The federal Small Business Act defines a small business as one that is “independently owned and operated, not dominant in its field, and whose size falls within the size standards established by the Small Business Administration (SBA).” While size standards vary by industry, most small businesses in the United States employ fewer than 100 people. The most recent SBA findings report six million small businesses operating in the United States and close to 20 million sole proprietorships. Make no mistake; the small business sector represents a substantial — and ever-expanding — market.
Although these definitions may be generic, there is nothing common about small businesses. Their unique character and offerings are what attract thousands of entrepreneurial sprits to transfer their ideas and dreams to reality. But with those exhilarating challenges, comes the need to minimize financial risk. Establishing a comprehensive insurance program becomes a critical step toward achieving that goal and ensuring long-term sustainability.
Small has many suitors
The small-business segment is attractive not only because of its scale and continual growth but also because of its historical profitability. Enhancing its profile are typically higher retention rates for carriers, which translates to a stable and predictable segment. This is particularly appealing at a time when insurers are facing a soft market cycle, most pronounced for midsized and large commercial accounts. Small business is also geographically spread which allows companies to align their portfolios with the geographic territories they know best.
Naturally, an attractive market creates a highly competitive environment. Independent agents can provide substantial value to their small-business customers by emphasizing their risk management capabilities. An agent’s expertise enables them to identify the unique exposures faced by this diverse population and develop appropriate solutions. In recent years, employment practices liability has been an emerging concern that may not be ordinarily requested by the customer. Carriers, including OneBeacon, provide that protection through additional coverage that may be added to the package policy.
Small business customers also benefit from a comprehensive solution provided through a single source, meaning one carrier and one point of service. By ensuring the protection is comprehensive the agent helps organize the small business owners’ risk profile and contributes to a satisfied customer.
Low margins demand efficiency
Agencies focused on small business face the challenge of running their business efficiently yet keeping the relationships personal. The lower premium associated with small business demands managing accounts with limited touch points, which has led carriers to centralize transactions in service centers and process business via online platforms. OneBeacon offers a service center on an optional basis for its agents, with the flexibility to manage all or select customers, depending on the agency’s preference.
The company has also streamlined its platform based on agency feedback, with a true “once and done” solution. The proprietary rules-based underwriting system provides a bindable quote that allows agents to confidently present a proposal to a potential client. Once the sale has been completed, transferring the business from quote to issuance is seamless for the agency. Both features allow the agent to focus on sales and business development in lieu of transactional activities.
The long-term strategy
Agencies targeting this segment will enjoy the certainty of a growing market with ample capacity, based on historical evidence. When selecting carriers to partner with, besides assessing financial stability, the primary variables to consider are: ease of doing business; the competitiveness and comprehensiveness of the product; the technology platform; and the personalities and skills behind the solution. Agents will rely on the carrier to facilitate its sales so processing capabilities and service center operations must be top tier. And as with any service business, the responsiveness of company personnel is critical to the overall relationship. Having staff positioned relatively close to the point of sale will allow agents to build deeper relationships and experience higher levels of responsiveness.
The small business market is a dynamic, competitive marketplace with room for many. That is what creates the excitement and opportunity day in and day out. And isn’t that strikingly similar to the experience that drives the small business owner?
Travis MacMillian is vice president of Marketing for OneBeacon Small Business. Contact: 781-332-8713 or e-mail firstname.lastname@example.org.
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