Insurtech: No Good for Small Business
This blog stems from a recent real-life scenario we’re going through with one of our newest clients. For this specific scenario, we’ll refer to this business as ABC Development. ABC Development is a home remodeler that specializes in high-value kitchens and additions for residential properties. Two years ago, they began purchasing their insurance from one of the largest Insurtech carriers out there. It was easy to get up front, there was little to no underwriting, and the initial cost was satisfactory.
Unfortunately, this story doesn’t have a happy ending for ABC Development. After their first year’s renewal, they were asked to complete an audit for their payroll and sales figures as most businesses are when their policy renews. After completing a clunky online-audit to the best of their ability with no human-assistance, ABC Development was hit with an audit charge of $13,000. To make things worse, the $13,000 was automatically drafted from their bank account without any prior notice. After countless phone calls and emails, the owner was finally able to get through to someone at the company. And after 12 months had gone by, they were finally able to dispute the audit and show that the carrier completed it incorrectly. They were refunded the audit charge in full after a year had passed.
I share this story to highlight one of the few major issues we see happening on a daily basis as a result of small businesses opting to buy their insurance online from Insurtech carriers.
So, What Exactly Is “Insurtech”?
Now that we’ve discussed a real-life scenario, let’s let’s break down what exactly insurtech is. Insurtech refers to the integration of technology innovations into the insurance industry, with the aim of streamlining processes, improving efficiency, and enhancing the customer experience. The result – 100% online insurance companies with a slick website and no human interaction. While these advancements can offer benefits like faster quotes and online policy management, there are also downsides to be aware of, especially for small businesses.
Limited Personalized Service
One of the key drawbacks of insurtech insurance carriers for small businesses that we already discussed is the lack of personalized service. Unlike traditional insurance agencies that offer dedicated agents who understand your unique business needs, insurtech companies often rely heavily on automated systems and algorithms. This can result in a one-size-fits-all approach that doesn’t take into account the specific risks and challenges faced by your small business. It can also lead to poorly managed policy changes, audits, etc.
Complex Claims Processes
Another area where insurtech carriers may fall short is in the claims process. While they may tout fast and easy claims filing through digital platforms, the reality can be quite different. Small businesses may find themselves navigating complex online systems or dealing with chatbots instead of having a dedicated claims representative to guide them through the process. This can lead to frustration and delays in getting the support you need when you need it most.
Limited Coverage Options
Additionally, insurtech insurance carriers may offer limited coverage options compared to traditional insurers. While they may excel in providing basic coverage for common risks, they may not have the flexibility to tailor policies to meet the specific needs of your small business. This can leave you vulnerable to gaps in coverage that could result in significant financial losses down the line.
Conclusion: Proceed with Caution
I’m not saying that Insurtech is the worst thing in the world. For very small businesses looking for a $500 policy just to check a box with vendors, it’s a great option. But for any businesses that have real exposures and complex operations, Insurtech creates a huge risk for you and your business. I don’t believe there will ever come a day that technology can replace the value that you get when working with a dedicated agent who takes the time to understand your needs. That’s a hill that I’m willing to die on.
Working with an agent already but not receiving the level of service you’re looking for? Reach out to us at mchughinsurancegroup.com.