Meeting the diverse needs of US home-based businesses

Bryant – a 30+ year insurance professional, with particular expertise in small commercial and digital underwriting – breaks small business customers into three groups: micro customers (many of whom run home-based businesses), traditional single-location businesses, and hybrid businesses with multiple locations and more complex business models.

“The micro/home-based business customers … may not have ever purchased commercial insurance before,” she said. “They’re looking for more hands-on service to help them understand what types of coverages they need, and whether or not they’ve purchased the right coverage. They tend to be a little bit more price point sensitive because of the phase that their businesses are in. They’re a very unique group of people.

“Then you have the more traditional small business customer that the BOP policy was designed for back in the 70s. They have a single location on Main Street, USA, customers come to them, and they do business in a local storefront that they may own or lease. And then you have customers that have a little bit of middle market hybrid to them. They might have multiple locations, they could be multi-state, and they tend to have a little bit more of a complex business model. And yet, we treat all of these small business customers like they’re the same.”

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In recent years – thanks partly to the COVID-19 pandemic – launching a home-based business has become increasingly popular. Of the approximately 30 million small businesses in the US, home-based businesses now make up about half of that number, according to Bryant, meaning there are approximately 15 million micro businesses with unique coverage needs and exposures that are not being served well by the insurance industry from a service, product, or pricing perspective.

Recognizing that the industry must adapt to the needs of this changing world, AXIS Insurance conducted a poll of 1,000 business owners across the country to better understand the challenges facing home-based businesses.

The survey found that pursuing a passion was the biggest motivator for starting a home-based business among respondents at 42%, followed by a desire to be their own boss (37%) and to pursue a “side hustle” (36%). It also found a significant insurance protection gap among home-based businesses, particularly among respondents whose business began as a hobby or side hustle, where the need for insurance may not be immediately clear. While 91% of owners recognized that they needed insurance, 44% did not have coverage or didn’t know what their insurance covered.

“We, as an insurance industry, need to really think about these customers in a unique way,” Bryant told Insurance Business. “We need to recognize that they work differently, they have different insurance needs, and they’re not being served by the service standards currently offered. It’s too complex, it’s too difficult for them to navigate. Ninety-one per cent (91%) of small business owners know that they need insurance, but they’re struggling with where to find it, they’re struggling with getting advisors to talk to them, they’re struggling with understanding if they’ve bought the right coverage, and when you look at the policy forms, they’re struggling with how to navigate the 100-page documents.

“As an insurance industry, I think there’s a tremendous opportunity to recognize this very large and emerging group of home-based business owners is different than the other segments within small business, and we need to start thinking about them in their own right, rather than lumping them into a bigger, broader category.”

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AXIS Insurance has launched a new solution for home-based businesses, spearheaded by Bryant, which focuses on two key principals: simplicity and transparency. It is a standalone, admitted package policy that includes general liability (GL), professional liability (PL), business contents, and crime coverage.

“When you look at this customer group, they are not sophisticated insurance buyers, and, as a result, they may have purchased the wrong types of coverage in the past. If they’re giving advice to someone, they may buy a general liability policy and assume they’ve got coverage for advice, because that’s what a neighbor told them to do,” Bryant commented. “So, we decided to take the guesswork out of it. If we believe they are giving or have the potential of giving some kind of consulting advice, we combine the two products [GL and PL] together so they don’t have to worry about whether or not they’re covered.

“We’ve worked really hard to align the types of exposures that they bring, and say: What’s a fair price for these unique exposures versus a counterpart that might be in an owned or leased facility on Main Street? How do we simplify the product purchasing? How do we simplify the product verbiage itself, so it is clear what business owners are covered for and what they’re not covered for? And then, how do we tailor a price unique to their business? What we’re trying to do is be the right alignment for this very large, emerging, underserved portion of the small business community.”