The insurance industry is stuck in the 1980s. I should know, because I’ve been making my career in it since then.
Despite the rise of the internet and smartphones, insurance has earned a reputation for its snail’s pace of innovation. And this is doubly true for business insurance– which, despite being a massive market, has yet to see the evolution that homeowners’ or renters’ insurance has.
Small business owners are right to feel shortchanged by the insurance products offered to them. All too often, I hear from owners who are dealing with complex insurance policies that are impossible to adjust without a day’s worth of work. To obtain coverage, they have to fill out 30 pages of paperwork, each crafted to identify additional products and services that can be bundled along with the core coverage their operation truly needs.
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It’s an upsell gauntlet that makes the process incredibly undesirable and frustratingly outdated. Today’s consumers don’t want to deal with that– and the insurance industry needs to adapt fast if it wants to keep up.
Selling Insurance in Three Questions
In 2020, there is no reason to rely on customers to provide information at the expense of their own time. It’s doubly true for business owners: Why force someone who already has a million things on their plate to fill out a lengthy application, when we can do the hard work for them?
We can apply a data-driven approach to hack this process. It starts with pulling in third party data sources. By leveraging existing information from places like the U.S. Census into the rating process, we can build out profiles of the average business owner. Rather than asking for 12 months of receipts or payroll information, we can make an educated guess with a high likelihood of accuracy thanks to sample size. Instead, we simply ask for three pieces of information: what you do; how many employees work for you; and your zip code.
It’s a big departure from the norm. When Thimble CEO Jay Bregman originally pitched me on the idea, I actually thought he was crazy. How can you possibly gauge risk in just three questions? There’s no way that legacy insurance would go for this concept.
That’s why it comes down to systemic mindset change relative to business insurance– which to date, has been all about assuming the worst. But in looking at insights and trends from multiple data sources we determined that with respect to SMBs, the severity of loss generally isn’t there. The average small business is not building Yankee Stadium. They’re the photographer looking for coverage while they’re shooting a wedding, or the handyman who might add staff to the policy based on the scale of the next job.
So we’ve applied a systemic change in mindset from the typical insurance company. Instead of assuming the worst outcome on each policy, we’re assuming the average outcome, based on the data. Coupled with a keen understanding of the scale at which our customers are working, the conversation around risk is much different.
With big data guiding the application process and mindset change in terms of risk, we can focus on upgrading the user experience. Instead of running prospects through the upsell gauntlet, we’re expediting happiness in small but meaningful ways– for example, by congratulating a business owner who just purchased insurance for reaching a level in their business at which they now require insurance. We call that “going pro” — because insurance is the de facto hurdle that separates side hustlers from small businesses.
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Through big data and a change in mindset around risk, we can turn insurance into a friendly advantage for the small business owner, versus an awkward conversation.
Looking Forward: Insurance in the 2020s
Insurance evolution is happening– and we’ll see the positive impact in a variety of ways over the next few years.
First, the data-centric approach could speed up the application process for any insurance buyer, not just business owners. Take, for example, personal auto. Why rely on customers to locate and input the VIN number of their vehicle, when all of that information is already publicly available? Smart insurers will begin to do this legwork instantly for their customers, streamlining the customer experience.
Second, we’re unlocking the subscription model for insurance. We see this across consumer-facing technology, with companies like Netflix or Spotify leading the way forward. Customers are drawn to these kinds of business models because they are flexible, scalable and easy to navigate. Insurance has been the opposite of that– static, archaic, difficult to adjust.
Finally, and perhaps most importantly, it means that we can position insurance as a catalyst for economic recovery. In the wake of the pandemic, as Main Street businesses are still reeling from national lockdowns, business owners need increased flexibility in everything they do. Through big data and a new lens on risk, we’re making insurance adaptable for businesses that want to pay month-to-month or pause in the case of extenuating circumstances.
Overall, the goal is to make the process of buying insurance simpler. Insurance is a tool– originally to protect yourself and your business, and now as an enabler to succeed on your own terms. It shouldn’t be your concern every day, but it should always be there when you need it.
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