The 21st century has seen rapid technological progression at unmatched speed. A considerable part of human life has been digitized. This has changed practically every industry on the planet, and the insurance industry is no exception.
Small businesses are now investing in more diverse and specific insurance policies compared to what they used to. Much of this change is rooted in digital, social, and economic power.
Research and Consulting giant Forrester dug into the last five years data of US small-business insurance purchasing to learn which small business insurance lines are extending, which are contracting, and the reasons behind those moves. This post is our attempt to extract some highlights from that excellent report. The report is here for folks who want to dive deeper. We do recommend you do that!
The insurance industry is evolving, and both sellers and consumers are taking advantage of the available advancements. The sector is progressing when it comes to the adoption of insurance technologies. Of course, success depends upon how well and how fast you respond.
The moves in the insurance industry can be attributed to various emerging trends in the market. And they need to be seen in the context of the unique needs of each individual business. For example, there’s a push towards a purely digital experience that does not require human contact. But without access to an insurance advisor, figuring out the right insurance can be challenging for small business organizations.
Changing times call for changed business systems. Forrester has spoken of the changing patterns in small business insurance consumption.
1. Reduction in the worker’s compensation insurance:
The strong US economy may make you believe that there has been a boom in the small business worker’s compensation insurance market. But that is not the case. The uptake of worker’s compensation insurance has dropped. Competition for labor and the rise of the gig economy has changed how small businesses hire. This has lowered the demand for workers’ compensation insurance.
2. A decrease in BOP & CGL: Offering security from a wide variety of risks has made commercial general liability (CGL) and business owners’ policies (BOPs) necessary coverages for any small business. But there has been a drop in CGL coverage and BOPs in the last five years. Perhaps, poor performance and execution have changed the market. This has led to an increase in the rates. This has resulted in some small businesses not opting for coverage and leaving their businesses uncovered. That’s, obviously, not a risk worth taking.
3. Increase in business insurance: The changing nature of hazards have spurred business and personal liability purchase. Trade wars, supply chain dangers, cyber risks, and extreme weather events are stimulating interest for protection. This has resulted in an increase in the purchase of business liability insurance by small organizations. The focus on the owners and business leaders in the age of Me Too and diversity actions is furthering growth in personal liability insurance as well.
4. Cyber demand: A rising insurance industry trend is cyber-security. Cyber attackers are moving on to more unprepared targets, read small businesses. This is an issue that should be considered from the perspective of a provider as well as a customer as the insurance organizations hold enormous amounts of sensitive personal data such as personal properties, health, etc. Today numerous organizations and individuals face the danger of their virtual data being breached or compromised. Insurance can help them recover from such cyber risks.
5. All-in-One Insurance Policy: The All-In-One type of insurance policy is an interesting emerging trend. It is hassle-free and provides great convenience. By utilizing such policies, consumers can cover every aspect of their business at once. When organizations in the insurance industry have all details like vehicles, home, wellbeing, travel, and assets about their customers, they can provide a single policy with a reasonable cost and a flexible adjustment of the cover as requires. Of course, this is a bit of a risk in that something that covers everything probably does so superficially. So, your business runs the risk of being unable to turn to your insurance in a significant number of specific instances. Handle with care, is the word here.
Other emerging risks also include Cyber insurance, digital assets insurance, and the insurance complication brought on by trends like the gig economy and the sharing economy.
Emerging risks are creating new challenges for small businesses that they look to address with insurance. As a result, the insurance industry is always evolving as the customers are evolving. But one thing hasn’t changed. It’s the need for small businesses to stay safe and remain secured.