Insurance for Next-Gen Entrepreneurs

Part
01
of two
Part
01

Insurance for Next-Gen Entrepreneurs – Competitive Landscape

Overview
There are five major players in the insurance market that are currently serving next-gen entrepreneurs in the United States: Nationwide, State Farm, The Hartford, Liberty Mutual, and Travelers. These insurance providers were distinguished as the "top" companies serving next-gen entrepreneurs based on their status on the McKinsey Report's published information on small commercial insurance providers.

The McKinsey Report defined businesses in the small commercial market as having up to 100 employees and $100,000 in annual premiums. This market is divided among many carriers, the largest of which only accounts for six percent of premiums. Some of these insurance providers appear to cater more to the needs of next-gen entrepreneurs than others, despite their similar market shares. Details on the competitive landscape that these companies form can be found below.

Nationwide is the largest insurer of next-gen entrepreneurs, accounting for six percent of the small commercial market. However, despite its popularity with next-gen entrepreneurs, Nationwide does not target this market specifically. When next-gen entrepreneur customers visit the Nationwide Insurance website, there are no options on the drop-down menu that are specific to them. However, they may find what they are looking for by choosing options like "Retail" or "Professional Services."

Nationwide policies that might suit next-gen entrepreneurs could include Business Liability Insurance, Commercial Property Insurance, or Cyber Liability Insurance. However, overall, the insurance options offered by Nationwide seem more geared toward traditional models of business, with no focus on technology-heavy or technology-savvy companies.

Nationwide is the 7th largest commercial lines insurer, with $7.6 billion in direct written premiums. In 2017, Nationwide's total sales were $46.5 billion, with an operating revenue of $27.5 billion and total assets of $236.1 billion.

State Farm accounts for five percent of the small commercial market, and it offers next-gen entrepreneurs the ability to view solutions for their business based on where they are in the business cycle. These individuals can choose from options like "Starting Up" or "Growing" to see information based on the status of their business. There's also a link to an article about how to "Insure Your Home-Based Business." State Farm is a user-friendly option for start up entrepreneurs who are just beginning their businesses.

State Farm's total assets in 2017 amounted to more than $160.7 billion and premium earned was $42.42 billion.

Insurance provider The Hartford, which also accounts for five percent of the small commercial market, has a specific page that is aimed just at the services that it provides for startups, including sections such as "The Basics of Business Insurance for Startups" and "General Liability Insurance for Startups." The Hartford also targets very specific segments of the business owner market, allowing customers to select from options like New Business, Growing Business, or Mature Business.

Next-gen entrepreneur customers have access to a wide variety of insurance solutions at The Hartford, including Computer, Software, Web, IT Services & IT Staffing, Electronics, Mass Media, Renewable Energy, Advertising, Graphic Design & Media Services. The Hartford's insurance agents are separated by small and midsize businesses, indicating The Hartford's commitment to providing individualized services.

If next-gen customers of The Hartford choose policies in the Technology category, they have access to tailored policies like FailSafe Technology Errors or Omissions Liability Coverage, Data Breach Insurance Coverage, Business Income Extension for Cloud Service Interruption and Business Income Extension for Off-Premises Operations Coverage. In 2017 the Hartford reported that their commercial lines had $7.9 billion in revenue which amounted to 47% of the total revenue.

Although Liberty Mutual also accounts for 5% of the small commercial market, they do not appear to cater specifically to next-gen entrepreneurs. They do not offer specialized coverage for cyber risks, cloud management, or technology error liability, as seen in other carriers.

In 2017, Liberty Mutual report its net income of $205 million and $17 million for the three and twelve months ended December 31, 2017. This was an increase of $62 million and a decrease of $989 million versus the same periods in 2016.

According to the inaugural J.D. Power 2018 Independent Insurance Agent Satisfaction Study, Liberty Mutual has the most satisfied commercial insurance agents. Liberty Mutual is the fourth largest property and casualty insurer in the US based on 2016 data (reported by the National Association of Insurance Commissioners). The company employs more than 50,000 people in over 800 offices throughout the world, offering insurance for personal automobiles, homeowners, commercial automobiles, general liability, property, surety, workers compensation, specialty lines, and reinsurance.

Traveler's accounts for five percent of the small commercial market and offers next-gen entrepreneurs the opportunity to take advantage of their wide range of technology-friendly product lines. Some of these offerings include their CyberFirst coverage and information about emerging risk and technology risk control.

Travelers has experienced recent growth in its sales of cyber insurance, which protects businesses against hacking and other liabilities. Nearly three quarters of the cyber policies that Travelers writes cover up to $1 million in damages, while nearly a quarter cover between $1 million and $5 million.

Travelers is a company of 30,000 employees that had revenues of $28.9 billion in 2017. The commercial businesses of the company had underlying combined ratios of 94.9% in Business Insurance and 83.2% in Bond and Specialty Insurance. Travelers is the second largest writer of commercial US property casualty insurance.


