As insurers look at the end of the industry’s big cash cow — private-passenger auto insurance — many have amped up their small business lines. Big tech, telcos, and insurtechs are also breathing down the necks of traditional small business insurers. But changes in tech, the workforce, pharmacopeia, deepfakes, and more demand different insurance. Figuring that out is a challenge for small businesses and is changing the coverage that they’re buying.
Forrester dug into five years of US small business insurance buying data to learn which small business insurance lines are expanding, which are contracting, and why. One thing’s clear: The insurance that small business owners said they bought in 2014 is different from what they said they bought in 2018. What’s changed in that five-year period? For starters:
- Shifts in the labor market have lowered workers’ comp purchases. The strong US economy and a 3.7% unemployment rate might make you think that the small business workers’ compensation market is booming. That’s not the case. In 2014, 69% of small business owners said that they purchased the coverage; by 2018, that dropped to 47%. Competition for scarce labor, the rise of the gig economy, and earlier uncertainty surrounding employer-provided health coverage under the Affordable Care Act have changed how small businesses staff. That’s lowered demand for workers’ compensation insurance.
- BOP and CGL rate increases have prompted some to go without. Offering protection from a wide variety of risks, commercial general liability (CGL) and business owners’ policies (BOPs) are “foundation” coverages for small business. In 2014, 61% of small business owners said they had CGL coverage; by 2018, that dropped to 54%. There was a similar drop between 2014 and 2018 for BOPs — from 52% to 45%. A three-year string of poor underwriting performance has hardened the CGL market, and rates are increasing. BOP rates have also been on the rise. The result is that some small businesses are skating along without the coverage. They’re leaving the business — and their customers — exposed.
- Changing perils have spurred business and personal liability buys. Trade wars, supply chain threats, extreme weather, cyberrisks, #MeToo, and the opioid crisis are stimulating interest in other protection products. The result? The percentage of small business owners who said that they bought business interruption insurance grew from 19% in 2014 to 28% in 2018. Interest in focused liability coverages like directors and officers (D&O) and errors and omissions (E&O) insurance has also increased.
Want to learn more about how small business owners feel about their agents and their confidence in the coverage that they’re buying? Read the full report, “Emerging Risks Transform Small Business Insurance,” here. Care to learn about how innovations like robots and autonomous vehicles are changing small business insurance needs? Then check out our video webinar here.