent of the market.

Small commercial lines business represents a little more than one-third of the commercial lines market with $103 billion in direct written premiums, according to consulting firm McKinsey. The market is highly fragmented with the largest carrier accounting for only six percent of total premiums.

However, “the largest carriers are moving quickly to secure their positions,”  a 2015 report by McKinsey said. It found that over the past six years, the market share of carriers with more than $2.5 billion in direct written premiums has increased by 12 percentage points.

According to McKinsey’s survey, almost 40 percent of sole proprietorships in the U.S. do not carry small commercial coverage, which raises the “possibility of unexpected room for growth in the smaller business market.”

McKinsey also found small businesses increasingly open to not only shopping but also buying online.

Allstate’s upgrade comes with the emergence of insurtech startups that promote similar ease-of-use and a streamlined, online buying process. The recent InsureTech Connect Conference in Las Vegas featured a number of tech entrepreneurs who said they believe the small commercial lines market is ripe for disruption.

Some of the insurtech entrepreneurs have received funding from and partnered with traditional insurance carriers.

Investors including XL have given $12.2 million to fund Embroker, an insurance broker offering a cloud-based system that allows business owners to buy, compare, analyze, manage and store all of their insurance policies and data in one place. Embroker lets businesses use its software for free, hoping that will convince them to eventually buy from it as well.

Insurers are also investing in online agency CoverHound, which last month launched a small commercial insurance platform. Insureon, an online agency for small business insurance, raised more than $30 million last October. Seattle-based AssureStart, backed by the American Family Mutual Insurance Co., sells to business with fewer than 30 employees.

American International Group, Bermuda-based Hamilton Insurance Group and affiliates of hedge fund firm Two Sigma Investments plan to launch Attune, a technology-enabled insurance platform for sales to the small-to-medium business market, in the fourth quarter.

Startup Bunker, backed by Hiscox and American Family Insurance, is offering insurance for independent contractors making money in the on-demand economy. Slice Labs Inc. is also developing a platform to sell insurance to participants in the on-demand economy, using seed funding led by Horizons Ventures and XL Innovate.

Two other recent insurtech entrants in the small business insurance space include CoverWallet and Next Insurance.

Last December, Berkshire Hathaway Inc., which owns GEICO, created Berkshire Hathaway Direct Insurance Co. to sell insurance directly to businesses over the Internet.

Independent agency carriers are  joining the TrustedChoice.com online commercial insurance platform backed by the Independent Insurance Agents and Brokers to sell small business insurance.

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Latest Comments

  • November 1, 2016 at 9:59 am
    Deplorables says:
    Because, you can throw Farmers in on the comedy commercials that are goofy to the extreme.
  • November 1, 2016 at 9:52 am
    Deplorables says:
    Talmo, link? Have you been in business 5 minutes?
  • November 1, 2016 at 7:48 am
    Wart says:
    Given independent agents' inability or unwillingness to "touch" small account business, a well structured program of this nature seems like a viable solution that will better ... read more
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