Consultant: More Comp Carriers Poised to Sell Direct

Thursday, June 29, 2017 | 0

The short list of workers’ comp carriers selling directly to customers may soon be expanding, as insurers look for new ways to distribute their products and grow revenue.

Karlyn Carnahan

Berkshire Hathaway unit biBerk, short for Business Insurance Berkshire Hathaway, sells workers’ comp insurance directly to customers online, bypassing broker involvement. Hiscox sells directly to small-business clients and in March began offering workers’ comp insurance in California, when purchased with another policy.

Other work comp carriers are waiting in the wings, drawing up business plans to launch direct offerings when the time is right, said Karlyn Carnahan, head of The Americas property casualty practice at Celent, an information technology consulting firm.

“They feel the inflection point may not have hit yet, but they want to be ready,” said Carnahan, who declined to name any of the carriers.

Selling directly to customers is just one example of “alternative distribution channels” that Carnahan detailed in webinar this month hosted by A.M. Best. Carnahan will be discussing the topic again in a Celent webinar today.

“Things are changing so dramatically and so quickly,” Carnahan said.

The downside to direct distribution is that it can irritate agents who are also selling the insurance, Carnahan said. One strategy carriers are using is to create a different brand for their online sales, such as American Family’s online brand, Homesite Insurance.

“Using a different brand is a smoke-and-mirrors way of going direct,” she said.

Online agencies are an alternative that allows customers to buy insurance online while keeping agents involved. One example is online broker Insureon, whose offerings include workers’ comp insurance.

Insurers may also look to what Carnahan called complementary channels, whose primary business isn’t insurance. Payroll company ADP and human resources platform Zenefits are some examples.

Employers Holdings, a Reno, Nevada-based specialty provider of workers' compensation for small businesses in low to medium-hazard industries, markets its products through independent agents and brokers. But it also partners with ADP, which sells Employers’ workers’ comp insurance along with its own payroll and accounting services.

ADP generated 12.4% of Employers’ total in-force premiums as of Dec. 31 last year, up from 11.3% in 2015, according to the insurer’s 2016 annual report.

Insurers might also partner with other carriers to increase business, Carnahan said. If a potential customer visits an insurer’s website but finds that the carrier doesn’t offer the line of insurance he's looking for, or doesn’t qualify, that carrier can refer the business elsewhere and receive a commission. Carnahan said partnerships are in development between work comp carriers and state funds, which she declined to name.

Insurers have only a few methods to expand their business, such as product changes, marketing and acquisitions, Carnahan said. Distribution has become a hot topic as insurers look for ways to increase revenue.

“Everybody’s trying to grow their book of business,” Carnahan said.

Despite the evolving distribution channels, insurance brokers aren’t an endangered species, according to Dave Dias, vice president of brokerage InterWest Insurance Services.

Eliminating the intermediary in an industry rarely happens as quickly as some predict, Dias said in a recent column, citing the example of bank tellers, who have actually increased in number following the introduction of automated teller machines. Brokers fill important roles such as explaining to a customer how a workers’ comp experience modification is factored, he added.

Carnahan noted during her webinar that independent agencies remain the dominant distribution channel for insurance, with 38,500 agencies in the U.S.

And some insurers are taking steps to make life easier for brokers. In March, Chubb rolled out a new online system to help independent agents quote and issue a comprehensive workers' compensation policy for small businesses.

Jim Williamson, Chubb North America’s division president for small commercial insurance, said in a news release that the fully automated system would make it easier for agents to place and service small business accounts.

Carnahan will discuss “Channel Management in a Rapidly Changing World” during a webinar hosted by Celent at 2 p.m. Eastern today. A link to register is available here.