Among the many changes wrought by the pandemic are those transforming the small business workforce. People have lost their jobs or businesses, with many starting new ventures, working from home or adopting new technologies that keep them in the workforce. Whatever their situation — and whether they work in growing sectors like e-commerce or one that has reduced operations — their insurance needs have probably changed.
Independent agents can help these small businesses re-assess their insurance coverage. By aligning with their clients’ needs, agents can gain their trust, increase retention and create opportunities to grow their books of business.
Aligning with Home-based Businesses
According to the Small Business Association, of the 30.2 million small businesses operating in the U.S. in 2018, about half were home-based businesses. This number has climbed significantly during the pandemic. Also referred to as “non-employer businesses” without employees, these proprietors often mistakenly assume their homeowner’s insurance policy will cover their small business.
To address this, the first question agents can ask is if their client has reviewed their homeowner’s (HO) insurance lately. Offer to evaluate the coverage, as home-based businesses are typically excluded from HO policies. Other questions will help determine their risk level: Are their business clients coming to the home office? Does the small business have protection for any equipment now in use at home? Are they using their personal vehicle for business? Answering these questions is part of a thorough client review.
Depending on the business’s specifics, the client may need a business owner’s policy (BOP), which offers a combination of standard business coverages. A BOP is often the best way to protect small businesses from liabilities.
Independent agents should discuss BOP coverages with their clients in detail:
- General liability coverage is critical if small business clients are coming to the home office, covering such risks as slip and falls resulting in medical expenses, for example.
- Business property coverage is needed to protect any business inventory in the home. For example, if the business has computers, printers or merchandise, it may not be covered if there is damage to the home office.
- Personal lines auto policies exclude business usage; a commercial auto policy can protect the business from any vehicular accidents while driving alone, driving with clients or delivering products.
- Product liability insurance will protect a small home-based business that manufactures or sells products against claims resulting from using the covered product. For example, if a small business owner sells desserts to a local restaurant, and their clients are sickened after eating the desserts, this policy can protect the small business.
The home-based business may require a lower limit policy than a small business with a commercial location, but there is still an opportunity for independent agents to develop their client base here. As the small business grows and eventually moves to a commercial space, it will require more substantial insurance.
Helping with the Learning Curve
New small business clients may not necessarily understand the differences between business and personal insurance. The independent agent needs to offer trusted insurance solutions to the greater community. No matter where the small business operates, the independent agent can help these clients understand their exposures and navigate new and existing business risks.
Beyond offering basic small business coverages, other smart coverage options may include cyber liability coverage and errors and omissions coverage.
Cyber liability coverage should be considered primarily if the small business relies on technology and holds confidential client information as part of each transaction.
According to a recent article by the Insurance Information Institute featuring 2018 small business cyber trends, “10% of firms surveyed suffered one or more cyber incidents in the prior year, and the average cost of cyber-related losses over the past year was $188,400, an increase of $73,000″ from 2016 data.”
An errors and omissions policy (E&O) is useful if the small business provides a service that could leave them open to a lawsuit by clients who are not happy with their service.
For example, if a home buyer or seller claims a real estate broker left out critical information from a purchase and sale agreement, the E&O policy can protect them from liability. A new study by the U.S. Chamber Institute for Legal Reform (ILR) shows that the U.S. commercial liability costs totaled $343 billion in 2018, and small businesses shouldered $182 billion, or 53%, of those costs.
Adjusting Coverage Over Time
For agents serving the small business market, the pandemic’s recent disruptions aren’t the only reason to regularly evaluate commercial lines. As businesses change, grow, or downsize, insurance needs will change as well. Some may add locations and hire additional employees, while others may change the mix of products or services offered, increasing their risk exposure.
For these reasons, agents should regularly talk with clients about the need to keep them up-to-date on any real or anticipated changes to their businesses. Insurance can be increased or modified as needed, and an agent’s clients can stay well protected no matter the business climate.
Agents who can share their skills with in-depth advice for clients, whether in person or virtually, can build a solid reputation as a trusted advisor for commercial lines — one who has helped small businesses reduce their risks in good times and bad.
Tombarelli is the senior vice president, Business Expansion and Innovation, at SIAA (Strategic Insurance Agency Alliance). Email: email@example.com.
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