Small Commercial Insurance Clients Present a Ripe Opportunity


This March, McKinsey & Company released a report highlighting the small commercial insurance sector. With steady market growth and no dominant player in the field, the sector is ripe for competition. Let’s just say, if it were a pear? You’d have eaten it already.

Introducing the small commercial market

The sector in question includes businesses with 100 employees or fewer, which spend up to $100K in premiums per year. Together, these businesses represent over one third of the commercial lines market. And it’s growing. In 2011, small commercial lines saw $91 billion in direct written premiums. Two years later, in 2013, the number grew to $99-103 billion.

What percentage of the market has coverage?

Forty percent of sole proprietors are not carrying small commercial coverage. Instead, they rely on homeowners’ policies, homeowners’ riders or their own personal policies. This revelation “raises the possibility of unexpected room for growth in the smaller business market,” McKinsey said – a possibility thrown into sharper relief by the fact that no one is currently commanding the field:

  • Nationwide: 6 percent
  • State Farm: 5 percent
  • The Hartford: 5 percent
  • Liberty Mutual: 5 percent
  • Travelers: 5 percent
  • AIG: 3 percent
  • Cincinnati: 3 percent
  • Auto-Owners Insurance: 3 percent
  • Farmers: 3 percent
  • AmTrust: 3 percent
  • ACE USA: 3 percent

Together, these players hold 44 percent of the market. Just in their rearview mirror, 14 other insurers hold another 18 percent combined. The remaining 38 percent is divvied up among everyone else.

Bear in mind, customers in this sector are not opposed to switching carriers. McKinsey observed that while 53 percent were loyal, 17 percent renewed their existing policy only after shopping around. Twenty-four percent ended up sticking with their insurer more out of habit than any other reason.

Act fast to stake your claim.

The small commercial insurance sector is fast-evolving, McKinsey said. Big players are quickly moving into the field, with a 12 percent spike in market share for those with more than $2.5 billion in direct written premiums. Point being, if smaller players want to stake their claim, they’ll need to act fast.

And they’ll need to do so through digital channels. According to McKinsey, this market prefers direct channels to the agency model. Those insurers who reap the greatest rewards will do so by reaching customers in the channel of their choice.

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