Digitization Makes Insurance Coverage More Accessible to Small Businesses

Small businesses that find it difficult to find affordable insurance with traditional carriers may find new options with digital-first carriers that operate with different assumptions and new processes.

For example, small businesses in the automotive service and repair industry often have a hard time finding affordable insurance coverage, particularly if they’ve been in operation for less than three years.

“I think we’re the only ones in some subcategories who are willing to insure what we call brand-new businesses,” Effi Fuks-Leichtag, chief product officer at NEXT Insurance, told PYMNTS. “In the vast majority of cases, they require a significant amount of years of experience.”

Bringing New Assumptions to Underwriting

NEXT Insurance, an InsurTech offering small business insurance coverage, recently extended its coverage to auto repair shops, auto body shops, car washes, oil change stations, tire shops and auto parts stores. This offering is now available in 37 states and districts.

Fuks-Leichtag said the company can offer coverage that many others won’t because it looks at different things and uses different processes.

“We do this macro analysis of the small business market and try to identify what we call ‘underserved’ categories — big enough, lucrative enough and begging for a different mindset,” Fuks-Leichtag said. “As we looked at the auto repair and service category, it checked all those boxes.”

Some of the assumptions used for years by traditional carriers have become irrelevant, he said. NEXT Insurance, on the other hand, will underwrite brand-new businesses in those categories, apply discounts for a business’ associations and certifications, perform its own online underwriting and use its own risk prevention methods.

“The level of sophistication that we can apply in 2021 and 2022 allows us to learn from everyone’s mistakes and build a brand-new product that is just more attractive,” Fuks-Leichtag said.

Enabling Fast Payments, Coverage, Disbursements

The new auto repair and service business insurance is available entirely online. The purchasing experience and the service experience are digitized, enabling most things to be done self-serve by the customer through the mobile app or the portal. The company is moving claims in that direction too.

The immediate online underwriting enables customers to go through the questionnaire, run the underwriting engine in real time and buy a new policy instantaneously. At the end of the process, payments are done with a credit card or debit card.

“We don’t wait for a phone call, interview, follow-ups — we try to do everything fully digitized,” Fuks-Leichtag said.

The company’s claims operation too is fully in-house in most cases, building its own systems and employing its own claims advocates. In some cases, it uses an artificial intelligence (AI) claims determination system that can provide a strong recommendation to the claims advocate whether to pay or decline.

“Eventually we want to solve things with code, not processes,” Fuks-Leichtag said.

Looking ahead, Fuks-Leichtag said NEXT Insurance will continue looking for underserved categories of small businesses as it has done for the last five years.

“We’re seeing an awesome beginning for auto service and repair for the month-plus that it has been out and live, and we want to replicate it throughout 2022 to more and more categories,” Fuks-Leichtag said.