Insurtechs move to take on lagging business insurance market

Despite the high rates of failure, bankruptcy, and litigation, among small and start-up businesses, relatively few carry business insurance, according to recent polls. Two insurtechs – Next and Counterpart – are forming partnerships to take advantage of this lagging market.

A 2018 survey by Insureon, a Chicago-based insurer, found that just 28% of small business respondents said they carried a business owner’s policy and even fewer respondents reported carrying several other common small business insurance, like business interruption insurance (6%), workers’ compensation insurance (17%), and cyber insurance (2%).

More recently, LegalZoom.com found that among entrepreneurs, just 9% said they had business insurance when forming their start-ups. And a survey from insurtech NEXT Insurance found 44% of small businesses have never had business insurance.

The reason for the low participation rates vary. Some say cost, or they see it as a low-priority expense. Others cite complexity, or a lack of understanding how much insurance is needed and what exactly it’s good for.

“Historically, business insurance hasn’t offered policies that are accessible or tailored to the specific needs of different types of businesses."Eran Liron, chief strategy officer for NEXT Insurance

“It’s largely due to the narrative around the insurance process being complex, cumbersome, and costly,” said Eran Liron, chief strategy officer for NEXT Insurance. “Historically, business insurance hasn’t offered policies that are accessible or tailored to the specific needs of different types of businesses. In addition, there is a lack of general education and understanding of the types of policies small businesses need for ample coverage.”

All this adds up to a huge underserved market estimated at $140 billion and insurtechs are pouncing with partnerships aimed at attracting small businesses to simple and easy online purchase applications.

LegalZoom and NEXT recently formed a partnership to better help small business owners create and protect their businesses online.

Also recently, Counterpart, an AI-driven insurtech that offers management and professional liability insurance for small businesses, launched its latest application interface for its broker partners. The new API offers quote-to-bind services for Miscellaneous Professional Liability, Directors & Officers, Employment Practices, Fiduciary, and Crime insurance products.

Traditional process 'doesn't cut it'

“The traditional insurance carrier quoting process doesn’t cut it for small businesses that need competitive quotes so they can get back to running their companies,” said Counterpart CEO Tanner Hackett. “We are trying to drive the small business insurance market forward through APIs, which are table stakes in most other industries, but have yet to be embraced by many insurance companies.”

Indeed, “embedded solutions, APIs, and innovative applications through partnerships have become central pieces to the insurtech strategy, trends that will likely ripple through the industry this year.

NEXT’s platform NEXT Connect, already features an online system for small business owners to get insurance quotes and purchase a plan, but now LegalZoom users will be able to access NEXT Connect without leaving the LegalZoom platform.

The companies say the partnership will make it easy for businesses to explore options, find necessary coverage information and design a plan that right for them.

“Insurance and legal services are two very complicated, yet critical, aspects of starting a business,” said Guy Goldstein, CEO and co-founder of NEXT. “NEXT’s partnership with LegalZoom simplifies this process by providing an embedded solution that enables customers to instantly get a quote and purchase insurance without leaving the LegalZoom platform.”

Goldstein said customers have come to expect access to insurance in the exact moment they’re ready to buy, and have the options integrated into their existing tools and processes.

Companies embedding insurtech into platforms

“More companies are finding ways to embed insurtech into their own platforms for more streamlined customer experiences and expanding their potential customer bases,” he said.

Customers exploring small business insurance on the combined platform will have their information automatically populated within Next Connect, making it quick to explore options. For those who aren’t ready to purchase insurance but want to learn more, LegalZoom offers educational content to provide insurance information for entrepreneurs, the companies said.

In Counterpart’s case, some of the most prominent and legacy national brokerages – including Brown & Riding, Bridge Specialty, and Jencap – can provide their brokers with access to Counterpart’s Quote & Bind API. Their teams and retail agent partners can take advantage of streamlined workflows, made available through a single portal that is customized with the branding of each wholesale brokerage.

The companies dismissed notions that their partnership would potentially inject some fierce competition to the traditional agent system of buying business insurance.

“It’s not about competition,” said Next’s Liron. “But rather about meeting small business customers where they’re at through an embedded insurance solution.’’

For businesses that prefer to go the agent route, the company said, NEXT has updated its site for users to find an agent that works for them.

Doug Bailey is a journalist and freelance writer who lives outside of Boston. He can be reached at [email protected].

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Doug Bailey is a journalist and freelance writer who lives outside of Boston. He can be reached at [email protected].