Insurance may not be the most flashy or exciting of industries, but its continued reliance on paper and inefficient underwriting processes makes the market a prime target for technology disruptors.
It’s no surprise, then, that the InsurTech arena has ballooned in recent years. As all aspects of individuals’ lives migrate online, from payments to dating, why shouldn’t the process of taking out an insurance policy do the same?
As is often the case with technological innovation, business workers increasingly want the same convenience in their professional lives as they do in their personal lives. The opportunity for a digital revolution in the small business (SMB) insurance market, then, is massive, according to Bryan O’Connell, CEO and co-founder of small business InsurTech startup Huckleberry.
In a recent conversation with Karen Webster, O’Connell discussed the personal experience that drove him to forge a better path for small businesses to obtain insurance policies. While building a different startup, regulation required him to obtain workers’ compensation insurance.
“I thought, surely, this would all have gone digital, and that I could go online and buy a policy in five minutes or less,” he said. “That turned out to be massively incorrect.”
From Analogue To Digital
What should have taken only a few moments turned into a week-long process of filling out paper forms and faxing documents. The saga led O’Connell to realize that if the process is filled with such friction for workers’ comp (a relatively straightforward insurance product that is required by law, and often the first insurance product a new small business seeks), then SMBs’ efforts to access additional insurance products must be even more of a headache.
However, the digital revolution of small business insurance won’t necessarily follow the same path as consumer insurance, largely due to the complexities of underwriting a small business compared to an individual.
“Business insurance is complicated,” O’Connell said. “That’s one of the reasons it’s been paper-based for so long, and why it’s lagged [behind] the traditional, personalized insurance in terms of migration online.”
Technology can solve some of those biggest pain points by automating data aggregation, he noted, both from the small business and other sources. For insurance carriers and managing general agents (MGAs) like Huckleberry, that means quicker digital customer onboarding and underwriting — in a process that would traditionally have been done by a human. For small businesses, that means less time filling out paperwork.
“In a traditional process, the end user would, for example, have to find a designated industry code for their business,” he said. “We can do that all automatically.”
Opportunity On Main Street
As InsurTech expands into the business segment, fellow tech startups have become a popular customer target. Yet, according to O’Connell, those fellow startups and white-collar businesses aren’t where the majority of the market opportunity exists.
The low-hanging fruit for technological disruption of business insurance is on Main Street, he said, largely because businesses with 100 or fewer employees can be serviced in a fairly standardized way. That differs from a tech startup, for instance, which can have complex, unique lines of insurance.
“It’s very fashionable out here to build things for other startups, but we found, with insurance, that’s not a great market,” he explained. “Blue-collar small businesses spend big dollars on insurance. There are millions of identical businesses that need to spend big-dollar amounts. It’s a major expense. That’s been surprising — how big of an opportunity Main Street has been, as opposed to more traditional startups or white-collar businesses.”
At the same time, this customer segment is eager to go online to shop for insurance, especially as younger entrepreneurs step into the market, noted O’Connell. Interestingly, these business owners are not only relying on desktops to search for and purchase insurance policies.
“Small businesses want the same, great digital experience they get with a consumer product,” he said. “Some are going through the entire process, end to end, on mobile — which we never would have thought of with something like insurance. But a lot of our customers are out in the field, and are more comfortable managing large aspects of their businesses through the computer in their pocket.”
An Expansion Plan
Of course, while Main Street SMBs offer InsurTech firms a significant market opportunity (O’Connell said there is an estimated $100 billion opportunity in insurance for businesses with fewer than 100 employees), no two businesses are exactly alike. Huckleberry is working its way into the market by focusing on particular verticals of small business, including quick-service restaurants, landscapers, beauty salons and small retailers.
The company announced this week that it secured $18 million in a Series A funding round led by Tribe Capital, while Amaranthine, Crosslink Capital and Uncork Capital also participated. The funding will be used to bolster Huckleberry’s existing team, O’Connell said, and support the firm’s expansion into new small business verticals, including nightclubs and bars, hotels and motels, doctors’ offices and auto body shops.
The company will also explore potential partnerships in the future for possible cross-selling or product integration capabilities. For now, though, the focus on Main Street small businesses will remain, as demand for digitization in this market grows.
“On Main Street, there are hundreds of millions of small businesses that have digital tools everywhere. There’s Square for payments, QuickBooks for billing,” said O’Connell. “And they’re still sending PDFs for their insurance. That’s what we want to change.”