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Direct Sales of Small Business Insurance Poised to Grow to $12B by 2025: Novarica

Over the past decade, selling small commercial insurance directly online to customers has gone from an outlandish idea to a reality. In a new report, research and advisory firm Novarica projects significant growth in the market as insurtechs and major carriers alike try to serve America’s 30 million small businesses online.

Novarica predicts that the market size for direct online sales of small business insurance will increase to $3.7 billion by end of 2020 and could grow to $12 billion by 2025.

Among the findings of the report, Direct Online Small Commercial Insurance: 2020 Update, are:

• Sales in 2019 were slightly less than expected, indicating the challenges of the direct small commercial market, even for established players. However, the underlying market factors for the sector are solid, and given recent activity Novarica expects future growth.
• The best opportunity is the middle 60% of small businesses. Very small businesses are unlikely to be profitable for insurers, and the largest accounts are accessible by traditional channels.
• Insurers continue to enter the direct small commercial market, including large insurers that have launched quoting and sales tools as well as regional insurers with line-of-business-specific direct sales arms.

“Given the underlying demographic and technological conditions, commercial lines insurers that are not already active in the direct sales space should consider their strategy now and make necessary investments in technology,” said Matthew Josefowicz, Novarica president and CEO, and lead author of the report.

In last year’s report, Novarica estimated that direct online sales would capture as much as 15 percent of the market within five years.

Novarica also said that while no one has yet committed the significant advertising dollars that drove the transformation of the personal lines markets, top-tier commercial insurers are entering the market through dedicated operations and acquisitions.

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