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Can middle-market insurers boldly go where none have gone before?

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Insurers in general tend to be a conservative bunch, rarely straying outside their comfort zones when it comes to product and service offerings. That likely needs to change in this rapidly evolving, convenience-driven economy. A good place to start might be the middle market, where commoditization threatens to trap commercial carriers in a race to the bottom on price and coverage terms.

March 7, 2018

A blog post by Sam Friedman, insurance research leader, Deloitte Services LP.

How might insurers differentiate themselves in an increasingly competitive market? What if they extended their offerings beyond standard insurance policies and related risk-management services? Could they become the hub in a comprehensive network of business support solutions, as well as educational and networking opportunities?

To gain firsthand insights into these key questions, the Deloitte Center for Financial Services surveyed 800 middle-market buyers, spread evenly across five industries and four business size categories. We also queried 100 agents and brokers with a large chunk of their business generated by this segment.

We asked both buyers and intermediaries to look at their insurers in an entirely new light—as a source of services adjacent and even unrelated to insurance that could help policyholders protect their assets as well as manage and grow their business. Nine out of 10 buyers surveyed said they would “welcome receiving additional business-support services” through their insurance company, while 86 out of 100 intermediaries said they would appreciate the opportunity to add such features to their sales repertoire.

While some possibilities seemed much more popular than others among buyers, at least one out of four surveyed expressed interest in each of the options provided (see figure 1).

Figure 1: Percentage of buyers interested in receiving noninsurance business services via insurers

us-figure-1-interest-in-business.jpg (844×556)

Employee benefit administration was the clear favorite, chosen by nearly one-half of respondents. Property safety systems and security services were the second and third choices, respectively. Business management advice, regulatory compliance help, and tech support were also picked by about one in three respondents. A host of other possibilities, ranging from group discounts for office supplies and equipment to business loans, payroll, and cloud computing services drew considerable interest as well.

Interest in education vs. networking services

When it came to being offered educational and business networking opportunities through their insurers, at least one out of three buyers expressed interest in receiving each of the proposed services.

Figure 2: Percentage of buyers interested in receiving educational/networking services via insurers

Figure 2: Percentage of buyers interested in receiving educational/networking services via insurers

Key highlights

Access to consultants focused on their particular industry and seminars or webcasts about insurance and risk management issues ranked highest, checked off by about half of those surveyed (see figure 2).

How might middle-market insurers execute such a profound business model transformation?

To start, carriers need to get their distribution force solidly on board. Agents and brokers will likely want to know exactly what is expected of them and how they will be remunerated. Beyond dollars and cents, however, insurers should make the case that they are looking not just to bolster their own value, market share, retention rates, and bottom line with these additional offerings, but to strengthen a customer’s connection to their intermediaries as well. The goal would be for middle-market agents and brokers to become broader business consultants, providing clients with customized, concierge services.

Insurers would also need to build relationships with noninsurance service providers. Indeed, the ability to create and maintain an exclusive, comprehensive services network would be a critical differentiator for insurers following this path. Carriers that don’t feel comfortable creating a hub of their own could decide to join another facilitator’s network of providers, becoming the insurance spoke in someone else’s services wheel.

Building new ecosystems in middle-market insurance

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The options laid out in this Deloitte research report are in line with a broader movement across industries toward bundling a wide variety of customized products and services and creating a diverse ecosystem under one central facilitator. For example, many cable television companies aiming to discourage customers from casually switching carriers or cord-cutting are now offering telephone, Wi-Fi, cloud storage, home security, and cellular phone services as a package.

Such brand extensions into associated and even unrelated products and services are a fairly routine growth strategy for most industries, yet the vast majority of insurers have yet to explore that business model. Given the emerging competitive realities of the middle market, as well as how more consumers are gravitating toward greater convenience and one-stop shopping in other aspects of their business and personal lives, now may be the time to give bundling a shot before someone beats them to the punch.

To learn more about the challenges facing insurers in realizing such a transformation and how they might overcome them, please read “Building new ecosystems in middle-market insurance” in Deloitte Insights, which I co-authored along with my Center colleagues Michelle Canaan and Nikhil Gokhale. You may also contact our subject matter specialists on the research project—Matthew Carrier, a principal in Deloitte Consulting LLP, and John Lucker, a principal with Deloitte & Touche LLP.

QuickLook is a weekly blog from the Deloitte Center for Financial Services about technology, innovation, growth, regulation, and other challenges facing the industry. The views expressed in this blog are those of the blogger and not official statements by Deloitte or any of its affiliates or member firms.

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