Liability insurance as we know it no longer suits a large fraction of today's and tomorrow's small-business owners. Brokers and insurers are at a crossroads on how to serve small businesses' changing needs in the on-demand economy.
The industry's one-size-fits-all approach to liability coverage has largely ignored the generational change at hand, the rise of the gig economy and evolving demands of modern workers. This model not only leaves brokers burdened by time-consuming paperwork and faced with a series of complicated hoops to jump through in order to qualify customers -- above all, it renders them unable to deliver tailored coverage to adequately fit client goals and enable their own professional growth. The modern consumer (and broker) expects an instant, on-demand product. Not days. Not hours. Not minutes. Seconds.
Next year, over 60 percent of small businesses in the U.S. will be owned by Millennials and Gen Xers. More digital natives entering the space means higher demand for technology offerings that allow small-business owners to manage and purchase insurance digitally and instantly. It also means more small businesses being born out of new technology, like on-demand platforms, which have created a modern economy around episodic, short-term, flexible work. Most importantly, businesses run by these new generations have become used to preferring ultra-convenient instant digital solutions -- often at a higher cost to legacy solutions. Delivering such a service is not possible without a fundamental simplification of the underlying insurance contract.
Liability coverage that is only available in annual policies are too expensive and cumbersome for independent workers, who don't have the outlay, need or will to purchase coverage for a full year. This model fails to offer the convenience and customization necessary to fit the diverse and dynamic nature of their work. Similarly, the short-term lead time on jobs and last-minute cancellations mean that without new ways of doing businesses, independent agents as well as small-business owners could continue to lose out on business because of a lack of flexibility.
No Small Business Left Behind
The insurance industry as a whole is continuously unsuccessful when it comes to cracking one key group of uninsureds: very small businesses. The small-business insurance market has seen major growth in recent years; that trend will only continue. A modernized approach is necessary to serve small business owners in the 21st century. Insurers who fail to take a hard look at the outdated liability models and expand their offerings will fall further and further behind the curve in an industry on the cusp of radical change. Focusing on enhanced offerings to serve small businesses not only helps today's workers get the protection they need, but also allows independent agents to set their own small business up for long-term success. The winners will be new, innovative, simplified products; not simply a web veneer on a traditional underwriting process.
From an insurance perspective, this new group of small-business owners comes with a unique set of needs. Independent workers take on higher levels of personal risk with limited, if any, access to benefits typically afforded to full-time employees.
Liability insurance is crucial for these individuals; yet often freelancers and gig workers forgo coverage. In many cases, they either underestimate their risk, can't afford a policy or simply are unaware they need it in the first place. The result: missing out on jobs that require proof of insurance, which in turn inhibits business growth.
The liability landscape has been long overdue for a true revolution, and that's what we've sought to do by pioneering a new model for episodic coverage.
Here's what we've learned so far about improving the customer experience and meeting the evolving needs of small-business owners in this modern economy:
Personalizing the experience: Consumerization has reached virtually every industry, and insurance is no exception. Small-business owners today want to feel like their needs are being heard and addressed with a personalized insurance policy that is flexible and custom-tailored to their specific work arrangements.
Delivering convenience through best-in-class technology: Digital-age workers crave speed and efficiency. They don't want to spend hours selecting an insurance policy. Leveraging best-in-class technology to offer a convenient, streamlined path to purchasing insurance at the touch of a button is paramount to cultivating a positive customer experience.
Making insurance approachable and accessible: Insurance is notorious for being confusing, and small-business owners have enough on their mind as it is. The information they receive from an insurer or broker should be straightforward and easy-to-understand, helping them navigate the complex liability landscape and make informed decisions without becoming overwhelmed.
Providing protection at a fair price: While having the lowest price on the market is typically not the most important factor among customers, offering a fair price for a quality policy remains imperative, allowing insurers to reach individuals who might otherwise have opted out of liability insurance due to the cost barrier.
Offering live support when needed: While a quick and easy digital experience will win customers, insurers should not neglect the importance of providing live support as a complement to self-service. Even in the digital age, customers look for a personal, human touch.
The bottom line: traditional liability policy structures have left the industry ill-equipped to handle the changing nature of work and have left brokers stuck with one hand tied behind their backs.
As technology advances and customer needs shift, insurance must adapt with the times -- and fast. Championing digital solutions to meet 21st-century demands can only go so far; we also need new, simplified insurance contracts that meet the needs of small-business owners across the many new forms they take.
The $100 billion small-business insurance market is wildly inefficient. Forty percent of sole proprietors don't buy liability insurance. The market is ripe for those willing to break the antiquated liability insurance mold and incorporate new products.
The one-two punch of generational change and the gig economy means new winners will be made in the next few years.
We're proud to work with brokers to expand their portfolio and make episodic coverage available to small businesses, just as we are proud to join with insurers to create and push these new products through the regulatory process.
It's time for the insurance industry to catch up to what others have seen coming for years: the modern worker and business owner is unlike any other, and we'll only benefit by offering products and experiences that protect and empower them.
About Jay Bregman
Bregman is co-founder and CEO of Thimble, an on-demand, by-the-job insurance app aimed at the ever-growing economy of independent, freelance and gig workers. Available across more than 100 professions in nearly 50 states, Thimble provides affordable, flexible liability policies to fit the dynamic nature of modern small businesses.