Pop-Up Lessons for SMB Insurers: Move to Meet the Demand!

Retail business is changing. Consider the growth of pop-up retail stores, pop-up restaurants and food trucks. All of these types of businesses operate on the premise that when precise timing is added to the laws of supply and demand, the maximum amount of profit may be gained in a minimal amount of time with a lower level of capital expenditure.

In some ways, the pop-up industry has the traditional retail industry to thank for its success. Bricks and mortar retailers, malls and shopping centers are struggling (and many are going bankrupt) as a result of several trends that were out of their control. Consumers — especially younger consumers — simply buy less stuff. They are more interested in purchasing experiences than consumer goods. All generations of consumers are utilizing more online shopping opportunities with the convenience of having goods delivered to their doors…even groceries. Of course, there is still a time and a place for retail. Pop-ups deliver the retail goods and the foods when the traffic in a particular location is high. They meet the demand when and where the demand happens instead of asking the consumer to travel to the supply.

Insurers can glean dozens of lessons from these entrepreneurial pop-ups. In our current blog series, we are examining the trends that shape small to medium business insurance demand. We have been closely scrutinizing the clues that these business owners and operators are giving us. The clues have not only led us to the conclusion that digital business models can meet the growing demand, but also that we can build our modern insurance processes into profitable frameworks that will meet demands that we haven’t recognized yet. For an in-depth look at Majesco’s SMB survey, be sure to download Building the Business Model for the Next Generation of Small-Medium Business Leaders.

Our survey looked at insurance demand and opinions across both size and demographic within 6 different segments:

  • SMBs with 1-9 Employees owned/operated by Millennials/GenZ
  • SMBs with 10-99 Employees owned/operated by Millennials/GenZ
  • SMBs with 100-499 Employees owned/operated by Millennials/GenZ
  • SMBs with 1-9 Employees owned/operated by GenX/Boomers
  • SMBs with 10-99 Employees owned/operated by GenX/Boomers
  • SMBs with 100-499 Employees owned/operated by GenX/Boomers

Let’s take a broader look at the opinions of the SMB insurance market, and how a pop-up mentality might help commercial insurers to reinvent themselves to meet these SMB demands.

Use competitive threats as a motivation to innovate around uniqueness.

Just as online players and retail giants upset the retail cart, insurance could be disrupted by “Tech Giants” jumping into the insurance market. Incumbent insurers should be concerned about this competitive threat for a number of reasons. First, over 50% of Gen Z and Millennial SMB owners from the two smallest segments already have Amazon accounts for their businesses. In addition to convenience, competitive prices and a huge variety of products, Amazon also accepts purchases via digital payment methods that SMBs favor. Amazon clearly has an interest in penetrating the business market with its Echo hardware and Alexa services which, if successful, could serve as a platform to offer products and services to SMBs – including insurance. (See our last SMB blog on Distribution & Engagement.)

Gen Z and Millennials, especially those from the two largest segments, have the highest propensity to consider purchasing insurance from not only Amazon, but Google, Apple and the other “Tech Giants” as well, should they decide to enter the insurance market.

Even though today’s core insurance customers are less comfortable with some of these purchasing and engagement scenarios, tomorrow’s customers will expect and prefer them. Insurers must be prepared to meet them on their terms with these capabilities. If insurers can view the competition as the driver of innovation, then they can tap into some very effective concepts from the pop-up playbook.

Pop-ups, for example, thrive on uniqueness. They pitch the “buy local” theme. They carry the things you can’t purchase online, curated and delivered in ways that online retailers will never be able to replicate. So, commercial insurers might begin here. What can they do that the large tech players cannot?

Commercial insurers grasp the traditional actuarial and regulatory complexities that reflect a variety of SMB scenarios within their traditional pricing approach for different types of businesses (i.e. beauticians, grocery stores, etc.).  However, businesses, just like individuals, want pricing based on their unique parameters using new data sources like sensor and telematic data as we identified in Majesco’s SMB report . What commercial insurers lack (digital preparedness, additional data and analytic capability, cloud platforms, etc.) are all things that are easily added right now in order to meet the competitive threat.

Recognize the vital importance of delivery partners.

Pop-up stores and food trucks are low-overhead businesses. Money isn’t spent on anything that is considered long term. There are no renovation or construction costs and no complex computer systems. To stay light and agile, pop-ups utilize partners for supply, space, marketing, technology and talent. They are, in many ways, virtual businesses operating in tangible environments.

Incumbent insurers’ business models, processes, products, services and systems have all been built for and around traditional business assumptions embraced by customers from the Boomer and Gen X generations, the core of the existing SMB customer base of insurers. Majesco’s research highlights behavior and expectation shifts that will be rapidly emerging within SMB owners over the next 7 years. Preparing for the shift requires partnerships. Insurers shouldn’t waste resources or time building, or in some cases even renovating their systems and processes. Majesco has developed robust cloud platforms for L&A and Group, and P&C that can be utilized at the points of demand, adding the plug and play capabilities through our Digital1st EcoExchangeTM that may be needed for customized engagements. This kind of partnership shares resources, technology and talent so that insurers can turn innovations into profit quickly and easily.

Meet the demand where the demand occurs.

According to Majesco’s research, many SMB segments would be willing to consider getting insurance from sources other than the usual agent/broker or company channels. And, they would like to manage their policies with digital tools.

Survey respondents were given 10 different scenarios that depart from the traditional Insurance 1.0 business model methods, but that may fit with their business models now or in the future. The younger generational businesses are more likely to consider new sources or channels of insurance that reflect an ecosystem-based approach to reaching customers with the right products in the right context. Once purchased, however, all SMB segments across all generations love the idea of managing their policies through their mobile devices.

Commercial insurers need to place their products in the purchase path of other items their customers need. They need to place them in the context of other circumstances and events to give their customers the power to manage their policies easily and immediately. This is the pop-up philosophy. Take the business to the point of demand and make the product fit the need. Consider how timing plays a role. Can an on-the-spot decision give insurers the precise timing that will yield the maximum amount of profit gained in a minimal amount of time with a lower level of capital expenditure? What changes need to happen to insurer systems to align them with real-time SMB insurance needs?

Food trucks “take the product to the people.” SMB insurers that live by the same mantra will tap into new markets at the point of demand.

Supplement the traditional business with the transitional business.

Of course, many of today’s pop-up businesses are creative extensions of traditional retail businesses, just like many food trucks are operated by traditional restaurants. Those businesses met the new demand by adopting a retail version of the “two-speed framework for growth.” SMB insurers should also continue to foster their vital traditional businesses as they drive their pop-up businesses out into the world, seeking new roads to growth within the SMB market space.

The last lesson that pop-ups can teach insurers is perhaps the easiest and it needs no analogy. Mobile and agile businesses, like pop-ups, need flexible insurance and digital engagement. Commercial carriers can help themselves by fitting high-volume, short-term business insurance products into their mix.

For more insights on the SMB market, with information that will help insurers draw their own conclusions, be sure to download, Building the Business Model for the Next Generation of Small-Medium Business Leaders today.