Conclusion
There are five major players in the insurance market for next-gen entrepreneurs, typically identified as the small commercial business segment. Some of these insurance providers appear to market more specifically to next-gen entrepreneurs than others, but all of them have nearly identical market share, with only Nationwide edging slightly ahead of the rest with six percent. State Farm, The Hartford, Liberty Mutual and Travelers each have five percent of the commercial small business market share, according to the well-respected McKinsey Report.
Part
02
of two
Part
02

Insurance for Next-Gen Entrepreneurs – Product Forecast

There are several major insurance products aimed at online entrepreneurs. Some target the entrepreneur as an individual while others target the business or startup that the entrepreneur is running. The insurance products include comprehensive general liability insurance, directors and officers liability insurance, cyber/media Insurance, health insurance, life and disability insurance and professional liability for online entrepreneurs. They leverage technologies like AI, data analytics and chatbots to better serve their customers' needs.

Major InsuraNce Products for Startups

As a general rule, startups should consider these five forms of insurance coverages which cover specific needs in the market:

1) Comprehensive General Liability Insurance (CGL) — The needs addressed by CGL relate to a company's assets that are protected by the insurance. When a claim is brought for alleged advertising injury, personal property damage, property damage or third-party bodily injury the policy protects the company.

2) Directors and Officers Liability Insurance (D&O) — The needs addressed by D&O protect board members or officers of the company from litigation related to business decisions. Claims alleging the officers or directors made wrong business decisions which had a negative impact on the value of the company, diluted the company's assets or negatively impacted the value of the stock are protected by D&O policies.

3) Cyber/Media Insurance — The need addressed by Cyber/Media insurance relates to hacks, cyber attacks, malware, loss of intellectual property or personally identifiable information. This problem is consistently getting worse which means the need for such insurance is absolutely clear. However, there is no standard policy between all the competing firms. Cyber insurers have started to resist many claims from companies that have not put in place, industry-standard tools to make sure their systems and data are secure.

4) First-Party Property Insurance — This insurance coverage is for the physical damage done to a company's property. As it relates to the technology industry, this insurance can cover destruction or loss of the company's data and coverage can even be added to policies for losses due to business interruptions and downtime.

5) Employment Liability Insurance — This insurance covers highly skilled and well sought after technology and skilled labor employees. The main advantage occurs if a dispute happens with a highly trained or paid employee who claims they have been discriminated against based on their ethnicity, age, gender, nationality, race or sexual orientation.

Major Insurance Products for Self-Employed Online Entrepreneurs

Listed are the major products for entrepreneurs that are self-employed online:

1) Life and Disability Insurance — The need addressed by this insurance is that of a backup plan of income replacement for the entrepeneur and family in case of loss of life or permanent physical disability.

2) General Liability — This insurance acts as an umbrella of coverage and protects the entrepeneur against a wide array of possible damages including protection from libel, slander, copyright infringement and loss or theft of customers' stored data .

3) Workers' Compensation — The need addressed here, especially if for a sole proprietor, occurs when working with a large company. Workers' compensation covers jobsite injury for its employees.

4) Professional Liability — This insurance protects the online entrepreneur from damages against civil suits. These civil suits can relate to advice given to a client. This insurance generally applies to consultants.

5) Health Insurance — As an online entrepreneur health insurance is the highest priority of all. The need for healthcare insurance is the most obvious as it pertains to entrepreneur and their dependents.

Emerging Technologies that Insurance Products can leverage

For each of the policies listed above, they can leverage certain technology to improve distribution, automate business processes, create new products, improve customer experience and provide more value for the online entrepreneur. These technologies are:

1) Artificial Intelligence (AI) — Development of 'Robo-advisors' helps insurers automate a myriad of business processes which can be repetitive.

2) Chatbots — This is a new channel for insurance distribution that is growing very quickly and is disrupting the current insurance distribution systems.

3) The Sharing Economy — Insurers are designing new products that will cater to the unique needs that the sharing economy has created. Companies like Uber and Airbnb are creating new, dynamic, customer lifestyles that require new policies to cover them.

4) Digital and Mobile Technologies — The increase in smartphone sales coupled with online entrepreneurs that need insurance and want a better customer experience means that digital and mobile technologies are playing a crucial role in helping insurers "gain a competitive head start".

5) Data Analytics — As data becomes exponentially more available to insurers, they use even more "sophisticated statistical modelling techniques" to improve profitability.

Conclusion

To wrap up, online entrepreneurs have several major insurance products aimed at them. These products target the entrepreneur as an individual while others target the startup that the entrepreneur runs. The insurance products address needs like Comprehensive General Liability Insurance, Directors and Officers Liability Insurance, Cyber/Media Insurance, Health Insurance, Life and Disability Insurance and Professional Liability for online entrepreneurs. The insurance products aimed at next-gen entrepreneurs leverage technologies like AI, Data Analytics and Chatbots to better serve their customers.
Sources
Sources