Plenty of customers don’t bat an eye buying car or homeowners’ insurance online, and even life insurance can be purchased with a few clicks nowadays.
But a new Massachusetts company is pushing the online frontier further into commercial insurance turf, selling professional liability – an often “scary,” complex, vitally important coverage – to small businesses, entirely online.
Maynard-based Insurancebee.com is the U.S. version of a 10-year-old British company with the same business model. Small businesspeople, generally contractors or consultants with very small operations, can log on, answer a few questions, pay with a credit card and get their policy mailed to them whenever they choose.
The idea is not unheard-of in Massachusetts – Needham’s Herbert H. Landy Insurance Agency sells errors & omissions policies online for residential real estate professionals. But analysts say it is still very rare to see commercial insurance sales go completely online, and some worry it could lead consumers into trouble.
‘Really, Really Scary’
Karen Pauli, research director with Needham-based insurance research and consultancy firm TowerGroup, counseled caution for businesses looking to simplify their insurance process.
“The professional liability thing for the U.S., is really, really scary,” she said. “I can’t imagine buying it direct, quite frankly.”
Pauli acknowledged Insurancebee’s target group of small businesspeople had less to worry about than mid- or large-scale businesses, which “absolutely” must work closely with brokers and advisors to ensure proper coverage. Professional liability insurance is vital to protect both the business’ and business owner’s assets, and picking the wrong coverage could be devastating.
It makes sense that Insurancebee’s concept started in the United Kingdom, Pauli said. The British insurance industry has more experience selling insurance online, and the country tends not to be as litigious as the U.S. As an example, she noted that Britain didn’t even have class-action lawsuits until the financial crisis.
Iain Hatfield, founder and president of both the American Insurancebee and its British counterpart, argued his company provides specialized coverage that is oftentimes better than larger, more traditional brokerage houses.
While customers can choose to finish the whole process online, Insurancebee also has advisors on staff to handle questions– in fact, because the business model requires very little overhead, it frees up individual brokerage advisors to spend more time on customer service, he said.
Hatfield admitted that the U.S. was a more lawsuit-happy place than the U.K., but noted his company had the approval to conduct its business from state regulators in all Insurancebee markets, which currently include Pennsylvania, Connecticut, the Carolinas and parts of the Midwest and Southwest. Massachusetts was chosen as the office location because Hatfield, a British citizen, was well-acquainted with the state through family connections.
While larger businesses tend to need – and get – a lot of attention, brokers and insurers overlook independent contractors or small entities.
“They’re left out in the cold somewhat,” Hatfield said. “We’ll look after everybody – $10,000 [in] revenue up to a million or two. But the vast majority of Insurancebee’s clients have] less than $200,000 [in revenue] a year.”
Inaccurately Categorized
Customers who seek errors & omissions liability are usually placed into specific categories based on their profession, and the types of risks special to it – “accountant,” “attorney,” and so on. But independent, freelance professionals, including work designers, public relations consultants and IT contractors, are often lumped into a “miscellaneous” category for errors & omissions coverage, Hatfield said.
In these cases, a customer may be paying a higher premium simply because he or she is lumped in with other types of companies with higher risk profiles.
Selling online has worked well for Landy Insurance, said spokesman John Torvi. Prospective clients log on and answer a handful of simple questions. If their answers indicate their business needs more nuanced coverage, the company will work with them through more traditional means. If not, they can buy their policy then and there.
Landy serves residential real estate professionals and companies, generally up to 25 employees, Torvi said. The company has been offering online coverage for several years and the system has worked well.
“The model is not new, there’s other insurance carriers throughout the country that offer a similar type of service,” he added.
Still, Patrick Linnert, executive vice president of Ohio-based brokerage consultant MarshBerry, said Insurancebee is a rarity in the industry. Most brokers for commercial insurance are online, of course, but their websites are merely brochures to help lead to a more traditional broker-client relationship.
“I don’t know of anybody that’s really doing what [Insurancebee is] doing,” he said.
